Wait. Are Affiliate Links Bad for the Salon Industry?!
There is SO much information out there about what salons should do with retail. Many sources claim that salons cannot make money on retail sales. This claim has had my ear for several years now and I continue to check if this is true or not for our business. At the end of the day, we do indeed generate revenue on retail. No it is not very much but yes there is revenue after we pay for expenses. So technically the information that says “you cannot” make money on retail is untrue…at least without context it is untrue. If a salon does not sell the retail they have or they carry too many products or too many SKUs, it may be true that they make no revenue or perhaps even lose revenue.
What is an “affiliate link”?
An affiliate link is a customized link generated by a product company or distributor. This custom link is usually subtly branded for YOUR business. The link is unique to you and you can give it out to consumers so if they purchase a product from the company you get a small commission back. Typically the commission is anywhere between 5%-40%.
What made them so popular?
Of course 2020 was a big part of it. When salons were closed for various amounts of time for the shut down, product companies stepped in and upped their affiliate link game and made it more accessible for salons to promote their product offerings by way of these links. This helped salons somewhat and really helped the product companies because they were able to go directly to the consumer.
In 2024 there are also many more independent professionals that either cannot afford to or choose not to maintain a stock of retail. Affiliate links are a way for them to recommend products and hope for a commission from their clients purchases.
The age of Amazon has also contributed to this. Product companies are selling on Amazon because they noticed that other people were selling their products on that platform and clients were purchasing them. Once they realized that, they wanted a bigger piece of the pie so they started their own platforms within Amazon. This bypasses the salons that used to exclusively carry the products.
Who benefits the most from affiliate links?
The product companies benefit the most financially otherwise they wouldn’t do it!. In some cases the salon industry businesses make about the same amount.
The downfall? The gap of purchase between the hairdresser recommendation and the online order is just long enough that many sales are lost.
Some affiliate links allow you to compensate the specific professional and some do not. In the case that a professional cannot be specified, the professional misses out on the product commission.
Should salons stop carrying retail?
Before we ask this question, we need to think about WHY a salon would carry retail. I believe there is (or at least should be) three reasons that a salon would carry retail:
Generating Revenue:
Retail DOES generate revenue. It does not generate as much as you think though. As long as you know this, you can make an educated decision for your business. You have to consider the buy price, the sell price, shipping costs, hourly wages for the management doing the ordering and commission payout to team members. The salon then makes a small amount of profit but as you can see, the margins are slim.
2. Offering Excellent Customer Service:
Online is accessible. In person at an appointment is MORE accessible. Even in this digital age, clients love to walk away with the products that will maintain their hair, skin or nails.
I have spoken to salons that stopped carrying retail a handful of years ago and now have brought it back for the sake of guest care. They found that their guests wanted to buy retail from them in person, not online. Asking clients to do a separate transaction after they leave the salon could be viewed as putting the labor on them rather than the entity providing the full service.
3. Backbar + Education:
This is my favorite point about carrying retail. If you only use affiliate links, you likely do not receive the benefits of backbar. A friend of mine owns a salon and chose to bring retail back into their salon because they realized they were paying so much for backbar. They decided to start purchasing retail products because then they got the backbar for free which was an excellent business decision.
Education is a perk of carrying products also. Historically, product brand education was based heavily in product knowledge. In today’s world, companies are focusing more on the technical based education. Companies invest in their education departments heavily and this benefits the salons that partner with them.
What else is true about retail?
It is a liability. It is sitting on your shelf and you have money wrapped up in it. You can look at any product shelf and see a bunch of cash in the form of bottles and pucks.
If a company requires you to carry ALL of their products this could be problematic. This is where many salons get into trouble with retail. If the product line requires this, negotiating may be helpful so you can do what is best for your business. Carrying all of the SKUs is not always ideal for small businesses.
My opinion of what the future holds?
If you know me you know that I do not believe that the same decisions are correct for all people, all businesses or all professionals.
I personally like having retail available for our clients. I think it contributes to them having a great experience. We do however evaluate product inventory every quarter to see if the products we are carrying are selling. If they are not selling, we make changes. We do have our affiliate links on our website because a handful of our guests like the option.
There is a right or wrong answer. I do believe that saying that salons do not make income on product sales is not correct and I have the data to show it.
You can have an excellent business and only utilize affiliate links if this works best for your business model.
I do believe that product companies will continue to grow further and further away from the hairdressers they were once loyal to. With the digital age, they are able to make sales easier alone without the salons as the liaison. I imagine the partnerships will change over the next decade dramatically.
There are many professional product companies that stand by the salon professionals…maybe that’s where our allegiance should go…