Sally Beauty Holdings is the largest distributor of professional beauty products in the US when measured by store count, with some 5000 physical outlets around the world driving nearly $4 billion worth of sales. Fifty years after its formation, the firm has found that its online presence has been substantially touched-up by the COVID-19 crisis.
Since April, e-commerce sales are up 278% year-on-year, topping $137 million in the most recent quarter to the end of June. And 50% of total e-commerce customers who’ve engaged with the firm during the pandemic period have been new customers to this channel.
That growth rate peaked in April at 353% and while it’s fallen off now to 115%, the shift to online is one that looks to be a permanent fixture as resurgences of the virus around the US bring about localised lockdowns. CEO Chris Brickman says:
We have seen data which suggests that consumer sentiment was increasing until the middle of June, largely in line with states re-opening and the hope that the country had beaten COVID. But sentiment then levelled off and retreated as COVID fears re-emerged in new parts of the country.
In contrast, we also saw consumers change their purchase patterns. While spending early in the quarter was quite depressed as consumers were addressing sudden unemployment and the uncertainty of COVID, we increasingly saw our consumers less cautious of spending even in the face of unemployment and fears of recession.
People still want to spend money on beauty, he adds, and consumers may now have surplus discretionary spending because they are spending less elsewhere on things like going out to restaurants, entertainment or travel or because they’ve received stimulus payments from the government. He predicts:
Consumers will cut other expenses before they stop investing in their appearance. They want to feel good about themselves.
Even in lockdown, there are consumer retail trends at play which have worked to the benefit of Sally’s online operations, he adds, such as a shift to DIY styling in the absence of professional salons being open. It’s the same sort of ‘stuck at home’ driver that’s fuelled growth at the likes of Lowes and Home Depot:
Whether in home improvement or hair color, consumers have responded to the fear of COVID by spending more of their time at home taking on tasks that they previously would have paid others to do for them, such as coloring their hair or doing their nails. Our Sally Beauty retail business is perfectly aligned with this trend. Sally is the industry leader in professional color for home use. Our customers can find all of the needed solutions or products either online or in our stores. Additionally, they can find How-To content on our digital sites, starting with Hair Color 101 all the way through more complex application techniques. Alternatively, a consumer can talk [online] to a Sally associate at a store who has been trained in hair color. We have the right products and the right expertise to respond to the consumer DIY trend.
With some lockdowns easing and stores able to re-open, attention can shift back to an omni-channel mix of online and offline. Brickman says the firm is now focused on ensuring safety at the physical end of that mix:
We started this journey by putting safety first. Our team members are required to wear masks and gloves and we are actively monitoring for compliance. We have installed the plexiglass screens at the counters, created social distancing operating procedures and our stores are regularly cleaned. We took similar steps at our distribution centers, while increasing capacity.
We also offer flexibility. We created curbside pick-up for our customers and have recently re-energized that offering in areas seeing COVID increases. We rolled out same-day delivery at Beauty Systems Group to address the need to be a busy stylist. We rolled out ship-from-store at Sally Beauty to increase the inventory that was available to our retail consumers. We have spent time optimizing both efforts and growing our [omni-channel] capabilities and expect to continue to add services.
It is also the case that we are able to operate in the COVID environment because of what we are not. We are not a mall-based retailer - very few of our stores are attached to a mall complex and most of our small footprint stores are located in strip malls or in developments with big-box retailers, like Walmart or Target or other large food retailers that stayed open during the crisis. This means that we are not dependent upon foot traffic at department stores or apparel outlets for our business. It also means that we do not have to rely on others to create a safe environment for our customers.
We do not face the overhang of mall stores and the fear that consumers may have of mall crowds going forward. In addition, our store footprints are relatively small and social distancing is relatively easy to enforce. We are building strong digital platforms at an accelerated pace…we will continue to prioritize investments in our digital platform and new delivery service models in order to better serve our customers and drive growth in a disrupted environment.
Another aspect of the accelerated relevance of the omni-channel consumer retail experience in the beauty sector. What’s being talked about here may not be as sophisticated a proposition as that of L’Oréal, but it’s another style guide on how the basics of retail can be improved and sustained through a balanced combination of online and offline. Clue - as any good beauty stylist knows, the secret is in getting the blend right…