Do you feel like you were meant to have a kick ass career as a hairstylist, like you got into this industry to make big things happen? Maybe you’re struggling to build a solid base and want some stability. Maybe you know social media is important, but it feels like a waste of time because you weren’t seeing any results. Maybe you’ve already had some amazing success but are craving more. Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer. Cutting and coloring skills will only get you so far. But to build a lifelong career as a wealthy stylist, it takes business skills and a serious marketing strategy. When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists. I’m Britt Seva, social media and marketing strategist just for hairstylist, and this is the Thriving Stylist podcast.
What is up? And welcome back to the Thriving Stylist Podcast. I’m your host, Britt Seva, and today we’re talking about the end of year retail strategy every salon should be using. So if you’re a studio suite owner and you have retail or you are a full salon owner and you have a team and you have a ton of retail, this one is for you. Now if you’ve not listened to some of our previous retail based podcast episodes, I would start there and I wanna highlight a couple that I think are critical. So first is gonna be episode 2 33, which is called Retail Sales Misunderstandings in Misfires. Then we have episode three 13, which is affiliate links for retail sales. Then we have episode 3 93, which is ownership blind spots keeping salon owners broke. In that one, we specifically talk about retail commissions, so I would listen to that for sure.
And then episode 4 0 6 just came out recently. It’s called Salon Retail is Collapsing. So I would listen to all four of those to get a good grip on what retail looks like in the industry today, how it’s changed in recent years, and what it would look like to be running a profitable program. We’re gonna talk a little bit about those things today. But I mostly wanna talk about the real end of year retail management strategies that everybody should be utilizing in their salons if they’re not already. So the exercise I’m gonna walk you through is beneficial in four different ways. One, it’s going to maximize your tax savings, which we’re always all about here at the Thriving Stylist. Second, it’s gonna help to thin any inventory that doesn’t really belong on your shelves anymore. Third, it’s gonna give you a sense of your sell through rate and the health of your retail program overall beyond like the basic metrics that we kind of think are a good indicator of our retail program, but really aren’t.
And number four, it’s gonna give you a sense of whether the commissions you’re paying out for your retail program makes sense if you’re running a profitable program at all, what changes might need to be made. This is a really nice time of year to look at this kind of arm of your business. So the way that I coach to retail programs is by looking at them as like a secondary revenue stream and source. And as I say that, it sounds very logical like, well yeah, of course we understand that in the salon that the primary revenue source is gonna be services. I don’t know of any salon today that makes more money selling retail than services. It would be more like a retail hub that also does hair on the side. But for most of us, it’s the services that are being done in the salon that generate the most revenue.
So that’s gonna be the primary revenue source. The secondary revenue source could be retail, could be education depending on how your salon or your business is structured. But generally speaking, primary is gonna be the services that we do. And then we have these secondary branches. So for most salons that I speak to, retail is one of the secondary branches. When I am analyzing a retail program, I don’t lump it into everything else going on in the salon. I think the lumping in of it is what causes confusion and is what prevents salon owners from seeing the reality of what’s going on with their retail program. There’s some salons that are running on really thin margins, not realizing the piece that retail plays into all of that. And if we are able to look at retail as truly a secondary business, like remove it for a moment and look at it as its own thing, it allows us to make much smarter decisions about just that section of our business.
In general, if you’re a salon owner, how many of you have stylists who are amazing stylists and just don’t sell retail, right? They’re embracing one side of the business that you have and that you operate and they’re not embracing the other. When you can look at the two arms of your business that way, it allows you to just make smarter decisions overall. So this podcast is gonna be coming to you using that frame of mind of saying, okay, let’s just analyze for a moment just the retail sales business that we are building or growing or sustaining in our salon space. So the first thing we wanna do is maximize our tax savings by taking a look at the retail we have in the salon. Now, we would do this exercise that I’m about to walk you through quarterly if you’ve never done it before and now is like the perfect time to do it, doing it at the end of the year.
