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CASE ANALYSIS-

Salon only hair care products found

outside the salon.

Submitted by-

Bijayalaxmee Pradhan(10PGDMABPM037)

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CASE OUTLINE

High-end, salon only hair care products have been showingup on the shelves at grocery stores, discounters and drugstores.

After being marked as for sale in professional salons onlythe brands are being sold through mass market chains also.

Currently there is no legislation prohibiting mass retailersfrom selling premium brands.

There exists a strong gray market, also available throughonline retail sites.

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Due to breakage of contractual agreements

with manufacturers, the makers of salon-only

brands lose millions of dollars, risk brand

image and reputation.

Improperly diverted hair-care products are

valued at up to $800 million.

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PROFESSIONAL HAIR CARE PRODUCTS

The industry in the United States generates more than $15

billion in annual sales.

The industry is highly fragmented, with more than 70,000professionals salons nation wide.

Sales of hair care products are important revenue source for

salons and typically provide 5-40 % .

Hair care products fall into 2 categories: mass market

products & professional or salon-only products.

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DIVERSION

The sale of professional or salon-only products

through stores that do not have a salon on the

premises is known as DIVERSION.

In the 1980s and 1990s, diversion occurred, but at a

low level and it increased enormously in the recent

past.

Today, diversion accounts for more than $1 billion of

the beauty industrys $5 billion in annual sales of

salon-only products.

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BIF

In 2001, a group of manufacturers,

distributors and salons created the Beauty

Industry Fund (BIF) to support and strengthen

the professional beauty industry byeliminating diversion.

Members: P&G, Sexy hair, Farouk and Paul

Mitchell etc.

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In the United States District Court for the SouthernDistrict of New York, A case was filed by Plantiffs onbehalf of beauty salons, against the defendants, whoare manufacturers of professional hair care products

for false advertising and unfair competition.

Plantiff, salon FAD (Fight Against Diversion) is a non-profit organization formed in 2008 to advance the

interests of salons in the face of the large scalediversion of professional products into non-professional retail channels.

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Paul Mitchell

John Paul Mitchell Systems is a California

corporation with its principal place of business

at 9701 Wilshire Boulevard, Suite 1205,

Beverly Hills.

Paul Mitchell products and advertises

professional products under the Paul Mitchell

brand.

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EDUCATIONAL CAMPAIGN

Paul Mitchell web site (www.paulmitchell.com):

The company is reminding customers to fight againstthe diversion through its product control campaign.

This is designed to war customers of the possibledanger of purchasing brands from intermediariesother than professional salons.

The risk associated are- tampering, expiration,contamination or substitution.

http://www.paulmitchell.com/http://www.paulmitchell.com/http://www.paulmitchell.com/http://www.paulmitchell.com/http://www.paulmitchell.com/http://www.paulmitchell.com/

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Product Label: Guaranteed only when sold by aprofessional hairdresser, otherwise it may be counterfeit, old, or tampered with.

Internet Advertising:

John Paul Mitchell Systems is the most recognizedprofessional manufacturer of salon productsworldwide.

Our products are guaranteed when sold by a

professional hair salon.Print Advertising: The real Paul Mitchellguaranteedonly in salons and Paul Mitchell schools.-www.paulmitchell.com June 2010 Instyle

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Changing practices

FOR:

Communicates important characteristics ofproducts.

Distinguishes professional hair care productsfrom mass market hair care products.

Communicates the superiority of professional

products.It adds cache and value to the products and

brand.

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Against.

Advertising of products and opposition todiversion is literally and intentionally false andlikely to cause confusion among consumers.

Whether the products sold by salons are massmarket products.

Whether the products sold by salons are

superior to mass market products. Whether the products sold in mass market are

professional products.

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Whether the salons recommendation is necessarybefore buying professional products.

Whether the products sold in both places are same.

Whether the products sold in salon or mass marketoutlets are genuine, untainted and safe.

Provides numerous other locations for consumers tobuy.

Customers will be reluctant to purchase salonproducts.

Costly and some times non-affordable.