INDUSTRY STUDY
SALON AND SPA

TABLE OF CONTENTS 1. OBJECTIVES OF THE STUDY A. Class Academic Objectives B. Group/Personal Objectives

2. INTRODUCTION A. Nature of the Business B. History C. Industry Background

3. RESEARCH DESIGN A. Scope and Limitations 4. PRESENTATION OF RESULT A. Players of the Industry B. New Entrants C. Buyers D. Bargaining Power of Buyer of Salon and Spa Industry E. Suppliers F. Substitutes

5. ANALYSIS AND CONCLUSION

I. OBJECTIVES OF THE STUDY

A. CLASS ACADEMIC OBJECTIVES

The research aims to evaluate the researchers’ understanding relevant to the undertaken course which is the “environmental analysis”. This would require the researchers to put into practice the studied theories into actuality.

B. GROUP/PERSONAL OBJECTIVES

Basically, the researchers have the goal to acquire knowledge about the salon and spa in terms of the possible and probable effects of external forces on the survival and growth strategies of the industry.

* To know what determines the level of profit in an industry/SPA industry.

* To understand how the competitive structure of the industry determines its profitability.

* To know how is industry profit shared between the different firms competing in SPA industry.

* Analyze firm's industry environment to know its profit potential.

* Identify the main structural features of the industry that influence competition and profitability.

* To be able to explain why competition is more intense in some industries and profitability is lower.

* Use structural trends within industries to forecast changes in competition and predict future profitability.

* Analyze competition and customer requirements in order to identify opportunities for competitive advantage within an industry.

* Develop strategies to influence industry structure in order to improve industry profitability.

* To understand the three sets of players in the SPA industry environment: customers, suppliers and competitors.

* Substitutes, barriers

II. INTRODUCTION

A. NATURE OF THE BUSINESS

A salon is a facility which offers beauty services. Salons provide a wide range array of services to men and women; they can be found inmany regions of the world. Growth in the salon sector tends to be constantly expanding, as more people grow interested in beauty services and new services are developed to expand the existing customer base. Employees at salon, known as aestheticians or cosmetologists, depending on the types of services they offer, usually require a license from the government in the area where they work.
Some salons prefer to focus on a specific type of services. Hair salons are a classic example of this. At the hair salon, customers can get haircuts, hair color and various hair-dressing services. Salons in urban areas may also on hair of a specific ethnicity. Asian hair, for example, cannot be handled in the same way that Caucasian hair is.
Salons can also specialize in services such as nail care, skin care and so forth. Others offer wider array of services, allowing people to come to one location to satisfy an assortment of beauty needs. Services at a salon can include manicures and pedicures, facials, body wraps, body polishes, waxing, hair threading, make-up and beauty consultations.
Due to continuous innovations, services extended and spa had been included in most salons of today. Spa services included massage, along with spa treatments such as mud baths. High-end spa/salons provided packages which allow people to purchase a bundle of services for an event or occasion.
Salons operate in different ways. Some lease out ‘chairs’ to their employees, with each person in the salon actually working as an independent contractor who makes rental payments for the chair to the salon owner. The lease may come with access to a reception person who answers the phone and takes appointments, and the employee is expected bring equipment and supplies beyond the basics to the salon for work. Other salons pay their employees an hourly wage or make payments based on the services they’ve provided to customers within the period. Some salons operate in 60/40 policy. The 60 % of the daily total income is for the owner and 40 % is divided to employees. Hence, owner provides everything, from supplies to equipment. Employee expected to render their service.

B. HISTORY

Salon

The idea of the beauty salon is not a new one. In fact, going back to ancient civilizations, we can see that hairstyles and the people who loved them have been setting fashion trends for thousands of years. Even though through the ages hairstyles, cuts, and trends have changed hundreds of times, there are some things that have remained constant through time, like women wearing long braids or wigs, men keeping hair clipped or shaved short, and even coloring hair is not a new, modern practice.
The ancient Egyptians would get their hair clipped very close to the head, especially in the upper classes, in order to don full, fancy wigs atop their heads for special occasions, public outings, and ceremonies. The women wigs were designed with gold and ivory trinkets, and were long and often braided. The beauty salons back then were where these wigs were ordered and made. Women in ancient Greece often had long hair, tightly pulled back. Even at this early time, women would dye their hair red and sprinkle gold powder on the hair, decorating their coiffures with tiaras and flowers. Men wore their hair short and often shaved, probably for comfort and convenience when putting on their gladiator helmets. Beauty salons during this time were inside palaces of the rich and noble, though there were also some on the streets for the commoners as well.

