20 Apr 2018 Spa Business Handbook
 

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Spa Business Handbook - Retail Therapy

US Research

Retail Therapy


Spa retail is critical not only to profitability, but also to a spa’s overall brand message and vision. Nancy Griffin highlights some of the findings from Contento Marketing’s in-depth retail survey

Nancy Griffin, Contento Marketing
More than half of spas surveyed say they have a strong retail concept
Sixty-five per cent of respondents report an increase in revenues in facial skincareshutterstock_231323005 shutterstock
Michael Tompkins, executive recruiter, Hutchinson Consulting
Ninety-eight per cent of respondents offer a commission structure to therapists and/or front desk staff shutterstock

Retail sales are an important component of any spa’s profitability, but many spa directors struggle to create a meaningful retail concept and engage their therapists with selling.

A new survey, conducted by Contento Marketing, found that only about half of spas are satisfied with their retail concept, and more than half acknowledge that their retail area could benefit from improvement. While this may sound discouraging, it’s an incredible opportunity for skincare brands and consultants to help create more engaging, dynamic retail concepts – and to help shape the future of spa retail.

The survey was administered in March 2017 to 400 US-based spa directors, owners and operators. Contento collaborated on the survey design with Ann Patton, principal of Savvy Spas and instructor of the spa retail course at the University of California Irvine Spa & Hospitality Management programme. The goal was to design an in-depth survey on spa retail trends, challenges and opportunities, financial metrics, compensation, sales and merchandising strategies and vendor relations.

Of the 150 survey respondents, 85 per cent were spa directors or managers, and 15 per cent fell in the “other” category, which included owner/presidents and regional, national or corporate directors. Participating properties included Destination Hotels, ESPA, Fairmont, Four Seasons, Hilton, Hyatt, Langham Hotels, Mandarin Oriental, Marriott, Montage, Omni, Ritz Carlton and Rosewood Hotels, Sheraton, St. Regis and Westin.

Nearly half (48 per cent) of respondents were resort spas, with hotel spas representing 19 per cent and day spas representing 18 per cent. While the participating properties were US-based, the insights presented are useful for any owner, operator, manager, supplier or consultant seeking baseline metrics and strategies to improve spa retail sales.

Satisfaction with retail operations
Slightly more than half (52 per cent) of spas surveyed responded that they had a strong retail concept and presentation, but only a quarter of the respondents were satisfied with the visual appeal. Overall sales volumes and inventory turn rates showed a similar trend: only one-fifth of respondents were completely satisfied, and 55 per cent conceded that they could be improved. Regarding retail profitability, the results showed that 37 per cent of those surveyed were highly satisfied with their margins, while half said retail profits could be improved.

Retail trends by category
Sixty-five per cent of respondents reported an increase in revenues year-over-year in professional skincare for the face, with sales flat for only 8 per cent. Sales for body products were mixed: up for 44 per cent, flat for 40 per cent, and down for 13 per cent. Just over one-third of respondents said they did not offer wellness gifts, books and music, and one-fifth did not offer accessories or apparel – perhaps an area for potential new sales.

Challenges
Staff resistance to selling is the number one retail-sales blocker, with three- quarters of respondents citing it as the biggest spa retail challenge. It’s also increasingly becoming a challenge to retain employees, as many therapists consider themselves healers rather than sellers, and are looking at models that don’t require sales as part of the job. “One of the reasons massage therapists are attracted to on-demand employers is because they aren’t expected to sell,” says Michael Tompkins, executive recruiter at Hutchinson Consulting.

Over half (55 per cent) of respondents felt pressure from online sites like Amazon and eBay – which often offer quick home delivery and attractive pricing – yet only a quarter of respondents said that other spas in the immediate areas carrying the same lines created a significant challenge. “Spas are typically in direct competition for a certain market segment,” says Savvy Spas’ Patton. “It’s essential that spa directors and retail managers, at a minimum, keep abreast of the retail offerings of their direct comp set.”

Sales channels
Spa directors report losing sales to websites like Amazon and eBay, yet 70 per cent still don’t offer the ability to purchase online from the spa. Day spas are leading the pack when it comes to e-commerce sales; more than three times more day spas than hotel and resort spas offer e-commerce – 56 per cent of day spas versus 11 per cent of hotel spas and 14 per cent of resort spas.

Less than a third of spas work with their vendors to drop-ship, but Patton sees that changing, which will help spas become more competitive with retail sales. “Vendor drop-shipping will become a must for spa retail sales in the future,” she explains. Only 10 per cent of respondents sold spa retail outside the four walls of the spa, representing a significant opportunity to increase revenues. Strategies are needed to sell retail outside of spa; kiosks, pop-up displays and portable rolling retail cases can generate interest in the spa while providing an additional revenue centre.

