Risky Business
The more things change, the more things stay the same — especially when it comes to diversion and the ongoing struggle to overcome the problem and eradicate it for good. Despite the best intentions of many, sales of professional products in unauthorized outlets, which first began to impact the professional beauty industry in the 1980s, have snowballed to epic proportions in the last couple of years. So much so that a December 2004 BusinessWeek article stated that nearly $800 million of the beauty industry’s $29 billion yearly in product sales may be diverted or counterfeit.
The news from the Beauty Industry Fund (BIF), an association of comprised of manufacturers, distributors and salon owners who have formed a united front in the war against diversion is just slightly better. The BIF’s AC Neilson/Market Decision data, which can be accessed online at the organization’s BIF Web site, http://beautyindustryfund.com/, confirms that between Quarter 3/2006 to Quarter 4/2007, the Total Professional Salon hare Care Products Diverted Dollar volume decreased by .2 percent. While the decrease from Quarter 3 to Quarter 4 was minimal, it was the first time over the last eight quarters that Diverted Dollar Volume did not increase.
With that in mind, American Salon Magazine will be dedicating a special supplement to diversion in July 2008 and we’d like to hear your thoughts on this vital issue that impacts the livelihood of professional salons. Specifically, we’d like to know if you’ve seen a positive change in the diversion problem in your local area and whether you’ve taken any steps in your salon to play a more active role in the diversion fight.
And finally, we’d also like your feedback on what more you think manufacturers could be doing more of to combat diversion and what you’d like them to know about the problem, in general Please be sure to include your name, salon name, and the city and state you’re located in. Thanks, and I look forward to hearing from all of you!
Kelley Donahue
Executive Editor
American Salon Magazine
May 16th, 2008 at 11:24 am
Kelley, technology exists to stop all diversion.It is only when the choice to utilize this technology that diversion will end.The most influential companies of the future will have zero tolerance for all profiteering at the expense of the professional.This issue is relatively insignificant compared to the lack of health and safety education which causes great damage to the industry.Bush repealed the Federal ergonomic standard in March of 2001,however,at some state levels there is a clear liability for workers upon educational organizations who continue to operate outside of ergonomic law.It is actually a good thing that the companies now running the industry are megaconglomerates who have the capability to pay out for their negligence.Class action lawsuits will provide the basis for change and dictate more clearly what it means to participate in this industry at the educational level.When we correct the more serious problems of the industry these little problems like diversion will go away.Harvard lawyers will now become the educators and big hair corporations will become the students.It should be quite a semester.Annually, thousands of beauty workers suffer disabling cumulative trauma injuries without the slightest effort to prevent from any sector of the beauty industry.I expect that this messege will be removed,but doing so will not stop the legal events destined to revolutionize the industry.
May 16th, 2008 at 11:56 am
Your article says it all - $800 million in diversion sales. Do we think these companies are going to let go of this kind of money? It’s much easier to just advertise they are against diversion - but still take the money. To any company with diverted products, why dont you donate the profits from those sales to an industry charity? It’s time for these companies to put their money where their mouths are and stop taking the profits from diversion.
May 16th, 2008 at 1:07 pm
This topic is likely the most serious joke in the entire pro industry. Can you seriously believe that Diversion actually exist in the manner manufacturers would have you believe? Do you really think that Wal-mart, Target, Costco, Superstore, all Canadian and US drug stores and the like, go around subversively asking salons for a dozen product here and there, so they can stock their shelves? They would need an army of purchasers to retain the sheer volume of professional products they have regularly in stock.
Don’t kid yourself. Professional product manufacturers make more money supplying their products to the big retail giants then they ever could supplying only salons. They sell direct Kelly. There is no diversion except perhaps the diversion created by these manufacturers to convince salon owners that their products are sold in this forbidden environments against their will.
Just pure logic alone should indicate that it is nearly impossible and highly improbably that a mass retail chain can have every single product line in the professional industry, fully stocked on their shelves, in ever store they own across the nation. That would be an incredulous number of failed or corrupt salons and owners if it were the case. And we are not talking one retail chain in one country. We are talking about every retail chain and North America wide for the past 15 to 20 years.
I have been in this industry as a manufacturer for over 25 years. We continuously get calls from mass retail outlets to carry our line of products. If manufacturers really want to stop diversion - then stop selling to them.
Pretty simple.
May 17th, 2008 at 2:04 pm
Could it be that the recession is why diversion didnt grow? Diversion is the worst its ever been. All you have to do is visit target to see how bad it is. In our salon, we are moving away from shampoo and focusing on fashion accessories. Profits are higher and they sell really well.
May 17th, 2008 at 8:23 pm
As an industry professional for 40 years I couldn’t agree with Keith and P.R. Thompson more. You both said a mouthful and I believe it is the way things are done!