Ancient Rome for much of its time had been a society of copycats, where the norm was to follow the lead of the Greek fashions. Some Roman styles saw women dying their hair blond or wearing wigs made from the hair of slaves that had been captured. Beauty salons in Rome began to make hairstyles more ornate and elaborate, to the point that hair was often styled around wire frames that women wore on their heads. The upper classes were tended to by slave cosmetologists and there emerged many beauty salons and barber shops for different classes to frequent.
In the Middle East hair was traditionally hidden completely when out in public, although men would go to salon bathhouses and wash their long hair in a henna rinse, compliment soft the local salon stylist.
Traditionally in China, young girls wore their hair in braids, which required the help of a friend or hair stylist, and women hair was pulled back and wound around in a bun. Men’s heads were traditionally shaved, except for part of the back of the head, which would grow long and stay braided. In Japan, the hairdresser of a Geisha certainly had her work cut out for her, styling the women hair heavily with lacquer decorations in very large ornate styles.
During the 15th century, the time of the Renaissance saw one of the most painful hair trends ever to hit beauty salons. Women during this era would not only pluck their eyebrows, but would pluck the entire front hairline that ran across their head in order to make it look like they had higher foreheads! Obviously the old saying Beauty is Pain rang loud and clear to women back then, too. This crazy era was followed by women rushing to beauty salons for white face powder and red wigs, in order to keep up with the fashion trends that had been set by Queen Elizabeth with her super pale complexion and bright red hair. Thus we have a very brief summary of some of the different hairstyles that beauty salons everywhere were called upon to create for customers. Whether it was a long braided wig in Ancient Egypt or a good old fashioned hairline plucking, hairstylists have always been sought after to give people what they want in hairstyles.

Spa
No one knows exactly where the word spa comes from, but there are two main theories. One is that spa is an acronym for the Latin phrase, "salus per aquae," or "health through water."
Others believe the origin of the word "spa" comes from the Belgian town of Spa, known since Roman times for its baths. They speculate that the town was so prominent that the very word spa became synonymous in the English language with a place to be restored and pampered. With more and more people looking to spas for health, wellness, anti-aging and relaxation, spa-going has been described as a new cultural trend. But, in fact, spa-going (i.e., social bathing in "healing waters") has been practiced for thousands of years - from the Mesopotamians, Egyptians and Minoans, to the Greeks and Romans (the word spa actually originates from the Latin verb spagere - to pour forth), and later, the Ottomans, Japanese and Western Europeans.
Modern spas have their roots in ancient towns famed for the healing powers of their mineral waters and hot springs. Travelers would come to "take the waters" and restore their health.
The practice of bathing in hot springs and mineral waters dates at least to the Babylonians and Greeks, and knowing people, probably much sooner!
In the 19th century, Europe's great spas were destinations for the wealthy, who went there to "take the waters." Water treatments are still considered the heart of the spa experience in Europe. Today massages and facials are by far the most popular spa treatments in America.

Spa-Going Hits Mainstream, Goes Global
With the advent of these and other diverse spa offering, the spa - which by the mid-20th century had become the rarified domain of wealthy women looking to lose weight - reclaimed its relevance in a society increasingly focused on prevention, healthy lifestyles, fitness, spirituality and relaxation. With record numbers of people turning to the spa for some of their most important lifestyle pursuits, today's spa experience covers medical and spiritual programs to outdoor adventures and exotic travel - with spas located in virtually every global region, including Africa, the Middle East, and the former Eastern Bloc. The spa aesthetic meanwhile, has broken out of the spa and into popular culture, influencing everything from fashion and cosmetics, to architecture, home décor, and cuisine.

C. INDUSTRY BACKGROUND

A beauty salon or beauty parlor is an establishment dealing with cosmetic treatments for men and women. Other variations of this type of business include hair salons and spas. There is a distinction between a beauty salon and a hair salon and although many small businesses do offer both sets of treatments; beauty salons provide more generalized services related to skin health, facial aesthetic, foot care, aromatherapy, — even meditation, oxygen therapy, mud baths, and innumerable other services. While Spa Salon is define as a beauty center where professional skin care treatments like facials are offered by a licensed and trained esthetician. They extract and cleanse skin by using proper professional skin care products and equipment such as steamers, Galvanic and LED machines to achieve the best results. The process is known as beauty without a knife.

