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Doing Personal Care Product Business in USA A Brief Overview

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1 Doing Personal Care Product Business in USA A Brief Overview
Presented by Mike Nave President – PBD / BIR, Inc. Bom Gia! My wife taught me that! AND that’s the extent of my Portuguese!!! (keep a happy confident face Relax and smile look at audience at a face you know (maybe Kenny) Make it a game and have fun) I am delighted to be in your beautiful country ---BRAZIL ! And to be able to speak to you about business opportunities in the US Personal Care product markets

2 Who is Mike Nave ? 50 year career in beauty products industry
Distributor Publisher Dot com company VP Communications Free lance writer for industry trade pubs. Sales and marketing consultant Who is MIKE NAVE? I have spent a lifetime in the beauty biz as a distributor, publisher, Dot com company VP communications, free lance writer and for the last 5 years doing sales and marketing consulting.

3 Size of U.S. Personal Care Markets
PBD Size of U.S. Personal Care Markets Mass retail market segment sales excluding Wal Mart* Total Haircare sales $4.3 billion -1.5% Total Ethnic HABA sales $107 million -7.5% Total Hair Coloring Products sales $1.09 billion +4.4% Skin Care sales $2.79 billion +4.9% Grooming aids sales $1.11 billion +.04% Shaving needs sales $1.81 billion +4.9% Deodorants sales $1.26% +1.9% *(52 week sales total through May 14, 2005 (Source AC Nielsen) The numbers speak for themselves. We’re talking billions! Mass market personal care product segments are huge

4 Size of U.S. Personal Care Markets
PBD Annual revenues of salon services and product sales $60+ Billion. Total salon industry professionals 754,000 Natural/Organic personal care sales $4.3 billion projected to reach $6.6 billion by 2010 Compared to the Mass market the size of the salon industry with $60 billion dollars in product sales and services is much smaller, and the natural products market is even smaller.

5 Market Segment (A brief description)
Mass Retail Market Department Stores (Federated, Nordstrom’s, Saks Fifth Avenue) “Masstige” (Ulta, Sephora) MVRs (Costco, Sam’s, Target, Wal Mart) Grocery (Safeway, Albertsons) Chain Drug (Rite Aid, CVS, Walgreen) Specialty (Bed Bath & Beyond, Hot Topics, Bath & Body Works) Electronic Retailing (QVC, HSC) At mass the major market segments are: Dept Stores “Masstige” Mass Volume Retailers (MVRs) Grocery Chain Drug Specialty Retail Electronic Retailing All substantial sized markets

6 Market Segments (A brief description)
Professional Beauty Market Independent Salons (45,000) Chain Salons (25,000) Salon beauty stores (2,000) Distributor’s professional-only beauty stores (1,800) OTC beauty stores general market (3,000) OTC beauty stores Multi-Cultural market (9,000) Sally Beauty Supply (2,800 stores in U.S.) Distributors (350 exclusive and open line) Spa (5000 estimate) Nail Salons (60,000) Barber (85,000) Beauty Schools (1,500) The professional beauty arena is made up of a dozen market segments Read the list The 25,000 Chain salon are owned by 50+ entities including Regis Corp., the largest salon consolidator which owns or franchises over 10,000 salons. The two largest distributor organizations are Beauty Systems Group (BSG) division of Sally Beauty Co. $800 million in sales and Beauty Alliance Inc. (BAI) $400 million in sales

7 Alternative Marketing Initiative
Direct On-line Manufacturer Sales, a new marketing concept of manufacture selling on-line direct to consumers while at the same time establishing distributor/retail relationships. Before getting into the nuts and bolts information, I want to share with you a new alternative marketing strategy that capitalizes on the rapidly growing importance of the Internet. More and more companies are starting to sell direct to consumers using software that allows them to channel manage. Reshare Corporation is a major technology source for manufactures using e commerce to manage their channels. This is definitely out of the box thinking!

8 Marketing to the US Mass Retail and Pro Beauty Markets  a Good News/Bad News story!
And now for the GOOD NEWS and the bad news

9 First, The Good News (The Reward)
Awesome opportunity selling to the world’s largest market in terms of buying power. U.S. consumers are major shoppers always looking for something new and innovative. First the GOOD NEW! The Reward Marketing in the US is an awesome opportunity selling to the world’s largest consumer market in terms of buying power. US consumers are major shoppers always looking for something new and different.

