peach

CrystalSS, I believe that it is the ORRRRR. Manufacturers know that they cannot sell these big machines unless they can convince us that there is a reasonable ROI. Return on investment.

So they take the Selling price calculate what price it would need to charge at the retail level to pay in off in say 5-6 months. Then they advertise it to us that way. They have no idea if we will be able to really get those prices at the retail level.

In reality 1 out of 20 salons can really pull it off, the rest suck wind, lose their butts, and sell the equipment at a loss. Perfect example is a Versa spa. What do those things cost now? 30kor more? In smaller rural communities, there is not enough business to support one of those things. Yet they will tell you that it will pay for itself in 4-5 months, just to sell one.

And you have to sell the sessions at these high prices just to try to pay for the thing!

peach

Low Supply? As the industry continues to shrink, there will continue to be too much supply. In individual markets, that may be true, but overall, the total number of tanners using salons in the US is dropping faster than people are getting out of the business.

Salon owners do not realize that there are alternatives to indoor tanning and that tanning is not a necessity. In economics, there is a theorem that says as prices rise, consumers begin to look for substitutes for products that they like to buy. Especially when their incomes are not rising as fast as inflation.

That has been my basic premise; as your services increase in price, you force people especially at the lower levels of the income ladder to look for alternatives to you; the sun, personal tanning beds, sunless lotion, procrastination, and plain abstenance. In effect, you are driving customers away from your business. We are making our own fish bowl smaller!

Lord knows that we have enough negative influences in this industry that we have no control over without adding problems of our own making.

House of Tan

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sbt501

I think your 1st post states that supply is dropping faster than ever before. Which for my area, this has been happening over the last 5 years. I see older salons that have no Vhrs or no Hp closing as those businesses are limited in ways to generate additional revenue.

Cost of lotion is about the same as it was 17 years ago so I don't understand any complaints about lotion.

I think the pie is shrinking a little but the pieces of pie are getting bigger.

peach

That I guess is a way of saying that there are fewer players in the tanning industry, and the few that remain are getting bigger and bigger. I can agree with that. But why is that happening?

As for lotions, I don't follow. What lotions were selling for $100 a bottle then?

peach

I have for 22 years and I will continue to do so. My number # 1 priority is low overhead. You cannot make it with monthly expenses in the $5,000 and above range in most small to midsize markets. # 2 priority is pricing. You must cover all of the income levels; you cannot make it in rural areas with 30k beds and booths alone. You simply do not have the population income to be profitable.

House of Tan

Best move I could have made given my situation. It worked out great. Our numbers are some of the best for that segment and it was solely due to our focus on one type of service.

Revenue dropped the first year when we pulled the HP out, I knew it would; we calculated it out ahead of time and were prepared.

Profit is what really took off. I joined a group of manufactures (various products; 10-1,000+ employees); they helped and assisted me on implementing efficiency systems like TOC, JIT and TQM. The main focus was on Eli Goldratt's TOC. It was kind of cool to see how it all worked and how it could be used in a retail/service situation with a few tweaks.

It worked great; too great.

We were growing way too fast and creating situations of 100%+ capacity (one unit) and the location we are in is "land-locked". We solved this by getting our cycle time cut in half for each "run" (customer); this increased the salons available capacity and that worked for a year.

This past year, I faced a decision to raise prices again and/or build another location to accommodate 2-3 more units. I ended up choosing another path in part due to my wife. I called up our #1 competitor and made them an offer to buy our spray tanning division and they happily did just that; we closed about a month ago. :)

I enjoy many things about being an entrepreneur, especially in this industry; dealing with employees is not one of them. At one time we had dozens of employees and several interns, I did not enjoy it; it was like adult day care.

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House of Tan

Certainly the end goal is not zero, so at what point do you stop lowering prices? At what point is your margin not going to cover your overhead (no matter how low you get it) based upon the available tanners and frequency in your market?

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uts-sj

Yes, imagine that, low supply does exist in many markets. We were never overrun by salons and never have had to contend with crazy antics.

Were there markets with salons on 4 corners (i.e. Vegas, etc.). Sure! People who participated in that were not business people and lost their shirts.

What I don't understand is if we are all told that each market is different, there is no correct answer, and you have to go through trial and error to figure things out for yourself, then why would any of us be concerned with anything on a national level?

Which is it? The speaking out of both sides of the mouth is annoying.

uts-sj

Somewhat rhetorical, as I knew the answer. My real question would be how do you think adaptation can be taught? As an entrepreneur, I knew adaptation was in the cards from day 1, but some don't get that, why do you think that is?