And then what I would like for you to do is to do this every 90 days from here on out, depending on the size of your salon, this is a large lift, but the larger the lift, the more critical it is as well. So we would do what I’m about to walk you through every 90 days. We did have a massive retail program. So I’m talking, I left the salon in 2016 and we at the time, anytime I would do a full retail count, we’d have anywhere between 20 and $24,000 in retail on the shelves. So we had a huge retail program. Not all salons are set up like that, but if you have some, some of you were like, wow, that’s a lot. Some of you’re like, oh, our retail program is larger than that. I think we were somewhere mid-range. If you have thousands of dollars of retail on your shelves, you have to doing this.
And even if you only have hundreds of dollars on your retail shelves, that’s cash tied up. So no matter where you are volume wise, you wanna do this. But I, I wanna acknowledge the fact that I understand this is time consuming. It’s okay to bring in reinforcements and have people help you with this. The key to this is the organization and the attention to detail. So let me give you the bird’s eye view of what we’re about to get up to. We are going to do a manual count of every single product you have in your salon that could be sold to a client. So I’m not talking about back bar, I’m not talking about station product, I’m talking about what could potentially be sold to a client. But we’re not just going to count it. We’re going to balance it against what we’ve ordered and what hopefully our organization system shows we should have an inventory.
So how many of you have gone to sell a bottle of shampoo and your system says you have two in stock but you can’t find ’em anywhere? That’s what we’re looking to identify. So whenever I was gonna do a retail inventory count, like I’m gonna walk you through right now, the thing I would do before I left the salon at the end of the evening where you could do a first thing in the morning before anybody comes in is I would go into our online booking system and I would print an inventory report. Any kind of booking system you use should be able to do this for you. An inventory report of the volume of every piece and product that you currently should have in stock in your salon space. Now this only works if you have been entering every single piece of retail that lives in your salon into your booking system.
You should be, imagine if something tragic were to happen to your salon space, there was a fire or you were robbed or something like that. Your record keeping is the only thing that’s gonna protect you in something like an insurance claim. So you wanna have accurate records of everything that’s in the building. So ideally you have every single piece of retail that could be sold in your salon, scanned into or manually entered into your booking system before it hits the salon floor, before it hits your back stock shelves that should be happening. If not, we’re also gonna start that today as a bonus fifth step in this whole process. But hopefully you have been entering in everything into your online booking system. You’re gonna run an inventory report, which should be a printout of what should be living somewhere within the salon available to sell to a client.
Okay? So usually this report, depending on how many pieces of retail you have, is anywhere between, you know, three sheets of paper to 30 or 40 sheets of paper depending on how many lines you have, how many skews you have for each line, et cetera. If I was to have somebody helping me with this, we would each get a packet. So let’s imagine it was who was gonna do the physical count and I had two assistants who were gonna help me. I would make three packets and we’d each get a full packet. If it was just me doing it by myself, I don’t need one packet. I never did split packets. It always made a mess. So instead everybody got a full packet. Everybody got it on a clipboard with a pen or a pencil and we would each take a zone of the salon.
If it’s you doing this by yourself, you’re taking the whole zone. And what we would do is go through the shelves and go through the back stock and count every single piece of retail that could be sold to a client and we would tally it up on these printouts. Now don’t worry about balancing anything yet. So for example, if I was counting Seva brand moisturizing shampoo, what I would do is I would go to my retail shelf and I would say, okay perfect. There’s four bottles of Seva brand moisturizing shampoo on the shelf. I would put four tallies on my sheet, 1, 2, 3, 4, and then I’d move on to the next queue. Let’s say that sitting next to that Siver brand moisturizing shampoo was Siver brand moisturizing conditioner, and I had three of those great, I’d write down 1, 2, 3 tallies next to Siver Brandand moisturizing conditioner.
And I would repeat that until I had done a physical count at every single piece of retail that I could find anywhere within my salon space. Okay? Next what I would do is I would compare the numbers. So my printout would tell me, okay, you should have nine bottles of Seva brand moisturizing shampoo somewhere in the salon. Well let’s say I only found four, so I’m missing five bottles. Those five missing bottles can be counted as a loss on my tax return. So it could be a tax write off. It’s shrinkage within the business. So what you wanna do, and you do have to do this detailed, you have to have the physical record of it, is you’re going to make a note of all of the products that you’re taking a loss on. So I was supposed to have nine, I only had four, I’m missing five.