Re-merchandising
Re-merchandising refers to changing products and visual displays to optimise retail mix and sell-through. The majority of spas surveyed re-merchandised monthly (44 per cent), followed by weekly (31 per cent). But, many experts recommend re-merchandising more frequently – even every day. Small, daily changes can have a big impact and keep things looking fresh and new.

Compensation strategies
Almost every respondent (98 per cent) offered some sort of commission structure to either therapists and/or front-desk staff, and 64 per cent offered both commission and incentives. In terms of the structure of commission payout, 70 per cent offered a flat percentage payout, 34 per cent offered some type of sliding scale percentage, and 16 per cent offered “pooled” or shared commissions.

Vendor support
Overall, respondents appeared satisfied with vendor support. Raising vendor service levels will increase sales and strengthen brand and vendor relationships, but expectations must be realistic on both sides. The key areas for improved vendor support are in the areas of in-spa visual merchandising, partnering on consumer-facing events and vendor-sponsored staff rewards.

Key performance indicators
Retail sales versus overall revenues
When respondents were asked to benchmark retail sales against total spa revenue, nearly one-third of all respondents reported that retail made up less than 10 per cent of total sales. The highest number of respondents (38 per cent) reported a range of 11 to 15 per cent retail to total sales, and only 2 per cent reported retail-to-service sales of more than 30 per cent.

Retail per square foot
By obtaining retail revenues and the square footage allotted to retail space, Contento calculated average retail per square foot – the standard performance metrics for retail outlets. According to Patton, industry benchmarks suggest that a good goal for total annual retail sales per square foot is US$1,000 per square foot (€858, £769). Survey results indicate that day spas are proving to come very close to that overall benchmark at US$898 per square foot, while hotel and resort spas are averaging around US$750 per square foot.

Table 1:

Retail trends by category, January 2015 - January 2016

Source: Contento Marketing
 


Next steps

1. Make retail a priority.
Spas with successful retail sales work hard. Make a plan to review your visual merchandising, product mix and compensation strategy. Re-merchandise regularly. Work closely with your vendors to create shelf-talkers, counter-top displays, special promotions and guest-appreciation events.

2. Measure retail per service.
Professional products used in treatments are the current driver of retail for the majority of spas. Savvy spa operators are measuring the amount of retail sold per service, in addition to monitoring their retail sales as a percentage of overall spa revenues. Estheticians and massage therapists have the client’s ear – it makes sense for them to initiate the sale.

3. Train and incentivise all frontline staff.
Hire front-desk staff with sales acumen – then pave the way for their success by providing the right tools. Training front-desk and retail staff on selling techniques and skincare lines in conjunction with licensed staff will become a necessity. “Structuring sales incentives for all personnel will be key to a successful operation,” says Michael Tompkins, executive recruiter at Hutchinson Consulting.

4. Develop multiple retail touchpoints.
Resort properties will benefit from telling a continuous product story not only through the spa, but also through the entire property. Think complimentary in-room gift sets, spa products as gifts and pop-up spa events in the lobby, poolside or meeting space.

5. Don’t lose the sale.
Selling spa products on your website increases your spa’s profitability by providing a convenient method of re-purchase. If e-commerce is not practical, ask your vendors to drop-ship. “Working with resource partners to create drop-ship opportunities and custom gift sales will be a win-win for spa and vendor,” says Tompkins.

6. Look to day spas for inspiration.
Key indicators show day spas outperform resort and hotel spas in retail sales, generating a higher retail-to-service ratio and higher average retail sales per square foot. Resort and hotel operators can learn from them how to grow retail sales and the facial services that drive retail sales.

7. Hire a designated retail associate.
“Consider a role for a personal skincare shopper in the spa, who designs product-specific, results-oriented skincare regimes tailored to each guest’s needs. ‘Personal skincare stylist’ could be a retail job role of the future,” says Tompkins.

Graph 1:

Resort/Hotel Spa. Percentage of overall revenues from retail sales January 2015 - January 2016

Source: Contento Marketing
 


Graph 2:

Day Spa. Percentage of overall revenues from retail sales January 2015 - January 2016

Source: Contento Marketing
 



About the author:

 

Nancy Griffin
 

Nancy Griffin is principal of Contento Marketing, a strategic marketing firm for spas and wellness brands. She is a founding Advisory Board Member of the UC Irvine Spa & Hospitality Management programme and member of the Global Wellness Institute’s Career Initiative.



Originally published in Spa Business Handbook 2017 issue 1

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