IN THE AGE OF DISRUPTION: “WHY

THE BEAUTY INDUSTRY MUST

CHANGE”. PART 1

Looking ahead to our immediate future, as a society and industry we have entered the age of

disruption. Big Companies have bought their way into our sleepy relationship-based industry and

created change. The good and bad of that will continue to be debated among industry

professionals.

Today, we stand at the doorstep of dramatic change with the

world’s largest company Amazon, primed (no pun intended) to

enter our market, and dominate it. Amazon’s pursuit, as a total

solution for B2B and B2C for beauty manufacturers, could wipe

out an entire industry and thousands of jobs within the

professional beauty industry. It could also serve as the catalyst

for change, that is long overdue in a stagnant industry, and open

up new opportunities for forward thinkers.

My belief is that the time has finally come for us as

Professional Beauty to take back our industry. Take it back

from big business product companies and Mega- Distributors

who:

Exploit you, use you and in some cases market directly against you to the consumer.

Pretend to be “professional only” while their products sit in large quantities on the

shelves of thousands of retailers.

Sell out to national chains offering discounted product every Sunday in newspapers

across the US.

Sell directly against you on Amazon with prices you cannot compete with.

Smile to your face, hug you and tell you they love you while selling cheap box color

directly to your clients.

Only willing to help when it is attached to an order!

Only interested in selling you, not helping you.

Do these people really deserve your business and hard-earned dollars? How can you fight back

or join the cause?

My belief is that:

Artists and their talent should drive our industry.

Artist inspire creativity and create an environment of learning.

Artists create a pathway to success.

Artists protect the integrity and the spirit of our unique industry.

Lets look for leaders who:

Teach, Educate, and expand your skill sets

and services offered to your clients.

Inspire us to do more for our clients than

cut, color and style hair.

Inspire and nurture shared knowledge.

Put your well being before there own.

Seek a better tomorrow for you and

themselves.

Offer you a clear alternative to today’s order

taking, product-peddling deal-driven mentality of business.

The Power of One:

Can we evoke change one person at a time?

Could my individual crusade change an industry?

Can I evoke change with Vigilante Consumerism?

We have the ability to change our industry

with our purchasing habits.

Force the big companies out by not purchasing

their brands. They will be forced to operate in a

legitimate retail space, which they already are.

Support the boutique brands, and up and coming

artists - just like you! You can either be the

leader that evokes change or be the victim of it.

The great thing is you get to decide.

My commitment to you is to change our business to focus on brands that are truly committed to

the beauty professionals. A commitment beyond product that educates each individual stylist to

the best of their ability. To create a journey of success we can share together. To bring you

companies and people that maintain a sense of integrity on how and where there brands are

distributed.

It has to be about more than just great products, it is about great PEOPLE. That is what makes

this industry great, it’s the PEOPLE. It is not the big product companies or Mega distributors.

Become the Vigilante Consumer who evokes change with their purchasing habits.

Support small boutique distributors and brands, just like your business. People helping People

making small business success in the land of giants.

Please message me directly if you want to be part of our movement and spread the word through

education.

Scott Cox

BeautySales CEO

"LIVING THE SUITE LIFE!". PART 2

In the first installment of "Disruption in the Beauty" Part 1, we spoke about three key changes

happening in the beauty industry.

We must look for new leaders and support our professional industry with our purchasing

power.

We must focus on truly professional brands, moving away from companies that play both

sides of the game.

It is people who make this industry great, not big companies. Once you take out the

people, you have chaos.

Thank you for the engaging feedback regarding this edition!

In this issue, we will continue with the DISRUPTION theme, outlining the emerging Suite

Business and its impact on the industry’s landscape.

Over the past 3 years, the industry and the California market has experienced the explosion of

the Salon Suite phenomenon with large to mid-size locations hosting up to 100 individual

stylists, each as a separate business.

