Fourth Quarter Forecast 2011

Targeted spa holiday strategies to cap off a turbulent year

The year 2011 will go down as one of the most economically tumultuous in recent memory. It began with a great deal of optimism—consumer confidence had reached a two-year high of 74.5% last December, and in January, unemployment dropped to 9%. In addition, President Obama averted income tax hikes by extending the “Bush” tax cuts for another two years. By February, the stock market had rocketed to 12,000, and retailers (including day spa owners) were riding the wave of a 5.5% increase in 2010 holiday sales—the best since 2005.

But just as it seemed the U.S. economic engine was finally revving up, things stalled. The GDP’s growth rate slipped below 2% by the end of the first quarter, the unemployment rate actually increased during the second quarter, and by the end of June, consumer and business confidence had deflated. As the second quarter yielded to the third, the U.S. government teetered on the verge of debt default, causing further erosion of consumer and business owner confidence.

Yet it wasn’t all bleak. As America celebrated its 235th year of independence, the National Retail Federation reported a 5.5% increase in year-over-year retail industry sales in June, marking the 12th consecutive month of growth. And despite the economic storm clouds that seemed to be gathering over summer’s horizon, business forecast publisher Kiplinger predicted a final retail sales increase of 3% over 2010’s numbers—but not without concerted efforts on the part of business owners. “Retailers will have to work hard to get shoppers to spend more,” a July 14th Kiplinger report stated. “Cost-conscious consumers will continue to keep their eyes peeled for discounts.”

DAYSPA turned to two veteran spa owners who echoed this sentiment when asked about their fourth quarter expectations. Read on for their strategies and tips for effecting a fruitful holiday season in a flummoxed economic climate.

Decking the Halls

As the 2011 holiday season approaches, two key economic principles will present themselves front and center: seasonality and competition. For day spa owners, the winter holidays typically present the biggest sales season of the year.

“A good 30% to 40% of our revenue comes from holiday gift certificate sales,” says Tamara Friedman, owner of Tamara Spa + Wellness in Farmington Hills, Michigan. Friedman, who’s been in business for 30 years, has a focused holiday sales plan that begins several months out. She starts in September by target marketing to businesses such as car dealerships and doctors’ offices, proposing they substitute spa holiday parties for employee bonuses. She also advertises heavily through local radio and television stations and regularly issues press releases to local publications. “Every year we create a gift package that entails a whole year of pampering at Tamara Spa,” Friedman says.

By November, her spa comes alive with open houses where guests and neighbors revel in champagne, balloons, hors d’oeuvres, raffles (for gift certificates, of course!) and games. While email blasts are used liberally throughout the holiday campaign, Friedman focuses primarily on marketing with a personal touch. “We set up booths to sell gift cards at a lot of other organizations’ pre-holiday bazaars,” Friedman says.

Focus as much energy luring shoppers away from the clothing, electronics and specialty retailers as you do on differentiating yourself from other spas.

Angela Cortright, who owns Spa Gregorie’s, with three locations in Southern California, is forecasting the tiniest of increases for her spa’s 2011 holiday sales. “If we beat it, great, but we’re being very cautious,” says Cortright, who typically derives 30% of her revenues from the holidays.

Cortright prepares for the holiday season early in the year by trying to discern which retail goods the customer wants. “This way I can identify trends, key items and best-sellers,” she says. “The faster you can get product into the store and see how it performs, the clearer idea you’ll have of which categories are going to perform during the fourth quarter.”

Using second and third quarter sales as a barometer, Cortright gauges the hot ticket items and then determines how fast they can be reordered. “It’s important to know whether the supplier is capable of doing special orders at the drop of a hat,” she says. “I would rather take early delivery than be caught without goods to sell!”

The Great Race

While spa owners tend to think of their competition as being limited to other local spas, it’s wise to consider a much broader definition. You’re also going up against various retailers’ storefronts and websites. So as you derive a marketing plan for the holidays, focus as much energy luring shoppers away from the clothing, electronics and specialty retailers as you do on differentiating yourself from other spas.

Friedman has this system down pat. “My ads always say, ‘No lines, no sizes. We’re a phone call away,’” she says. “Busy people can just call or click to order a gift card. It’s fast and convenient.”

Cortright sees retail shops at the mall as key competition, and focuses her marketing drive accordingly. “In order to be competitive, you have to have holiday goods available at roughly the same time as traditional retailers. We aim to offer stress-free shopping and unique products at an affordable price,” she says.

Cortright emphasizes service over stuff—reinforcing gift certificate sales with a clever tagline: “The gift that always fits, is not fattening, will not wilt and die, and is never returned.”

“Most of my spa clients like having a one-stop shop for all their holiday needs,” she says. “This year we’ll increase our focus on customer service to differentiate us from the mall. We’ll also offer an early bird special that allows the first gift-card shoppers to keep a $20 gift certificate for themselves with every gift purchase of $100.”

Both Friedman and Cortright report using other tools such as specials, spa bucks toward a second gift certificate and Groupon to further drive holiday sales.

Holly Jolly Outlook

While preparation for the big revenue push and competition awareness are both critical for the spa owner to succeed this holiday season, Friedman believes that a positive attitude is the most important trait to win the day. “Your outlook passes on to your employees, which passes to clients,” she says. “The owner should be very upbeat and positive for the holidays.”

“Our primary goal is to knock the socks off customers with amazing service.”

Friedman advises owners to seek outside education. An avid reader of DAYSPA, she also peruses other business magazines and attends spa conventions throughout the year to pick up new ideas. “Opportunity is everywhere,” Friedman says. “You just have to open your eyes.”

Cortright, who strongly promotes community service (such as footraces, fundraisers and charity galas) as a way to connect with customers, agrees that a positive attitude goes a long way in attracting holiday dollars. “Make sure your front desk and entire staff are especially focused on service during this time. We recognize and encourage our staff when they do something right—we celebrate our ‘wow’ moments,” Cortright says. “Our primary goal is to knock the socks off customers with amazing service. And I think clients will want it all this holiday season: unique product, available quantities, great pricing—and all of it supported by superior customer service.”