Okay, great. So you’re gonna do that for every single product. And this does take time. You’re gonna do this for every single product in the salon. Once you’ve done that manual count, what you’re gonna do is you’re gonna go back into your booking system and update your records. So remember, imagine that my printout, so that I should have nine bottles of the Seva brand moisturizing shampoo. I only found four in the salon. I’m gonna go into my computerized system and change my inventory count from nine to four ’cause I couldn’t find five of them. So there’s not nine that live anywhere in my salon. I couldn’t find them anywhere. So I realistically have four. So I’m gonna enter in four into my online booking system. Okay, I’m gonna do that for every single product in the salon. I personally have never done an inventory that did not show shrinkage.
Shrinkage is normal. It happens when Silas borrow a product off the shelf that they need to use for station product and forget to mark it out of inventory. Shrinkage happens when somebody rings up a bottle of retail wrong, they mean to scan out one thing and they scan out Another thing, shrinkage happens when a bottle of something breaks and gets thrown away and not marked out. Shrinkage happens when a return is done improperly. It just happens. So what you’re going to do is end up rectifying all of the product that actually does live within your salon and you’re gonna update your entire online booking system and then you’re gonna run a secondary inventory printout. What that secondary inventory printout is gonna show you is a now completely accurate rundown of every single item you have in the salon space.
What you’ll likely find is the value of the first printout you did before you started the count is much higher than the actual value of the secondary printout. Sometimes by thousands of dollars, those thousands of dollars in shrinkage now become a tax write off. So what you can do is at the end of the season when you sit down with whomever you file your taxes with, you can say, and we lost, you know, 5, 6, 12, $14,000 in retail this year and they can account for that for you. You can only do that if you have the records to prove it. So going through this process is a huge piece of how you make that possible. The other thing that’s great is now your booking system and your retail inventory is completely and 100% accurate. Now note you do have to do this all within one day.
If you’re like, you know what, we’re gonna do the count over the course of a week, you’re gonna make a mess of it because product is ideally gonna be sold throughout the course of the week. And then it’ll be hard for you to know like, wait, was that taken into account? Was that not taken into account? You wanna do this within a day. So within the day you do the printout, you do the physical count, you rectify everything in the booking system so you have an accurate count and you do that final printout that shows the loss or the shrinkage. Okay? The other thing you wanna do is take this time to add in any SKUs that were not previously living in your booking system. Sometimes we do that, we order hot tools and it never really makes it into the booking system or for whatever reason something doesn’t make it into inventory.
You want everything in inventory. So now once you’ve done this exercise, you should have a full accounting of what lives in your salon space and you have the opportunity for that tax write off. So that’s gonna be step number one. Now the next thing we do is again, we lean into our booking systems reporting and I run a secondary retail report of my retail sales. I do it three ways. I do it once over the course of last year. I do it once over the course of the last six months and once over the course of the last 90 days. So I’m gonna run this report three times and what I’m looking for is patterns. Generally speaking in your booking system, you’re gonna be able to run a retail report by volume. So I want to see the products that sold at the highest volume and at the lowest volume.
So what you’ll find is there are a very small group of products that you sell a ton of. There is a huge group of products that you sell a few of, and then another group of products kind of at the bottom that you sell like one or two pieces here or there or you don’t sell it all. That’s what we’re looking to find. So generally speaking, when you run this report, we’re looking for your top 20. So the the 20% of products that sell at high volume all the time, we’re looking for the middle 60, which is gonna be the products that you move, but they don’t move super fast. And then you’re looking for the bottom 20, which are the things you sell like maybe one or two pieces of a quarter. Maybe you only sold one or two pieces a year. When you’re looking at these reports, what I would suggest is you really take a good hard look at that bottom 21st.