However, during this time California has suffered a

rapidly declining number of beauty related business

licenses. California had the largest number of salon

listings and licensed hairdressers in the US, with over

34,000 locations and 115,000 stylists at its height. The

numbers now stand closer to 28,000 locations and

100,000 licensed hairdressers, a shocking decline that has

happened in the just 18 months!

What is interesting about these numbers is that while they

declined primarily because of the mass Beauty Supply closures (DISRUPTION), they actually

should have increased. The shift in the market happens when one-salon housing 8 booth renters

under one business license closes and individual stylists register as suite owners. The math in the

example is plus (7) business licenses, certainly not in line with a 15% market decline.

In California there are over 17 different

Salon Suite operations with multiple

locations. It is projected that, based on the

current trend, 35%-50% of all hairdressers

will be working in a Salon Suite

environment within the next 3-5 years.

Even if these numbers are slightly off

projection, there is enough business today

that it cannot be ignored.

How much does business really change

for the stylist, salon, distributor and

manufacture when the business moves to a

Salon Suite driven model? Simply, the

business becomes different, harder and for

less profit. Do you believe that large

corporate shareholders for manufacturers

and mega distributors care about hairdressers or profits? Exactly!

In the current model, manufacturers and large mega- distributors are not set up to deal with

individuals. They are streamlined for businesses - business based on volume, reward benefits and

a collective effort towards one big company. You can certainly claim that the professional store

business offers proximity and convenience for individuals, but in most cases, that is it. So, to be

professional all you have to do is open a store? Let’s not be fooled anymore by what these really

are - retail brick and mortar locations catering to stylist use. How long will it be before they will

turn into a hybrid retail/professional store and take away your business due to increased buying

power, better margins and lower prices to the end consumer? This turns retail products into

commodities whose value is only based on price.

While I personally believe that a salary, salary and commission, or team-based pay environment

is best suited for success in a full-service salon, not all stylists want to work in that environment

or cannot because of health issues. (I.e. Formaldehyde treatments) Should we deny them the

opportunity for success because they only have the Power of One Individual? No, we should not.

How do companies who overpaid for brands/ businesses get their money back?

They pull away from education as a founding principal of doing business.

They water down products and change formulas to lower costs.

They offer less support for the hairdresser and more advertising to the consumer.

They sell to every possible location offering the lowest price.

They trim down their field staff and open stores.

If you see this happening, it is time to change, before it changes you!

We want to do something different at BeautySales, and with the Salon Suite Business in

particular. If you work at a Salon Suite, ask your BeautySales Business Development Manager

how you can get involved and be part of Salon Suite Program.

Salon Suite Program Outline:

1. Education opportunities with leading brands.

2. On-going Salon Suite education.

3. Networking with other successful Salon Suite owners.

4. Outside Business Consultants providing key information on financial planning &

requirements.

5. Social Media Branding.

6. Professional speakers and leaders to share their success stories and “Systems for

Success”.

7. Haircut, Color, Styling and finishing techniques you can use on your clients.

8. Daily go-to cuts that are easy to learn.

9. How to become a $125,000 a year stylist by building a membership based cliental.

10. How to create a Virtual Store with no product investment.

ACT NOW AND BE THE CATALYST TO CHANGE

Scott Cox

BeautySales CEO

2018 TRENDS: “What’s Happening and

How It Could Impact the Beauty Industry”.

PART 3

The disruption theme continues in the third edition for 2018. As the industry looks to sort itself

out, these trends continue to be front and center in California.

Large Professional Brands expanding into non-traditional sales channels:

Premium Retail

Big Box Retail

On Line Retailers

Amazon

Wal-Mart

The industry consolidation and high company valuations have created the need to capture more

consumer business to satisfy hungry shareholders.

For these companies selling in the professional only channel is like pumping water from one lake

to another using a garden hose. It is too costly and slow for them to make money.

Premium Retailers, notably Sephora and

Ulta, eliminate the small independent

Beauty Supplies.

• The mass closures of professional Beauty

Supply locations.