10 Now, The Bad News ( The Challenges!)
Huge marketing challenges due to consolidations in all major market segments Surviving Mass Market Retailers’ shelf-space is a premium. You want it you buy it! Or more accurately, you rent it! In mass market payment terms can stretch out 6 months or more. (Being paid promptly – Forget It!) Now the Bad News! Consolidation has put more power into the hands of fewer accounts Retailer’s shelf space is a precious resource. Accounts such as Wal Mart, Target, Costco, Sam’s, Walgreen, CVS and Rite Aid are in the “real-estate” business when it comes to their shelf space. Payment terms are stretched

11 Now, The Bad News ( The Challenges!)
In order to have credibility with large account retailers you must be represented by a high profile broker. Pro beauty field consists of multiple submarkets with overall limited sales potential requiring two step pricing accessed primarily by rep groups and distributors Both segments require large margins to cover high cost of doing business. Your product line must be unique and different, or address a untapped market niche. There must be a compelling reason for your product line’s existence. More bad news, but not to worry, let’s consider them challenges You need to use a high profile broker Pro beauty field sales potential is much more limited due market size. However, barriers to entry are less than in mass. Selling through distributors in pro beauty requires a large 2 step discount structure. Both mass and beauty fields require large margins to cover high cost of doing business. Your product line must be unique, different, or address an untapped market niche.

12 What Accounts Expect Need manufacturer to create product demand Need manufacturer to promote product Need manufacturer to bring consumers into stores Need US distribution center for timely replenishment Need complete timely shipments Need professional sales representation Want company decision maker on the key sales call Require $5 million product liability insurance Well, first you have to know what accounts want and expect. They need you to create product demand that brings customers into their stores. They require suppliers have $5 million in product liability insurance, a US-based distribution center in order to process re-orders, shipped complete, in a timely fashion, and be represented by a professional sales organization.

13 Payment Terms Standard terms 2% 30, net 31
Introductory first order 2% 60, net 61 Seasonal terms Pay at end of season, return remaining product % payment in 60 days, balance end of season Major accounts: Pay on scan Expect free goods Getting paid, a reality check! Don’t expect to be paid in terms. Beware major accounts are not at risk YOU ARE! So if you want to do business you must be prepared to “Play the Game!!!. This system has worked for others and it can work for you

14 Product Returns Guaranteed Sale Return product if it does not sell
Failure Rate on New Products is 75%! Product fails, company goes out of business, chain stuck with inventory To sum it up, accounts buy on a guaranteed sales basis. If goods don’t sell they return it and the failure rate on new products is very high up to 75%. Large accounts make sure they do not get stuck with dead inventory if a supplier goes out of business.

15 What Brokers Expect Plenty of Samples Professional Sales Materials
Compelling Sales Story, reason for being: Patent, previous success, strong advertisings, excellent packaging and displays, timely shipping 7-10% commission paid promptly Long Range growth opportunity Company responsiveness and professionalism Factory field key account sales support Using brokers or sales rep firms is standard operating procedure in the US so make sure you know what your independent sales force needs to be successful Read Bullets

16 What Brokers Do Represents a large number of companies
Regular sales calls on food, drug & mass accounts Handles all paperwork Checks stores for distribution, pricing, location, Speaks to buyers frequently “Eyes, Ears, Feet”— extension of manufacturer Brokers respect what manufacturers inspect Here’s what you get for your money! Read bullets Most important your sales cost is variable, they don’t sell you don’t pay!!!

17 Barrier to Entry Lack of knowledge of the market
Major investment required Need to have US point of distribution Public Warehouse Joint Venture Company Owned Operation Meeting US Customs import regulations Here are some key challenges to overcome Your lack of knowledge of the US Market. Doing business in the US requires a significant investment. You must have a US located shipping point You need to meet US custom’s import regulations.

18 How to Market Here are some good tips to gain market info:
Gain adequate working knowledge of the U.S. marketplace by doing the preliminary investigative activities Attending trade shows Contacting trade associations Hiring a marketing/sales consultant Create strategic marketing plan Choosing right broker or rep organization Using public relations versus advertising to start Here are some good tips to gain market info: Attend trade shows Contact trade associations Hire a consultant You definitely must create a strategic marketing plan Be selective in hiring a broker Build your brand with PR and drive it with advertising.