The influenced from other country inspire the Filipino entrepreneur to bring Salon and Spa in the whole Archipelago of the Philippines including Davao City. Today, great numbers of salon and spa are fast emerging because the people want to relax and be relieved from stress from their hectic schedule. Beauty salon and spa is about more than good grooming, massages and waxes because people consider this as a place where they can go to unwind. For some individual, they are a kind of modern-day sanctuary. The challenge Salon and spa owner faced is the need to provide top-notch beauty treatments and with competitive pricing in order to compete with their rivals.

III. RESEARCH DESIGN

It is an overall framework that indicate what information is to be collected and from which source and by which procedure in research project. In this research, the first stage is to divide the group into three each group is task to interview at least two salon and spa, in which we chose the best three salons and spa as focus of our study. Each group is given a letter of permission to conduct a formal interview and a guide questions.
This study involves actual interview to owners and employees conducted in different salon and spa in Davao City. The respondents were approached through a formal request letter and question guidelines. It also focused on the services offered and its price, age of the customers, there social status, operating hours, and number of employees.

A. SCOPE AND LIMITATIONS

The scope of study is limited only to Davao City particularly in downtown area. It tries, however, to find answers on some of the issues raised in this study. It specifically presents, discusses and investigates the nature of business and its meaning sources and other aspects of Salon and Spa in Davao City, the major problems of investing in the industry as new entrants. This study covers the period of August to September 2011.

IV. PRESENTATION OF RESULT

A. Players of the Industry
(Competition, Programs and Strategy, Market Share and Cost Profile)

Salon A (Operation and Competition Strategy)

Operation

Salon A is owned by a professional hair stylist (Gay) provides hair services to both women and men, but the vast majority of its clients are women. They provide haircuts, coloring, rebond, hair styling, manicure, pedicure, foot spa and eyebrow shaping. Over 10 years of operation and have a new branch near Davao Doctors College. There operating hours daily is from 9:00am to 9:00pm.

Customer Base
Salon A customers are students, women, office workers and man. Some are there loyal customers since they opened. There marketing tool is their word-of-mouth and there free short head and foot massage every time you avail their services. As the majority of customers are students and workers, they are highly price sensitive. Therefore an increase in price would lead them to consider going to a competitor.
The age demographics of its customers are as follows:

50% -- 15-25 years old
40% -- 26-45 years old
10% -- 46-60 years old

Competition

Salon A is located in downtown area near mall, school, offices and other establishments. It has several competitors in the immediate neighborhood. There are five other salon and spa offering almost the same services and located in the same street. Salon A prices are lower than compared to other salon and spa but of a little difference. All of them are renting their place and have several employees mostly are gays and women. They can adjust there pricing strategy fast and easy.
Other competitors in the same area have their own marketing strategy. For Salon A they offer packages and have a short head massage for hair services and a free short foot and hand massage for pedicure and manicure services.

Salon B Tressess Salon

Salon C

B. NEW ENTRANTS

Salon and Spa in Davao City are everywhere it’s like a people part of their weekly and monthly schedule. Younger customers bargaining power is very high because they have high mobility. They can have an instant make-over anywhere in the city. Their purchasing power is not too high. Younger newcomers move frequently and are unlikely to be loyal customers. In addition they are more demanding: require new styles, new services and use of credit cards purchases. Current customers are leaving without replacement. The current customers are highly price sensitive since they are already old customers. As such, the threat from competitors is high as some of them younger and much more aggressive.
The threat of new entrants is high. Any hair specialist who has access to some capital can open a salon. It has low entry and exit barriers, so competition is fierce. Employees bargaining power can be very high in the salon business; customers are loyal to the specific hair stylist, not the salon itself.
Salon and Spa is also highly competitive nowadays due to the lifestyle of the people that they need to relax and rejuvenate. They need to release the stress that they encounter in their daily activities in work, family, etc.
Base on our industry analysis we found out that there is a high level of new entrants because the industry does not require to invest large financial resources to be used in investing in the capital equipment and in the research and development. The new entrant is not threaten by the existing firm even though they already earned strong customer loyalties because there are so many effective ways to capture customers attention. They can market their service through the internet, sending pliers or inviting friends to come over to try the service for free or given a discount. In persuading distribution channels to access a new product, the new entrants often provide incentives in the form of price discount, promotions and cooperative advertising. Since the new entrants and the existing competitors are in the same industry, it is up to them to strategize in marketing the services. The key also is in finding the differing abilities and how to deal with the impact of industry forces. The government does not prohibit or limit new competitor from entering the industry. It is easy to get licensing requirement, access to raw materials, pollution standards and product testing regulation are not strongly regulated. There will be a little problem in the manpower like the cost of retraining employees, purchasing support equipment, enlisting technical assistance and redesigning products. In the economies of scale the unit cost of a product declines as the volume of services increases.

