LIST OF TRADE SECTORS

Contents

Executive summary

Sector overview

Nature of the trade

Start up

Legislation and regulation

Performance indicators

Investigation matters

Accountancy matters

VAT position

Statistics

Further information

Skim read

Click on any part of the Skim read to link into a relevant section of the main text

There are currently around 30,000 - 35,000 hairdressing salons in the UK. The market has polarised to a considerable extent over the last two decades and there is now a marked contrast between modern, progressive outlets and those which have remained more or less unchanged for many years.

Consumers' expenditure on hairdressing and other beauty care currently stands at around £3.8 billion. Following a protracted period of stagnation in real terms between 1990 and 1995, the market for hairdressing services benefited from an upturn in the economy and experienced several years of growth during the closing years of the 1990s and early 2000s. 1999 and 2000 were particularly buoyant years for the industry. However, the economy began to slow in 2001 and remained somewhat depressed throughout the first half of 2002. This affected industry turnover, which saw a much lower rate of growth during 2001.

The hairdressing sector is highly fragmented and the great majority of salons are small, independent concerns. The Department of Trade and Industry estimates that almost 70% of hairdressing businesses (including freelances and mobilers) are single outlet businesses with no employees. If micro-businesses such as freelances and mobilers are excluded, it is estimated that owner-managed businesses with one salon and four employees or less account for around 65% of all hairdressing businesses.

Despite a downturn in the economy during the early 2000s, the outlook for the hairdressing sector is still fairly positive. However, only modest market growth is forecast to occur in real terms up to 2005. Any future growth potential may be adversely affected by a serious shortage of skills, as well as by demographic trends towards an ageing population.

Research suggests that a 'typical' salon has a working proprietor (95% of salon owners cut hair) and up to three full time stylists. Some salons also 'rent' out chairs to independent operatives.

The core services provided by the sector are ladies', men's and children's hairdressing. A salon might specialise in a particular area of the market, such as Afro-Caribbean or barbering, as well as offering related services such as beauty therapy and body piercing. Some salons also offer hair treatment products for retail sale.

Many salons are busiest during the spring and summer months, as fair weather tends to encourage clients (particularly women) to spend more money on expensive and complex hair styles. Christmas may also be a busy time for the hairdressing industry.

Sales may be affected by a number of other factors, including the size and appearance of the outlet, the stylists' reputation and the volume of passing trade.

The hairdressing sector is highly competitive and many proprietors go to considerable lengths to retain their clients' loyalty. As well as offering free refreshments and a welcoming environment, many salons offer financial incentives to regular clients.

Hairdressing supplies are generally purchased from manufacturers and/or specialist wholesalers. Franchised outlets may be obliged by the terms of their contract to purchase some or all of their stock from the parent franchisor. Attractive discounts may be offered to salons who purchase goods in large quantities, although smaller outlets may have difficulty in meeting minimum order requirements.

Financial performance within the hairdressing sector may be expressed as a ratio of purchases to takings. Although individual businesses vary considerably in nature and trading results may be affected by a number of factors, trade sources suggest that a purchases:takings ratio of 1:10 might be achieved by a well run, 'middle of the road' unisex salon.

A salon which charges high prices and uses only small quantities of products such as shampoo (for example an upmarket barber) might achieve a considerably higher ratio. Many salons, however, require substantial quantities of hair treatment products but are unable to charge high prices for their services; these are likely to achieve a considerably lower purchases:takings ratio (for example 1:5). Other factors, such as wastage and theft of stock, may reduce this ratio even further.