19 How to Market (Exhibiting at Trade Shows)
Pro Beauty Market Major salon trade shows (4) Rep association sponsored shows (2) ISPA Spa Show plus additional smaller spa shows (6) International Esthetics Cosmetics and Spa Conference (2) plus half a dozen other esthetics shows Professional nail shows (5) In the professional beauty field trade shows are very important and the following are the major shows: Read the bullets!

20 How to Market (Exhibiting at Trade Shows)
Mass Retail Market NACDS (chain drug) GMDC (grocery) ASD/AMD (general merchandise 6) ECRM-EPPS (one-on-one apts. with major retail accounts 30+) In the Mass Retail market there are fewer trade shows but these are important ones to be aware of. NCDS Market Place focus is on chain drug and other mass market accounts. ASD/AMD shows Las Vegas, the largest has 3200 exhibitors and over 8000 booths jam-packed with lots of personal care products

21 ECRM-EPPS Guaranteed 20 minute meeting with buyer and/or category manager in a 4 or 5 star     hotel room setting 60 retailers in attendance Food, Drug & Mass Perfect way to jump start distribution in mass market In my opinion this is the best bang for your bucks. These shows are held in top hotels and resort areas where the major account buyers are brought in with all their expenses paid for and in turn they must visit every exhibitor at the show. The show cost is expensive, but when you consider the time and cost of trying to see a large number of buyers located all over the country it makes ECRM-EPPS a real bargain

22 How to Market Packaging
Make sure it meets U.S. market requirements from both a regulatory and marketing effectiveness standpoint. A quick note on Packaging! You have to make sure you’re meeting the regulatory requirements, and also your packaging needs to address the US market from a consumer’s view point making sure your marketing message brings a call for action.

23 Important Information
Key Trade Associations NACDS (National Chain Drug Store Association) PBA (Professional Beauty Association) ISPA (International Spa Association) Here are a few key trade associations and publications that can be valuable information resources for you

24 Important Information (Mass Retail Market Publications)
Chain Drug Review Drug Store News Mass Market Retailers Supermarket News NACS Magazine In the mass retail market segments these are the top publications.

25 Important Information (Pro Beauty Market Publications)
Skin Inc Derma Scope Day Spa American Spa Nails Nailpro Launchpad American Salon Modern Salon Salon Today Beauty Store Business OTC Beauty Magazine Beauty Times In the pro beauty market there are trade magazines with editorial focus on salons and salon professionals, beauty stores, skin care establishments and estheticians, spas, nail salons and nail techs.

26 Important Information (Pro Beauty Market Publications)
and last but not least, my newsletter the Beauty Industry Report. AND I saved the best for last!!! My newsletter the BIR, also affectionately referred to as the “BLUE THING,” and its motto is “If you ain’t reading the ‘Blue Thing,’ you know nothing!!!