As a new entrant, we have to consider the competitiveness, locations, strategies in putting up this kind of business.
For competitiveness, we made a survey on the prices, services offered. And we found out the prices from downtown area to areas outside the center of the city are affordable. Aside from that we also considered the location. Most spas & salons are located near the schools, offices and malls and some are near the subdivisions / villages. We can conclude that salon & spa located near the schools & offices are more competitive compared to ones located near the subdivisions. With these informations, we will know our strategies in putting up this kind of business.

It is important to note that barriers in market entry change over period of time, as an industry matures, or as a result of strategic decisions made by existing competitors. Low entry and exit barriers reduce the risk in entering a new market and may take the opportunity more attractive financially.

Exhibit I : Price List and Services Offered

Type of Service Salon A Salon B Salon C

Hair Rebond 1,500.00
Hair Relax 300.00
Hair Spa 300.00
Hot Oil 300.00
Haircut 100.00 100.00
Hair Iron 150.00
Hair Color 400.00
Blowdry 100.00 w/ Shampoo 120.00

Manicure 60.00 80.00
Pedicure 60.00 80.00
Foot SPA 150.00
Foot Spa & Pedicure 200.00
Eyebrow Threading 100.00
Hair and Make-up 400.00 500.00
Backmassage 130.00
Whole body massage 330.00

C. BUYERS

The power of buyers describes the impact customers have on an industry. When buyer power is strong, the relationship the buyer has the most influence in determining the price.

The bargaining power of buyers of our industry, the “Salon and Spa” increases when they have the ability to:

Avail of the services that represents a significant fraction of the buyer’s cost that is undifferentiated
Incur low switching costs when they change vendors
Be price sensitive, with other options available.

D. Bargaining Power of Buyer of Salon and Spa Industry

Although it is a high growth industry with strong competition , there is still no uniformity of prices of the services offered. Operators of these business price the services as per (a) package (b) individual . hence, buyers have limited bargaining power when it comes to pricing or bundling in of additional services.

The most targeted clients are females but with changing trends with growing wellness and health consciousness, making men as the new target clients.

E. SUPPLIERS a. DAVAO BIOSKIN TECH LABORATORIES
Bioskin started as subsidiary company on April 2002 and started as independent company on January 28 2005. We are a one stop shop when it comes to skin care products of both natural and synthetic origin. In line with this, we customized and personalized a made to order skin care (OEM) because we offer a wide range of Packaging Materials from Bottles, Jars, and Canisters to a diversified active ingredients and raw materials.
Our client ranges from budding entrepreneurs, professional Dermatologist, Direct Selling Companies, and Consumer Trading Companies-local and export. Our product reaches on some parts of the world because we are dedicated in providing the perfect solution for all our client needs. With our continued Research and Development projects and sustainable skills training you can never go wrong with us. Duly licensed by the Bureau of Food and Drugs, the Department of Trade and Industry and by the Philippine Securities and Exchange Commission, we ensure nothing but excellence in every product that originate from us.

b. TBS Beauty Products is a ONE-STOP SHOP ( they don’t have office in Davao City but they ship there products through cargo ) where they provide all SALON, NAIL and SPA business a wide range of beauty equipment, tools, accessories and consumables to cater for the growing beauty and wellness needs. There company addresses the discomfort experienced by busy beauty and wellness professionals looking for the right products. Designed with the Beauty enthusiasts in mind, TBS Beauty Products' unique ergonomic shape, designs and formulation give you the leverage to apply and use easily and provide good comfort to the beautician and clientele.TBS Beauty Products has been riding a growth spurt, having discovered the professional Beauty Products market that gave us a push to new potential volumes through local market and competing in national level. Bolstered by appearances in advertising in trade publications and end user magazines, they were able to develop an additional channel through there website.

They offer an irresistible discounts and lots of freebies for the start-up salons, nails and spas including trainings for the service providers and the employers.

In all, the outlook shows a healthy company with good growth prospects, looking to manage its orderly growth in the future

F. SUBSTITUTES

Manicure/Pedicure/Haircut - Home Service
Massage – Home Service (Blind), massage equipment/machine
Hair Coloring Service – Self application (Wella, Loreal and china branded products)
Skin Whitening Service/Bleaching – Self application (Soaps like Belo, Papaya soap, bath salt, milk bath)

V. ANALYSIS AND CONCLUSION