III. Industry Analysis
[Company Name] competes against small, individually owned salons, spas, massage parlors, and against major regional or national chains. There are over 450,000 registered beauty or spa salons in the United States.
According to a report by Packaged Facts, the spa and salon industry is a fragmented one, as the 50 largest companies only hold 15% of the market. The market is estimated to grow to more than $35 billion in three years. This bodes well for [Company Name]; since there are no truly dominant competitors, barriers to entry are not as high as many other industries, and a start-up can expect to have success in this growing market. There is plenty of room in the industry particularly for well-placed local day spas that cater to specific geographic and demographic customer niches. Smaller spas can easily develop loyal clienteles that enable them to compete and succeed against industry giants; in this industry, size does not necessarily mean an advantage, which bodes well for [Company Name].
The market in which [Company Name] will compete is experiencing a number of different trends.
- Slow but steady growth. This market is expected to grow consistently at around 2% annually.
- Success drivers. Customer satisfaction is what ultimately makes one spa triumph while another fails. The experience a spa’s client has determines whether or not they return and whether or not they refer others to the same spa.
- Economies of scale. Larger spas are finding opportunities to succeed, by making effective use of support personnel. Receptionists, washers, and assistants at larger establishments can take care of many of the menial tasks that skilled masseuses and cosmetologists have to handle in small day spas. This permits a skilled masseuse or cosmetologist to spend a higher proportion of their time actually performing skilled services.
- Premium independent day spas. Independent day spas also compete in the premium segment of the market. These firms develop loyal customer bases and select their location on the basis of population demographics.
- Specialty spa salons. Presently, a niche is being carved out for spas that cater to very specific customer segments, such as those that desire gemstone treatments and dermatologist brands.
- Intense customer loyalty. Many spas develop repeat customers who become a regular client base and represent a significant portion of their revenues. Spas whose employees are able to develop strong relationships with customers can expect to see more long-term success.
- Changing gender patterns. Traditionally, women bring in the lion’s share of revenues for spas, using beauty services more often and spending more at each appointment. In recent years, however, the male consumer’s attitude has begun to shift. Men now make up approximately 25% of spa clientele.
- Gender preferences. Women are the most lucrative customers for spas, visiting more often and purchasing more special treatments.