27                                                                        The Beauty Industry Report was founded in 1997 to fill a need for sharing timely, interesting, entertaining information between all segments of the professional salon industry. Today, the BIR is the only executive newsletter serving the professional beauty industry, including manufacturers, reps, distributors, associations, chain salons, day spas and top independent salons, with behind-the-scenes information about the people, products and companies that are meaningful to our readers. With the landscape of the salon industry rapidly changing, BIR is the "score card" that lets you know who's on first, who's striking out and who's scoring big. I continue to serve as the editor and principal reporter of BIR. In addition, every month, I invite a guest columnist to present his or her views on a chosen topic. Our team strives to make BIR the place where the various segments of the professional salon industry can be heard. We value your input, and invite you to contact us anytime with your ideas and input. The BIR is published 12 times a year with each issue being 12 or more pages. The paid circulation is 1,500 and growing. In addition, the circulation may include up to 1,000 extra copies as part of promotional mailings or show distributions. The BIR is published in Travers, MI and mailed bulk third class, usually arriving in the middle of the issue month.                                                     Articles written by Mike Nave for BSB Magazine               Hot New Product? Download Complete BIR About this eNewsletter Develop your eNewsletter Subscribe to BIR! Contact Us Mike Nave News Articles Pravana’s Super Shape’s sales are sizzling Company has a Good Hair Day Jim Fisher returns to Jungle at Nexxus Lafayette Jones’ Multicultural Column Access Brands keeps salons’ phones ringing Expo Latino opens doors to new sales and marketing opportunities for beauty biz IESCS mirrors skin care category’s growth Bob Oppenheim: “Manufacturers don’t want to control diversion” Mr. and Mrs. BIR make a quick escape to Santa Barbara to cover show Feature Sections Consultants' Corner Diversion Last Minute Blasts The Multicultural Report Obits People Rep Rap Show Biz Spa Biz What’s Hot What’s New Who's Looking for What by Mike Nave editor                   BIR is in “rehab” after spending five fast and furious days and nights in LV covering the third annual Cosmoprof North America Show and all the other happenings during the show weekend. Cosmoprof Bologna it’s not! But maybe given time, Cosmoprof NA will reach its potential. Read about the happenings in the September issue. In this issue, BIR covers the Santa Barbara Beauty Expo and Latino Expo. BIR also drove out to Malibu to interview Michael Apstein, president/CEO of Access Brands, to learn more about his THE SALON new client referral program for salons. Last month the salon industry lost a wonderfully creative hair stylist with John Sahag’s passing, and in this issue, Dwight Miller, a close friend of John’s who worked with him, wrote to share some nice thoughts with BIR’s readers. Regards,                                                                                                                        Marketing lesson By Bob Salem Marketing represents the greatest opportunity for independent salons to fuel their future growth — but not in its current state. Marketing is most successful when it results from a fully integrated strategy that is specific to the brand and importantly, when the immutable laws of marketing are respected. We experience the power of marketing every day through the choices we have in the products and services we consume. For each of those choices, the marketing intent is to create a memorable and motivating image. At the same time, marketers attach attributes to that image to elicit your trust in its performance. Everything leading to the creation of trust is specific to the brand, its image and its attributes. Trust is at the center of the emotion consumers feel when products and services live up to their expectations. Marketers of consumer products focus on creating demand for the goods and services of their brands. Rarely do they borrow interest from another brand to enhance their own. Great marketing thrives on having a single minded focus on everything specific to the brand. The brand is the destination and consumers place their trust in the brand’s intrinsic qualities that are carefully assigned to it through marketing. (click here for full article) Here’s a sample of page one of eBIR, the electronic version that’s sent to subscribers via the Internet once a month. There is also a hard copy available, however most of our overseas subscribers prefer receiving eBIR This was sent by Mike Nave, Beauty Industry Report, Mulholland Hy. #403, Calabasas, United States to Unsubscribe                                               

28 Remember, if you ain’t reading the “Blue Thing,” you know NOTHING!
Get Your eBIR Free Trial Subscription Complete the Hand out form and submit to Mike Nave or Fax to: or Mike Nave with your request to Remember, if you ain’t reading the “Blue Thing,” you know NOTHING! I invite everyone to request your free sample eBIR subscription by filling out the hand out you have received, or going on line to my website,

29 Important Information (Valuable Resources)
Reshare Corporation, a provider of patented channel management software. (www.reshare.com) Katherine Frank Creative, a full service marketing and trade show management group. (www.katherinefrank.com) Kirschner Group USA (Sales rep organization covering the pro beauty market on national basis. (www.kirschnergroup.com) John O’Maley & Associates, Sales & Marketing Consultants covering mass retail market on national basis. (www.omaley.com) Fred O'kasick Sales Inc. Sales rep organization that covers the U.S. Chain Drug Store market. (www.foksales.com) Joni Rae Russell/JRA Associates. Full service marketing organization specializing in product development and packaging design. ECRM-EPPS Efficient Collaborative Retail Marketing - Efficient Program Planning Sessions a business process that streamlines the consumer packaged goods sales and marketing supply chain (www.ecrm-epps.com) You do not have to fly solo in marketing to the US. These are a few excellent resources that I use regularly that can be of great value to you. If you want additional information on any of them contact me or the go directly to their websites.

30 So where do you go from here?
Use a knowledgeable consultant to gain sufficient information to make an intelligent decision, whether to market in the U.S. or not. Do the necessary home work Visit trade shows Do store checks Contact trade associations, You have the option of going through the process on your own, or if you really want to “kick start” doing business in the US in a more efficient way, I suggest you use a knowledgeable consultant.

31 Thank You for the Opportunity!
PBD / BIR, Inc. Publisher of the Beauty Industry Report International Representive Master Broker Consulting Michael Nave President 22287 Mullholland Hwy. Suite Phone: Calabasas, Ca. U.S.A Fax: Mobile: The world is getting smaller and the opportunities are getting larger. I thank you for giving me the opportunity to open up marketing possibilities for you in America. It’s wonderful to be here in Sao Paulo again and I look forward to returning soon.


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