• Small independents cannot compete with

price or promotional offerings offered by the

premium retailers in daily email blasts and weekend inserts in local papers.

Booth Renter Salons close and independent stylists flood the suite business. Massive

expansion with over (17) different multi-unit suite operations. Small businesses become even

smaller, one stylist at a time.

The top trends within the Beauty Sector and what it means for the salon and stylist:

• Natural, wellness focused Beauty

• Small Indie Brands

• Social Media

• Experiential Retail

• Online sales/Branding

The trend suggests that we should have an interactive experience, and if possible, customized or

personalized beauty solution defined by each individual’s terms.

The trend for small Indie brands have become the rage, brands that embrace inclusivity by

looking beyond age, gender, sexuality and body type. The obvious trend of social media and

having online partnerships and solutions that brand you, your business and the services you offer.

The social media aspect of the business has been a

glowing hot spot over the past 24 months. The questions

become:

How?

What is the right content?

How do I attract the right followers?

How do I leverage my following into a tangible

asset?

The (6) Key Points to building brand value via Social Media are:

1. Develop an educational theme that teaches and builds trust.

2. Inspire your clients to be and do more than they can on their own.

3. Develop an Omni-Channel reach to maximize exposure to as many customers as

possible.

4. Always refine your targets. Seek meaningful connections.

5. Humanize brands. Make it their brand with customized solutions for each person.

6. Position yourself to prosper and grow - Be ready!

Within Social Media the use of Influencers to impact your business is a growing trend. There are

(3) basic levels of Influencers:

Mega

Macro

Micro

At the stylist and salon level most, if not all, will be concentrating on Micro and Macro

influencers - influencers with less than 150,000 followers. It is important to be able to measure

the reach, engagement and capture rates when engaging with Influencers.

Lastly, the growing trend of memberships

and how that can be translated into the salon

and stylists marketing.

Within our own daily lives, we see, experience,

and participate in Amazon Prime, Netflix, Cable

TV, Direct TV, YouTube, Facebook, Instagram,

Snapchat, Twitter and even the Gym. These are

all forms of memberships. We need to think

about how we can incorporate this concept into

our industry. We need to have walking, talking

endorsements of our work with every client/

member.

What we see is a whole new industry and

playing field quickly emerging. The rules that

were once Standard Operating Procedures are no longer the norm or accepted. We have become

immune to Big Companies’ failed promises and out of channel sales. It is time for changes and

new leaders - leaders who invest in you as you invest in them!

If you want to be part of this growing movement, message me to get an exclusive invitation

to the launch of my 10 Step Program of Success.

Scott Cox

BeautySales CEO

“THE AGE OF DISRUPTION”. PART4

We are going to review more industry changes with the 4th installment analyzing “Disruption”

within the beauty industry.

The announcement of a major brand going to Amazon as its B2B and B2C solution, and away

from a national distribution group, will open the door for massive change – quickly! Once a

leader takes a position, and endures the blunt of criticism or reward, it is easy for others to

follow. The floodgates have been opened.

But where is the chaos leading us?

The beauty industry will never be what it

once was, nor is it standing still waiting for

a hairdresser, or the new “voice” of the

industry to emerge and guide it.

Instead of fading away, as some of us

hoped, Amazon is instead forging new

paths and taking a leading role in how

beauty is sold to professionals and clients.

We need an open dialogue into why brands

are turning to Amazon as a catch all retail solution:

Is there a difference between a brand that takes the luxury position and sells at full retail

pricing, vs. those that allow free trade, or Amazon fulfillment?

What happens when Amazon markets other goods and services directly to your clients?

Is the customer’s data more important than the products they use?

Do these brands deserve the right to call themselves a “Professional Only, sold and

recommended by stylists”?

What makes a brand “Professional Only”?

What qualities and characteristics must a brand have to remain a “Professional Only”

brand?

These questions seem so simple a few years back, the unwritten rules of Professional Only

products have morphed and changed over the years. The same type of clarity was needed years

ago when the beauty supplies became a force in the Southern California market in the late 80’s

early 90’s. How could an outlet sell professional only products yet have no hairdressers working

in that location?