These are gonna be the products that do not move hardly at all. For me, we would phase those out of our retail program in the upcoming year ahead. If I’m buying retail and my team or myself is only selling 1, 2, 3, 4 of those products in a year, those products are more than likely expiring before I even get a chance to sell them. Those products could be like a special order or something that we do just for the very, very small handful of clients or probably like the one client who enjoys using them. I don’t want to tie up that cash on my retail shelves any longer. So the bottom 20, meaning the 20% of products that we’re really hardly selling it all become discount. Kind of like foreclosure products that we’re gonna phase out of our program completely. Some retail brands will buy those back from you, which is great, and then you can use them as a credit to stock your shelves with other things, some will not.
And then I would just sell them at cost and move them out of my program to free up cash, get more liquidity and get them off my shelves. So that’s why we do them at the bottom 20, the top 20%. These are the things we wanna keep fully in stock at all the time. So you’ll see some of you have products that you’re selling hundreds of a year, great, we wanna prioritize those. We could do a whole episode on how to optimize retail shelves too to maximize sales. But those top 20%, that’s, that’s what you need to focus on. Reordering the mid 60% is interesting. These are products that you sell sometimes and you don’t wanna be sold out of, but we don’t wanna be deep in the inventory with them. So for me, when I’m looking at a like that mid 60, I wanna have maybe two of those products on my shelves at any time.
And then I can kind of like order to fill, like sell one, stock one, sell one, stock one. But if I’m only selling like two or three in a month, you probably only need to have three on your shelves at any given time. If you have a dozen, you’re overstocked on it. So this is a good chance to say like, okay, what is actually selling at scale? What sell sometimes and what do we really need to phase out? Why do I have you run the three reports? Well sometimes we make to our program, we introduce a new line, we phase something out. And when we do that, we see trends shift and change. The last 90 days tells a partial story. The last six months sells probably the most complete story and the last year sells a longevity story. What was happening a year ago is probably not a reflection of what’s happening today, but you’re kind of looking for patterns across these three reports.
What patterns you’ll see will be different for everybody. Some of you will be like, well if you look at it, the top 20% have been stable for the past year, great, well then you have full confirmation of what your top 20 are gonna be. Some of you’re gonna be like, well this is interesting, like for the past year, these five products were doing super well. Now they’ve shifted and they’re way down low on the sales report and in the last 90 days what we’re selling at scale is something totally different. You’re looking for anomalies like that. You don’t want to stock your shelves based on what used to happen. You wanna stock based on what’s happening right now and it’s finding the balance between all of those three things. The thing that you also don’t wanna do is keep your shelves stocked so minimally that your stylists go to sell stuff and they’re frustrated ’cause it’s never there, right?
That’s annoying too. So it’s finding the balance and when you look at it as what are our top sellers? What are our mid sellers and what are our bottom that really helps with that. Next we wanna look at our sell through rate. And sell through rate is really the indicator of the health of your retail program. This is the piece that I think is most misunderstood. So let’s imagine that I’m just starting a retail program today. I’ve never sold retail before and I buy $500 worth of wholesale products. I mark it up a hundred percent. So keystone markups. So I’m selling it for a thousand and I sell $800 worth of retail. So that means I sold 80% of what I could have sold, right? I could have sold a thousand, I sold 880%. Sell through rate is excellent. It’s exceptional. So imagine and and even that fiscally sounds great.
I invested 500, I sold 800, I now have $300 that I can use to restock with that would end up being healthy. The piece that we often forget in retail programs is, but what about that bit that I didn’t sell, right? So because I’m using keystone markup, I could have sold a thousand dollars worth of product. I only sold 800, which means I have $200 left of potential sales sitting on the shelves. That’s $100 of wholesale investment. So there’s a hundred dollars I spent that I did not rectify, some of you never rectify that hundred and it just sits there and it churn over and it builds over time. And that’s where retail sales programs go to die. So having 80% sell through or more is considered excellent. A 40 to 70% sell through is more average and considered moderate. If you’re seeing a 40 to 70% sell through, it just means there’s areas to tighten your program.
And we just talked about one way to do that, right? I talked about looking at the top 20, the mid 60 and the bottom 20. So if you’re noticing like listen, we invest, you know 500 and we end up selling like $200 worth of what we bought, there’s probably an opportunity to tighten up your program there. You’re likely overstocked on your shelves. So taking a look at how much you’re spending versus how much you’re selling is a good thing to do. Anything below 40% is a huge red flag. It means that your retail is moving way too slowly. So going back to our example, imagine I’m investing in retail for the first time. I spend $500 on a line, I could sell it for a thousand and in my first month I sell $400 worth of product. That’s technically considered red flag because I have more on the shelves to sell than I’m making in profit.
