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Post Lockdown: Will the salon business shrink?

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The spread of Coronavirus and the resultant lockdown has had drastic financial ramifications on the beauty and wellness industry of India. Experts predict volume of loss and put into immediate effect solutions to minimise business risk.
BCG and McKinsey & Company report that the global beauty industry is a roughly US$ 500 bn market that has been growing steadily at 4 percent to 5 percent annually. FY20 will see a decline of approximately 15 percent. Even though online trends are showing good growth, the COVID-19 impact is remarkably high on categories like high end skin and hair care products, perfumes, colour cosmetics.
Corroborating to the figures is Spoorthy Shetty, CEO at BBLUNT. She shares, “Post opening, in the first few months, we may see 50 percent of our usual footfalls. For the last two months we have been burning cash as the revenue generated is zero; what is worse is the tremendous pressure on the working capital. On the face of it, business is going to shrink after the lockdown is lifted, and it will take months to reach our past performance levels. The solution from now to then is to have a razor-sharp focus to reduce overheads.”
The Beauty and Wellness industry is one of the largest employers – with over 1 crore professionals (70 lakh directly and 30 lakh in ancillary services) working in the organised and unorganised sector. More than 2/3rd of these are women and most belong to lower socio-economic and educational backgrounds. With manpower costs being around 40 percent of revenue and rent at 15 percent to 20 percent, and zero revenue for the 60 days of lockdown, both owners and employees are equally distressed. The extended lockdown will lead to large scale unemployment and significant disruption given the high proportion of migrants.
Solutions to mitigate loss
Spoorthy has a few solutions in mind to mitigate the loss. She shares, “We plan to make up for the revenue loss by with solutions like have the staff work in shifts and limit the number of working days and hours to cut down on utility costs; work on inventory rationalisation to not have money sitting on the shelf; review the compensation structure like aligning the salary with higher variables and keeping the lower fixed; speak to the landlord for consideration, where a part of the rent can be fixed and some can be on a revenue sharing model; put into place a rigorous follow up mechanism to collect receivables faster, wherein we could offer early bird cash discounts; not make marketing investments to acquire new clients, rather focus on a regular client base; reduce value-added services; negotiate credit period with product partners; and finally, trade off non-cash perks like annual trips, sales incentives or marketing investments for direct invoice discounts, if possible.
“To ensure continuity in business, we will re-visit allocated budgets from what one calls a MOSCOW Prioritisation POV (point of view). This acronym stands for four different categories of initiatives planned where – ‘M’ stands for Must Have, S for Should Have, C for Could Have and W for wish to have. It means that look at what is non-negotiable and temporarily suspend the ‘nice to have initiatives’, may be even chuck the S, C and W. Budgets will drive the strategy, for instance, we had plans to add company doors this year in Mumbai and Bengaluru, which has been clearly pushed for another day. Hopefully, 2021 is when we should be healing, recuperating.
“Nobody has the exact math, but it seems like the cost of increased hygiene could be an additional 8% to 10% hit on the bottom line. So far, we have not thought about taking the prices higher, but brands will think in that direction if the bottom line becomes negative. We are focussed on rationalising our salon spends and absorbing the hygiene cost for now.”
Pushkaraj Shenai, CEO, Lakme Lever, says, “Representatives of Beauty and Wellness enterprises such as salons, barber shops, beauty parlours, spas and clinics, from across the country have made a representation to the government asking for permission to restart operations in strict compliance with the health and safety guidelines issued by the Beauty & Wellness Sector Skills Council, under advise from Corona Critical Care Unit of AIIMS and Ministry of Skill Development.”
Neeraj Senguttuvan, Business Head at Godrej Professional opines, “Post lockdown, the challenge of getting clients to visit salons as frequently as before will be the highest. However, our solution is the launch of the No Profit Suraksha initiative, where we are providing disposable kits at a hugely subsidised cost to any salon who requires it.”

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