Wrinkles appear in beauty business in 2013

Wrinkles appear in beauty business in 2013

The business of making people look good, or at least make them feel good is itself not doing too well these days. Apparently, the urge to look good has slowed down in tandem, so to speak, with a slowing economy. 

The Rs 13,000-crore salon and SPA business that witnessed 25 to 30 per cent growth for a decade till last year, is set to post about 25 per cent decline in 2013, according to the CEO & Director of R&R Salons, Rahul Bhalchandra.

The five-year-old, Bangalore-based company runs the You Look Great (YLG) chain of salons. Paradoxically, the business is seeing an attrition rate of 100 per cent among hairdressers (or hair stylists), says Bhalchandra in conversation with S V Krishnamachari of Deccan Herald.

Excerpts:

How would you describe the salon business in India?

Actually, there is very little differentiation among salon chains, except that some are unisex and others exclusively cater to women. The services are similar. Of course, as the market matures, there will be differentiated offerings.

India’s demographic profile and the desire to look good must be a good proposition for you, isn’t it?

To be honest, this is not health service, it’s vanity affair; people come because they want to look good. But there is definitely a slowdown here, like in all other businesses.

Could you elaborate?

Well, during slowdown, people tend to cut down on their visits to salons or downgrade the services they avail. Lesser visits obviously means lesser revenues.

What is the size of the salon business?

The estimated market size in India, based on derived figures, was about Rs 13,000 crore last year. However, it is down to about Rs 10,000 crore this year (2013), reflecting the downtrend everywhere.

Is there an increased demand for hair stylists these days?

There is a challenge  because too many salons have come up in the past few years, Bangalore itself has close to 1,000 salons. The demand-supply gap is in favour of stylists who are not many in India. Their market rates have therefore gone up.

How much do they earn?

At YLG, an entry level stylist earns about Rs 10,000 to Rs 12,000 per month. The experienced ones earn as high as Rs 70,000, typically those with 10 years of experience. And they would have barely had 10 years of education.

Is it tough to retain consumers?

Yes, while they are loyal to their stylists, the stylists keep moving from one salon to another. Loyalty is hard to build, hard to break in this business.

How and when did you take the plunge to start YLG?

I was associated with the Future Group’s wellness division for many years, launching their salon chain. In June 2008, I quit my job and thought of doing something different, of creating a brand. When I got a chance to fund my idea, I set out on my own. Helion Venture Partners invested about Rs 20 crore in June 2008 and we opened our first salon in January 2009.

What has been the progress over the years?  How much does it cost to open a salon?

Well, today we are a chain of 33 salons comprising 28 in Bangalore for women and five in Chennai. We opened 15 stores this year and plan to launch 30 more next year. We plan to shut down our three salons in Mumbai and focus more on Bangalore and Chennai. It costs about Rs 25 lakh to open a salon in a city like Bangalore and it takes about three to six months to break even.

What is the age profile of customers and how much do they spend at YLG?

Some are as young as 11 years and there are those who are 70 years of age. The average spend per customer is about Rs 1,200 and it has been growing at 10 per cent. The services availed are facial, waxing and hair colouring.

What is the total investment in YLG till date?

It is about Rs 90 crore. We got the second round of funding of $10 million in May last year from private equity firm Everstone Capital, Helion also invested about $1 million. I and my family have invested about Rs 1 crore.

What is your revenue model?

We get about 95 per cent of our revenues from services at YLG, the rest comes from our two beauty academies called International Skin & Hair Academy.

What was your turnover last year and estimated revenues for the current financial year? What is the profit margin in the salon and SPA business?

I can’t share revenue details. As for margins, the earnings before interest, tax,  depreciation and amortisation in our business is in the range of 25 to 30 per cent.

Who are the major players in India and globally?

VLCC, Kaya, Lakme and Naturals are the big ones in India. The largest company in this business globally is Regis Corporation. (It posted revenues of $2 billion for the year ended June 2013, 4.9 per cent lower than its previous year).

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