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A Cut Above



Regis Corp. already dominates the U.S. hair salon industry, but the company wants to grow even more by getting closer to its clients.



By Tom Branna, Editorial Director



Published April 7, 2011
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Few relationships at retail are more intimate than the one between a hair stylist and her client. Talks range from kids to love lives to aspirations and even a product recommendation or two. And yet, Regis Corp., the world’s largest hair salon conglomerate, has been missing out on the conversation, perhaps because it has been deeply focused on the big picture.


Regis operates nearly 12,700 locations worldwide. Of that total, 8,000 locations are company-owned, 2,000 are franchised and 2,700 are affiliated. Company-owned locations registered sales of $2.3 billion last year, while system-wide sales reached $3.8 billion. Brand names include Supercuts, Sassoon Salon, Regis Salons, MasterCuts, SmartStyle, Cost Cutters, Cool Cuts 4 Kids and Hair Club for Men and Women. In addition, Regis maintains an ownership interest in Provalliance, which operates salons primarily in Europe, under the brands of Jean Louis David, Franck Provost and Saint Algue. Plus, it maintains ownership interests in Empire Education Group, Inc. in the U.S.and the MY Style concepts in Japan.System-wide, these and other concepts are located in the U.S. and in more than 30 other countries in North America, South America, Europe, Africa and Asia.


According to Regis’ estimates, there are nearly 350,000 salons and barbershops in the U.S., each contributing to a domestic market worth $50-56 billion a year. Worldwide, the professional salon industry totals an estimated $150-170 billion.

 
“Regis dominates this industry; there really is no No. 2,” insisted Randy Pearce, president of Regis Corp., who spoke earlier this month at the Bank of America 2011 Consumer Conference. “There is no ceiling for growth. I’m looking to accelerate growth and opportunities in the near future.”


About six weeks ago, Pearce took over leadership at Regis and he’s pledged to take more market share by focusing on customers and their relationship with the salons. To achieve that goal, the company named David Bortnem, formerly head of operations of the MasterCuts brand, to the newly created position of corporate chief operating officer. At the same time, Brent Moen, who had been vice president of finance and corporate controller, replaced Pearce as senior vice president and chief financial officer.

 
Pearce noted that with consumer confidence low, they are stretching their dollars by getting a haircut every eight weeks rather than six. To entice the consumers to return more frequently, Regis will focus on the customer experience, become customer-centric and measure their satisfaction.

 
“We served 156 million customers last year, but we don’t know who they are, we can’t communicate with them or track their visits,” admitted Pearce.


He lamented that Regis hadn’t done a better job of learning more about its customers. But he pointed out that weekends are the busiest time for a salon and it might not be prudent to have the salon manager, who is also a stylist, punching in data at the sales counter when she could be cutting hair.

 
To do a better job of connecting with customers, Regis is investing in customer relationship management tools to figure out why she’s coming in every eight weeks instead of every six weeks. At the same time, Regis expects better CRM will create more opportunities to relay information about products and services.

 
“We want to communicate with our customers in the salon,” explained Pearce. “We want to tell them about a color sale.”

 
Or, in the case of products, if Regis can successfully track visits, employees will know that a particular customer uses Paul Mitchell products, they can target promotions to the client and build up a loyal base of customers. Last year, haircutting and styling, including shampooing and conditioning, accounted for 72% of sales; hair coloring, represented 18% of sales; hair waving, 4% and other, 6%.

 
“We can’t track customer churn today,” Pearce admitted. “We know that we have a lot of repeat customers and we know that there is a lot of new trial. There are opportunities to bring them back more aggressively.”

 
But creating an effective CRM program takes time. While Regis already has more than one million customer emails in its files, much more information is needed. Pearce said an effective CRM program could take as long as two years to create and implement. So, in the meantime, like so many other companies, Regis is focused on cost-control, adding new franchisees and putting some science behind the art of real estate selection.
 
 
“We have a lot to offer franchisees, and we can accelerate our franchise growth,” he insisted. “We used to build, on an annual basis 400-500 stores from scratch and acquire 400-500 a year. With the downturn, we slowed that growth. We will see an increase in growth next year, but we won’t bounce back that quickly.”

 
If Pearce can make good on all his plans, Regis should have no problem remaining a cut above its competitors in the salon industry.


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