Focus on "competition"

There are at least 30,000 hairdressing salons in the UK and the sector is highly competitive. Large concerns which are registered for VAT may find it difficult to match the prices of smaller businesses (only around 25% of salon businesses in the UK are VAT registered). Small and medium sized independent salons themselves face strong competition from the following;

• other similar outlets in the locality, including ex-employees who start up in business on their own (sometimes taking a number of clients with them)
• mobile hairdressers (although many target customers who cannot or would not normally visit a salon)
• freelances operating within salons and elsewhere
• large, well known multiple chains
• 'do it yourself' home hair styling products

In many instances, several similar salons are located relatively close to one another. Some may try to 'poach' important clients from rival salons. Strong competition may affect a salon's pricing policy and prices may be set according to the local 'going rate', rather than as a result of a detailed analysis of costs.

Mobile hairdressers and freelances usually have low overhead costs and are often able to undercut larger salons. Independent operatives who 'rent a chair' from a salon should actually represent competition for their landlord if they are to qualify for legitimate self-employed status. Statistics published by the Department of Trade and Industry suggest that the number of mobile hairdressers and other freelances is at least equal to the number of salons in the UK, at around 35,000. Legitimate traders complain that they are undercut further by 'cowboy' hairdressers (particularly mobilers) who work within the black economy and are often untrained.

Large multiple chains benefit from a high profile corporate image, substantial resources and centralised marketing and purchasing strategies. Some of these advantages may, however, be available to independent traders who join franchise schemes.

Consumers are particularly likely to turn to home styling products during times of economic hardship. The domestic market for hair products is currently worth over £730 million each year. £190 million of this is accounted for by sales of colourants and home perming lotions. Retail sales made by salons, however, represent only a tiny fraction of these figures.