Does GroupOn Work For Beauty Salons?

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If you don’t know GroupOn, it’s a website that offers great discounts for it’s users. If you are a member you can make great savings – up to 90% –  at local restaurants, salons, cinemas, hotels, etc. It’s a brilliant idea and it’s a company growing very, very quickly.

As a beauty salon, you could have the ideal offering that fits into GroupOn, you just need to make sure you can afford to make the offer.

Create New Clients

For the suppliers of the offers, the idea is that if you create a great offer and GroupOn put you in front of potentially thousands of local people that fit the profile of your business. It’s then down to you to create the loyalty and either up-sell to them when they are there, or turn them into a regular customer.

Loss Leader

That said, you are effectively creating a loss leader in a similar way to the supermarkets. But… it could be one hell of a loss.

For instance, if you offer a £20 treatment, the average sort of offer seems to be 70% off. So already you are down to a £6 sale (70% of £20). You then share that money with GroupOn – after all they have done the sale.

So, your £20 treatment is now worth just £3 to you – £2.50 if you are VAT registered.

Granted, that £3 sale could generate a loyal client but I have two personal worries, and both stem from experience of running the beauty salons and trying various offers:

Loyalty

Firstly, I would wonder if someone who is looking for 70% off bargains is someone who would then go on to be a full paying regular client. I would also question how loyal that person would ever really be to my salon if they love a great offer.

It also creates an expectation with bargain hunters.

In one of our salons about three years ago, our sales weren’t great so we started doing some great monthly offers. They were popular but our cash flow reduced because of the decrease in revenue. I also heard people actually shying away from buying treatments or courses because they would ‘wait until they are on offer again’.

Cash Flow

Secondly (and this was the main stumbling block for me as our salon is quite busy at the moment). If we started earning just £3 from a 45 minute treatment we would be seriously jeopardising our cash flow and client loyalty.

If just 100 people took us up, we could be losing £1,700 in lost sales. Meanwhile my costs of paying staff and running the salon would be the same.

We’d also potentially be turning down our regular clients who are already loyal.

Summary

I think GroupOn is a great idea and I think it fits some business models perfectly. But, it’s worth deciding if it fits your beauty salon business.

In a beauty salon, where every therapist has to earn their money, can you afford to be paying your therapists what you pay them + the overheads of your business, and take around £4 per hour in sales?

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About Author

Working in Hampshire (UK), myself and my wife have a beauty business. I’m the guy that sits in the office doing marketing and numbers. My experiences are based around these skills.

5 Comments

  1. I totally agree with this article above. Groupon came to see us and wanted us to do a £60 colour treatment for £25, they keep £12.50 and since we are VAT registered we get about £11. Now that client will be in that chair for up to 3 hours and the product cost (the colour) will be about £10 so you can see how much money we would lose. We could just about swallow that if say 50% off those customers came back to us a few times paying full price but I truly believe you would keep less than 5% – if that!! Groupon sold it to us that you have to generate extra sales when they are in the salon but as a company we do not pressure sell. We then negotiated a different deal where we just did a cut and finish which usually would be £25 for £10. Groupon initially agreed to this but then never contacted us again presumably due to the fact that they wouldn’t make enough money out of it.

    Anyway, this prompted me to do our own Groupon style campaigns. Have a look for some ideas : http://www.the-salon.net/offers.php

    We would be happy to expand this out to other salons eventually letting them set a reasonable price though rather than demanding you give at least 60% off.

  2. I agree completely. Offering these kind of deals would be huge losses for the average small business and would offer no guarantee of ongoing/repeat business or options to cross sell. I certainly wouldn’t be looking to do Groupon deals with my window cleaning business for the same reasons as your beauty businesses. Also, if I look at the deals I’ve bought (like iPhone covers; City Bus Tours; and afternoon tea deals) there’s been nothing extra in it for the providers, but they’re the type of deals that rely on VOLUME of deals to generate profit. Huge difference.

  3. We have solved this problem.
    When a salon runs a coupon deal with us it makes the coupon only redeemable by booking online. The salon can control what slots are available and so can spread the load.

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