E-commerce has changed much in the beauty industry, including how salons, spas and barbershops manage distribution. For many businesses, the logistics of supply also extends to consumer deliveries as well as to their locations, bringing with it the promise of increased margins but also the increased burden of organization.
ISBN members’ methods of distribution are as varied as the membership. V’s Barbershops has a hybrid approach to deliver to its stores all over the US, while Chicago-based Mario Trococi has a warehousing partner and a novel solution to logistics. GS Beauty in Canada has a more conventional set-up, a well-established company-owned distribution centre that also manages its growing e-commerce business. Kindly, all three allowed us to scrutinize their distribution structures in greater detail and you can read about each individual approach here on the ISBN website. Their generosity, plus the expertise of Rainer Hoeglmeier who straddles both distribution and salon ownership, has enabled the ISBN to grab a snapshot of the challenges of distribution for the smaller to mid-size players.
GS Beauty decided early on to wrest control of distribution from third parties, and now runs it all from a 16,000sq ft centre in Toronto and with its own fleet of vehicles for local deliveries and LTL Transport for the rest of Canada.
‘When we first started dealing with distributors we realized every new market we would expand to would mean having to deal with a different distributor,’ says Paola D’Elia, general manager of the group. ‘Pricing varied and in some instances they didn’t even want to sell to us as they saw us as disruptive to their existing salons business.’
But taking distribution in-house obviously brings with it an additional layer of administration, often requiring skills new to a beauty salon. The GS centre is manned by 20 dedicated staff overseeing 4,500 active SKUS and a further 6,000 deemed as special order. It’s not a route for every business to follow.
‘You need to think about space and convenience and expertise,’ warns Rainer Hoeglmeier, who oversees Goldwell’s New York distribution alongside his six salons. ‘It’s all about economy of size and geography. Discounted costs are quickly off set by warehousing, people, shipping and invoicing. There are so many variables.’
Another consideration is the attitude of the manufacturers. Rainer warns that many will refuse to distribute direct because of fears of divergence. They also have relationships with their established distributors who might object to losing a valuable client. It’s a fine balance. GS had reached 25 locations before it took distribution in-house (it now has 120), but with e-commerce both a threat and an opportunity, smaller chains might look for similar control.
Rainer recommends a distributor for external suppliers but to keep it in-house for private label, as do V’s Barbershops. Over recent years, V’s has grown quickly, opting for a hybrid approach to give it greater control over brand management.
‘We wanted to streamline the quality of the branded goods and have tighter controls on inventories; to be able to monitor whether or not products were being ordered, how often, in what quantities and insure the proper quality provisions of these goods,’ says Emily Brown, COO of V’s. ‘We don’t use this distributor for any product lines, other than our own V’s product line.’
She runs a lean franchise operation, with franchisees encouraged to build up direct relationships with distributors as part of the culture. It means the executive branch do not have the burden of organizing logistics, managing warehousing or the man-power, and all the costs involved.
Mario Tricoci has its 14 locations in high-end areas across Chicago where real estate costs render warehousing unsustainable so it has partnered with a warehouse and logistic specialist to receive and store all products, including own label. Orders are sent by the retail coordinators in each salon to this partner for fulfillment. To manage down costs, replenishment is done quarterly where possible, and the company uses an app that allows truck companies or truckers to bid for the work.
More recently, Mario Tricoci’s management has been updating its technology so it will soon have e-commerce capability that will be fulfilled by the warehousing partner. But according to GS Beauty, it’s a challenge to find a combined software solution for the salon and e-commerce.
‘Software is now our biggest challenge,’ says Paolo. ‘E-commerce is run from our facility but has its own department: separate staff, software, space and overheads. We had to develop work-arounds as a result of the lack of tech specialized for our business model.’
More detail into each of the three members featured is available in the individual case studies, but together they show some of the various solutions available to other members who may have reached the point where bringing some or all distribution in-house could bring down margins and boost e-commerce.