COVID-19’s short–term impact is, without question, greater than the 2008/09 recession. Will the industry’s post-pandemic performance mimic that of the previous “New Normal”?
Salons, along with all other non-essential businesses, will be closed throughout much of the United States for weeks, if not months, to come. While some stopgap and entrepreneurial measures are in place to help stave off business closures (e.g. DIY salon services/kits; virtual and mobile stylists), the economic impact is already significant and, like the pandemic itself, has yet to reach its peak. If the vast salon closures are in place even for only one month, the loss in industry service revenues will be an estimated $5.5 billion. With a recession beginning, consumer behavior and spending in 2020 will shift even more dramatically than it did in 2009.
Source: Kline Salon Hair Care USA report; Kline analysis; Professional Beauty Association industry statistics. *Kline analysis; likely case scenario forecast.
By 2012 salon product sales recovered to pre-recession levels. Such a recovery post COVID-19 appears unlikely.
Sales of salon hair care products were flat in 2008 and subsequently declined by over 6% in 2009, the year most impacted by the recession. Sales growth resumed, albeit at a slow and somewhat inconsistent rate, with more moderate and steady growth resuming in 2012 and thereafter. By 2019, sales reached $3.7 billion, an increase of 3.6% over 2018 and a CAGR of almost 4.0% from 2012.
Historical Sales Growth of Salon Hair Care Products in the United States, 2008 to 2019
In 2020, Kline estimates that salon hair care products will most likely realize $2.8 billion in annual sales in the United States, a drastic decline from 2019 performance. Key factors influencing the level of decline include the number of salons and the state of consumer buying power, among other factors. Our outlook for 2020 is particularly bleak in Kline’s worst–case scenario.
- Best case: reopening of salons during Q2 of 2020, monthly unemployment rates ranging from 5% to 10%
- Most likely case: reopening of salons during Q3 of 2020, monthly unemployment rates ranging from 5% to 15%
- Worst case: reopening of salons in Q4 of 2020, monthly unemployment rates over 15%
Looking forward, Kline’s best–case scenario projects salon product sales of $3.4 billion in 2025, a CAGR of –1.4% from 2019.
What awaits the United States is not The Next New Normal but The New Reality of a world that is fundamentally changed without a return to business as usual.
The road back from the economic fallout from COVID-19 will be unlike anything most of us have experienced. Many businesses that existed as we entered Q1 of 2020 will be out of business and will not return or be replaced. This will be particularly true in the hospitality industry, which has already witnessed business closures which are devastating the restaurant and travel industry. The professional beauty business will experience much of the same—a substantial reduction in the number of salons, business closures among marketers and distributors, and more. But such disruption will also create significant opportunities with digital delivery of services and more personalized solutions. And near–term, there are pragmatic solutions and opportunities to pursue for both the benefit of businesses and for the greater good of the industry and key stakeholders at all levels.
Opportunities Ahead for Salon Hair Care Marketers
For a more in-depth analysis on the markets, please refer to our Salon Hair Care Global Series and Professional Skin Care Global Series that cover key market changes and challenges, opportunities, channel drivers, key product categories and new launches regionally and globally despite the harmful coronavirus impact, analysis of which is included in the reports.