May 18th, 2008 at 9:20 am
I think the comments before are right on. I feel I’ve been duped by the manufacturers. Stopping diversion seems like a simple task that several manufacturers have done. I’m fighting my own battle by only recommeding products that do not end up on grocery store shelves. I was a big supporter of Redken, but have only been given the run around when I reported diversion to the company. They just blow smoke about diversion. They will sell products and professional color to anyone. I recommend Aquage. Have you ever seen Aquage in Walmart, Target, etc.? This company has it figured out!!
May 19th, 2008 at 12:23 am
You guys are wasting your breath!The only way to change the industry is to be the change. Start now.What are you going to do?
May 20th, 2008 at 5:46 am
We win by not swimming against the tide but with it by carrying only the most diverted products! Am i crazy? We do more retail then ever and keep growing. Our theory is a simple one - give people what they want at a place that is convenient. We carry crew and sell it all day long to our ladies for their sons and husbands. We sell Paul Mitchell as our lower price product and Redken at the higher end. We carry some matrix and it sells well. About half our retail is sold to walkins who are not buying services - and we use our windows for retail (we copy supercuts retailing approach because we see how well they do with retail.) Dont cut off your nose to spite your face. We cant stop diversion but we can all learn and benefit from it by turning a lemon into lemonade!
May 21st, 2008 at 11:29 am
Kimberlee,It’s nice that you can make a profit selling grocery store brands.Good luck moving your inventory when the grocery stores start offering your products at a price below your wholesale price.You’ll need to invest in a feather duster to keep your non-professional beauty products looking good.The whole purpose of selling professional products is not necessaraily profits, it is to provide a network of dedicated educators and platform artists who are commited to forging the industry into the future.I believe that true spirit has been gone a long time.The network is driven at every level by capitolists who are extremely competent in the area of money making however they remain naive in the most important issues which involove the beauty worker.It’s no wonder that every 5 years the beauty schools turn out enough graduates to replace every worker in the USA.
May 21st, 2008 at 6:49 pm
Joanathon, i love your commments on here. You are a smart and passionate and i love that about you. Why do salons have high turnover? Because we arent working smart. Most salons dont have benefits or educction. We do and have no turnover to speak of, we give good benefits and incentives. How? By working hard and smart - selling a whole lot of retail to pay help pay for it. We copy target becuase they know what people want. We tell our clients that we carrry the best - at a better price then the drugstore and with a professional staff to back it up. And guess what, it works! “dont get mad (about diversion), get even” by selling more and doing it better.
May 22nd, 2008 at 6:39 am
Getting us to sell was never easy but diversion has made it harder. Worse then diversion is distributors.We put our energy into great service and adding a service to every ticket with add ons. Walmart cant offer That’s what makes us different. That’s where we make our money. For retail, focus on gift certificates for services and fashion items like jewelry, scarves, hats and appliances like blow dryers and chi irons, and forget the shampoo. It’s a commmodity and we’re not about that.
May 31st, 2008 at 12:53 am
High turnover is the end result of oversaturation of workers in a market that already is struggling with economic issues.We the professionals are still just laborers using our backs to put food on the table.Sooner or later each worker reaches the end of their carreer with a generally bleak outlook financially.Try cashing in on an old salon and retiring after 20 years and see how long the money stretches.Kimberlee,I am happy for you that you are doing well. I hope that you don’t look back some time from now and regret what has evolved within the industry.Sometimes when we compromise on our principles we gain in the short run, and lose in the long.Remember, it is you the professional that gave these wet line companies their stature in the industry and it is they who continue to put you down and take advantage of your continued support through mass distribution.Without you, their products wouldn’t be selling at Target or any place else for that matter.Isn’t it time to have greater expectations from those who are the supposed leadership of this industry?A dialogue needs to begin within the industry to address multiple issues which continue to plague our industry.Who do you think has the audacity to make a difference?You would most likely sell ten times the amount of retail without Walmart as your competition.Why not make some real money?It’s you the professional that make a product professional.Why sell drugstore brands as professional products when you can find an obscure brand created by a professional educator and bring to the forefront of the industry? Thanks Kimberlee
May 31st, 2008 at 10:48 pm
Wow!! Jonathon and Kimberly! Two great and different perspectives on this subject! Each of you touch on two VERY IMPORTANT issues
*Retention
and
*Retailing
On Retention: Weather you are talking about Clients or Staff it’s all about meeting their needs…If your salon doesn’t do that, THEY WILL GO ELSEWHERE! To make that happen you must create realationships with them to build loyalty! When you are in “relationship” eveyone “get’s heard”
and only then can their need be met!!
That goes for * both* CLIENTS AND STAFF!!!
On Retailing:
I love Kimberly’s attitude! Figure out what factors are making you clients buy elsewhere and solve that issue!
We can’t stop diversion but we can REWARD OUR CLIENTS for buying from us!
OUR ADAVNTAGE IS OUR RELATIONSHIP WITH THEM! The captive audience!
Get Creative!!! That’s one game that the big companies can’t beat us at!!!