And yes, in my mind I’m like well I made $400 in sales but not really. ’cause you made that initial $500 investment, you haven’t even paid it back yet. But the temptation is to take some of that 400 and use it to restock the shelves. And that’s how retail programs end up running in the red. So what you wanna do when you look at kind of your retail ordering over the past year and your patterns is saying, listen, how much were we actually selling? How much were we buying? And how much of this inventory is like dead inventory, it’s just sitting here, it looks pretty on the shelves, but it’s not moving, it’s not selling. I’m just dusting it off every single month and it’s sitting here. We need to look at the health of our program and our sell through rate. So what are you selling versus what are you buying?
What did you buy months and months and months ago that you still haven’t sold? And are you really turning over a really healthy program? Like when you watched a perfect recent example, road Beauty just hit Sephora, I think it was a couple months ago, but based on the time of the recording of this podcast, Haley Bieber has had the road brand for years. It’s not a brand new brand, but it was a huge deal when roads started being carried in Sephora, I made it, made national news. Everybody was talking about a huge, huge deal and those road products hit Sephora and sold out almost immediately in stores. It’s not ’cause it was new. You could have bought Road online through the road website for years, but it was exciting ’cause it was placed in Sephora and they sold out. Do you think Sephora was mad that they sold out?
I promise you they weren’t. They were thrilled because what does it indicate Health of a program, interest desire. Now they hurried up and backstop and made it happen. But I think that often with retail programs in the salon were like, well we like the shelves to look full. It looks nice when it looks full, it looks pretty. It’s part of the salon ambiance, but debt isn’t beautiful. And so really thinking about like, yes, it should look good, but maybe you need one less shelf. Like would you rather have three full shelves and $18,000 in retail tied up or two full shelves with $11,000 tied up? Like just thinking about what our sell through rate is. What is actually smart? What actually makes our retail look desirable and how can we make this program profitable for ourselves? Which leads into step number four. And step number four is taking another look at sales versus commissions versus profit.
So there was somebody who shared in our thriving leadership group really recently that they were looking at their retail sales for the year and this person was like, well our team sold $51,000 in retail for the year and, and when any leader looks at that, they’re like, wow, that’s a huge piece of our revenue. $51,000 is not a small amount of money. But this salon leader also did a lot of the things that I just mentioned and said, we spent $30,000 to restock the shelves. So 30,000 was spent in restocking. So of the 51,000 sold, 21,150 was what was left over. When you remove the restocking, took 30,000 to stock the shelves, 51,000 in sales. So 21,100 leftover. This salon leader pays 10% of sales commissions. So 51,000 was sold, 5,100 went out in commissions to this person’s team. So that leaves the owner with 16,000 0 5 0.
So sold 51,000, but what the owner is left with is 16,000 zero 50. Well, when this leader goes to count the retail on their shelves, they have over $12,000 in retail on their shelves. So there’s $12,000 in product that’s not selling through, right? We just talked about sell through rate. So yes, they’ve made $16,000, but 12,000 of that is tied up on the retail shelves and some of it’s been tied up for years. So of the 51,000 sold, you take the 16, you minus the 12,000, you’re left with $4,000. And so the lesson that we learn in doing all of that is that the sell through rate is like everything. If you consistently have 25 or 30% of your inventory not selling, your margin gets crushed. So while looking at that top line number is amazing, if we’re not doing things like a retail inventory to reduce, you know, our tax implications, if we’re not looking at what our sell through rate is, if we’re not looking at what products sell well and what we should be really phasing out and really spending time nurturing our retail program, it could be an arm of our business that’s not profitable.
So I encourage you to take these last few weeks of the year to really take a good hard look at your retail program, what you have on the shelves, take advantage of those tax savings, make a good plan for the year ahead. I hope this has been helpful. So much love, happy business building and I’ll see you on the next one.
