Financing For Beauty Supply Stores
A recent survey found that 82 percent of women believe that social media helps them discover and engage with beauty brands, as well as driving the standard and definition of what beauty and beauty trends are. In the past, the beauty industry was defined by industry trend setters, but through the use of social media such as Facebook, Instagram, Twitter, YouTube, and so forth, the beauty industry is revolutionizing what trends are in and which are out at an incredibly fast paced – the beauty industries perspective is now experiencing a cultural shift that many beauty supply stores will have to change with in order to compete in this incredibly diverse and competitive industry.
The beauty supply business industry primarily focuses on selling a wide variety of beauty products and cosmetics, ranging from nail care products to hair care, skin care, and facial products. The major United States companies in this industry include well-known brand names such as Sally Beauty Supply, Ulta, Sephora, L’Oreal, and divisions of L Brands (including Bath and Body Works and Victoria’s Secret). Global sales for the beauty supply store industry are expected to reach $265 billion by 2017, with the United States creating over $16.5 billion in annual revenue. This extremely high generated annual revenue has led to over 16,000 beauty supply stores in the industry – and industry analysis for beauty supply stores show that this skyrocketing number is only going to continue to grow; this business will continue to be incredibly profitable for many beauty supply business owners, especially with the increase in more expendable money in the pockets of many American’s today. The bad news? The United States beauty supply industry is incredibly concentrated, meaning the top fifty beauty supply companies have about 75 percent of the beauty supply industry revenue. While this can be a cause for concern for some beauty supply businesses, reviewing industry trends and catering to key demographics and their new demands will allow most beauty supply businesses to thrive.
Many beauty supply businesses are looking for ways to stay on top and ahead of the competition in this fiercely competitive industry. Staying on top of all the technological trends is absolutely essential in this industry, as well as keeping all of the currently trending products, or the “must have” items. Hair brushes, foundations, conditioners, skin treatments, eye lash appliances, and so many other products are constantly shifting from being ‘in’ and popular to fading out of fashion in an instant. As well as implementing these top products into a beauty supply store, knowing the products and perfect selling points is just as important since many consumers are wanting a more personal experience and interaction when entering any type of store. In order to stay on top though, stimulating store sales through the constant introduction of the new and cool products are what is keeping this industry going.
Beauty Supply Industry Trends
- Experience at Retail Locations: Many beauty supply businesses are taking a lesson from Sephora since their innovative “TIP” (Teach, Inspire, Play) concept was implemented into their beauty supply retail locations. The goal of TIP is to creative an interactive experience for consumers by offering a variety of services and classes to make the experience of visiting their retail store an exciting and individualized experience – a major demand among younger generations.
- Asian Innovation Continues: 2015 was the breakthrough year for implementing Asian innovation products, but that trend has exploded and is constantly increasing in demand. Implementing innovative products from Korea, Japan, China, and India into a beauty supply store is incredibly important in the upcoming years. Why? Because the philosophy of most of these Asian companies is to respect the skin and improve it from the inside out – including innovative botanical extracts and other facial products. These businesses fall in line with the growing demand of all natural and green products.
- All Natural Products: Over 49 percent of Millennial women prefer natural, organic skin care products – but as mentioned in the next trend, millennial’s are not the only demographic to reach when choosing which products to carry. Every single generation is demanding all natural products in every industry, but especially in the beauty supply industry. No consumer wants to put chemicals and unpronounceable ingredients into their body, so beauty supply businesses need to be focusing on more natural products with fewer ingredients – we all want to know what is in our products! The growing number of consumers demanding all natural products is skyrocketing, but in addition to the product ingredients, consumers are also becoming more aware and conscientious of the packing and sourcing of these green products. Implementing these types of products into a beauty supply store is one of the best business moves to stay ahead of the competition.
- Reaching All Demographics/Cultural Marketing: Marketing has always been directed at young women, but some of the biggest industry growths are due to the increase in Baby Boomer women and men of every age. As well as gender biases for marketing in the beauty supply industry, there is also a past of marketing towards different ethnic groups and supplying items to a specific gender and/or ethnicity, but today there is a culture shift happening in the beauty supply industry. To stay on top and reach all demographics, beauty supply stores need to be focusing on communications to create inspiring experiences and content that resonates with all groups to draw in new customers.
- Social Media/Technology/Ecommerce Websites: In today’s technology driven society, every business owner knows that customers will review a business online before they will ever visit a store, so staying on top of social media, as well as having blogs, is important – especially because social media is the leading factor in how women discover and engage with beauty brands. Selling the top beauty brands and innovative products is not the only way to draw new customers in to a beauty supply store – creating content to reach a wide variety of consumers, engaging customers, exploring a variety of social media platforms, and implementing an online website to buy and search for products is essential.
Types of Beauty Supply Store Loans
| Types | Rates | Terms | Funding |
|---|---|---|---|
| Bank | 6-10% | 3-7 years | 14-30 days |
| SBA | 6-10% | 3-7 years | 10-30 days |
| Line of Credit | 5-15% | 1 – 3 years | 7-30 days |
| Alternative | 6-25% | 1-5 years | 5-7 days |
| Cash Advance | 1.16-1.55 | 3-24 months | 1-3 days |
Beauty Supply Bank Loans
Traditional bank finance options and lines of credit are the best financing option for every beauty supply store, assuming your business has great credit and enough documentation to meet the strict requirements. It is because of their tough credit requirements that conventional lenders are able to offer such competitive rates (lower the risk, lower the rate).
- Rates: 5-10%
- Terms: 1-25 years
Beauty Supply SBA Loans
We all know obtaining a conventional loan isn’t easy for any business. If you business is newer, or if you have borderline credit or profitablity chances are getting a bank loan may not happen. If you can’t obtain a conventional loan but still want conventional rates, the next best option would be SBA financing. Small Business Administration loans are loans that are provided by traditional lenders, but the US govt agrees to cover a portion of the lender’s losses if the beauty supply store should default. By reducing the lender’s risk, the SBA hopes to encourage lending to borderline applicants.
- Rates: 6-8%
- Terms: 3-25 years
Alternative Beauty Supply Loans
If you’ve given the conventional and SBA lenders a try without sucess, the next best option would be alternative business financing. Alternative loans are the midway point between low-interest bank finacing, and high-interest cash advances. While the rates are a bit higher than bank loans, the process of obtaining an alternative loan is much easier to get (with approval rates around 70%).
- Rates: 9-16%
- Terms: 1-5 years
Beauty Supply Store Cash Advance
While far from the cheapest form of business financing, a cash advance is much easier to obtain (with some cash advance funders having 95% approval rates) with very fast funding times. But the tradeoff is much higher rates than conventional and alternative lenders, with very short terms. A cash advance is the sale of the beauty supply stores future earnings in exchange for upfront cash. The lender agrees to either purchase future credit card or bank account deposits and will pay the beauty salon upfront (at a discount to the lender).
- Factor Rates: 1.16-1.50%
- Terms: 4 months – 2 years