The solution was simple, if the qualifying standards were 50% retail and 50% service space and

revenue, all beauty supplies needed to do was add stylists to the location to qualify. Once they

did, the debate turned to where in the location should your products be merchandised? In the

store or the salon portion of the location? Some brands opted for the salon portion, others for

primary real estate and impulse locations. This seemed like a logical approach to policing

ourselves and having manufacturers, distributors, salons and stylist all on the same page or level

of understanding.

What changed over the past 2 years to

flip the market on its head?

The answer is, in fact, many small things…

Consolidation, which leads to

finance “suits” and big business C- level

executives killing the culture of an

organization.

Overvalued purchase prices lead

shareholders to aggressively seek huge

returns, despite the industry growing at

barely 2%.

Lack of innovation in product development stagnates the growth process and turns

manufacturers into copycats.

The industry becomes “IDEA” bankrupt.

Distributors and salons try and complete unsuccessfully with big box retail outlets selling

“professional only” products at lower prices.

The explosion of on-line retail, at both Amazon and other e-commerce locations, further

erodes sales and the trust of the professionals.

On line retail, run by algorithms dramatically reduce “professional only” product prices,

eroding the middle margin for distributors and salons.

Products become commodities. Services are next!

Manufacturers start direct distribution entities and open multiple channels of distribution

in and out of the professional only sector to maintain shareholder confidence and increase

valuation.

Distributors struggle with ways to sell within their channel but include on- line sales.

Consumers want a direct connection with the manufacturer believing middlemen inflate

prices.

The economy begins to shift away from a Baby Boomer driven economy towards a

Millennium economy. Shopping habits change and the shift towards Click and Mortar

and Omni-Channel distribution is in full swing.

Based on these changes where is the

market headed in the next 2-3 years?

I believe the industry will follow the

economy. It will be a matter of the

haves and have not’s. The middle of the

market, much like the middle class,

erodes and is no longer the driving

force of any industry.

The top 15% of the salons will

survive IF they have a solid concept,

training system, apprenticeship

program and experiential services. In most cases, these locations will be commission,

team based or salaried employees with benefits.

National chains will control the middle of the market with low to mid-priced haircuts and

minimal services. This is the Walmart model - stylist want benefits so they will work 3

days a week for low pay.

The remaining part of the market will be serviced by the emerging suite business and

booth rental driven salons. The explosion of the suites will lead to 4-5 models surviving

and then purchased by a larger national or global chain that are looking for additional

market penetration and ways to expand private label products.

The industry becomes divided on the Pro/Con of Amazon. Big, commodity-based brands

will go to Amazon. Smaller, boutique brands with hairdresser backgrounds will stay true

to the industry and compete with Amazon by offering on-line shopping and virtual store

options for their customers.

Distribution, as we know it today, erodes and is replaced by manufacturer agents or sales

reps.

Manufacturers do not need 50 distributors anymore to cover the US market. 4-8 regional

players will survive and dominate for a short period of time. This will effectively

eliminate distribution and those companies will be purchased as part of the industry’s

“Big 5” consolidation plan.

Let’s call this the big bang theory, the beauty universe explodes and a whole new system and

galaxy emerges. What we once had is already gone. What the future holds remains to be

determined.

If we look forward, what

new role can we create for

ourselves? As one door

closes, several more open

up.

Does this create or force a new frontier of creativity in the beauty industry?

How much of social media determines our value and worth?

How do salons and stylist morph and expand their service bases during this transitional

period?

What is the future of distribution in its current form?

How do we change to service our life long clients whose needs will also change?

These are the million dollar questions we will continue to explore and write about. Stay tuned for

the next edition of Disruption in the Beauty Industry. I am always excited to hear from you all

about your thoughts and beliefs. Please feel free to email me, scott@beautysales.com.

Scott Cox

BeautySales CEO