As the coronavirus pandemic spreads, government-mandated shutdowns have hit the professional side of the beauty industry hard. Before the pandemic struck, the US hair and nail salon market was forecast to be $64 billion in 2020 and employed 1.7 million people, according to IbisWorld. As of March 27, BehindtheChair.com said that less than 50 percent of hair salons were still open.
The economic impact is already significant and, like the pandemic itself, has yet to reach its peak. According to Kline, if the salon closures are in place even for only one month, the loss in industry service revenues will be an estimated $5.5 billion. They predict consumer behavior and spending in 2020 will shift even more dramatically than it did in 2009.
Salons Service Revenues:
- Revenue was down -8.3% in 2009 and the number of salons -2.9%.
- The impact of Covid-19 is projected to reduce revenue by -33% and the number of salons by -20%.
Frequency of Salon Services:
- During the great recession, the industry saw an average 8- to 10-week service interval increase to 10 to 16 weeks.
- A similar pattern is expected once salons reopen after the pandemic subsides.
DIY Haircare (e.g. at-home coloring):
- Retail sales of traditional colorants were down -2.4% in 2009; sales of colorants to salons -1.6% in 2009.
- It’s projected that during the Covid-19 pandemic salon sales of DIY colorants of personalized formulas will offset some of the salon declines; traditional retail projected to be up 3% in 2020.
Professional Haircare Product Sales (through salons and retail channels – online and offline):
- During the recession, sales declined -6% in 2009 and saw a shift to masstige, mass product.
- Covid-19 sales are forecast to decrease -23% for 2020 driven by lower consumer discretionary spend; shift to masstige, mass product.
Consumer Point of Purchase:
- Mass retailers, specialty retailers (e.g., Ulta) benefited from the decline in in-salon sell thru and shift to mass/masstige products during 2008/2009.
- During the Covid-19 pandemic, online sales are projected to increase from 5% to 10% due to both salon and retail store closures
According to Kline, sales of salon haircare products were flat in 2008 and subsequently declined by over 6% in 2009, the year most impacted by the recession. Sales growth resumed slowly and at a somewhat inconsistent rate, with more moderate and steady growth resuming in 2012 and thereafter. By 2019, sales reached $3.7 billion, an increase of 3.6% over 2018 and a CAGR of almost 4.0% from 2012.
In 2020, Kline estimates that salon haircare products will most likely realize $2.8 billion in annual sales in the United States, a drastic decline from 2019 performance.
Kline’s Outlook Scenario for 2020:
- Best case: Reopening of salons during Q2 of 2020, monthly unemployment rates ranging from 5% to 10%.
- Most likely case: Reopening of salons during Q3 of 2020, monthly unemployment rates ranging from 5% to 15%.
- Worst case: Reopening of salons in Q4 of 2020, monthly unemployment rates over 15%.
Photo: Jonathan Weiss via Unsplash