Plus some tips to help your team weather tough times

Talk of recession is dominating the headlines. A recent survey found that 61% of economists believe an economic downturn is likely in 2023. Whether or not a recession will actually happen, preparing your beauty biz for leaner times is always a smart move.

Let’s go through some warning signs you should watch out for, as well as some tips to help you protect your business and your team. 

How do recessions and economic downturns impact beauty businesses? 

If that introduction sounded a little ominous, take heart. While no industry is immune to recessions, beauty businesses are much more resilient because of a phenomenon called the “lipstick effect.” 

Sales of small everyday luxuries, like lipstick, actually spike during economic recessions as consumers look for ways to boost their mood without breaking the bank. Massage parlors, facial bars, hair salons, and other beauty businesses can provide clients with a similar boost. When a client can't buy a new car or take a deluxe vacation, they may still be able to afford a haircut or a manicure and walk out feeling much better about the world at large. In other words, beauty businesses help people feel good in the face of uncertainty, and that’s nothing to sniff at during a recession. 

However, that doesn’t mean you should ignore what’s going on in the economy. Though the “lipstick effect” can help you keep some clients in chairs, an economic downturn can be devastating if you’re not prepared. As more people face layoffs, you may see a decline in bookings and sales of products as clients pull back on visits and purchases to save money. That could leave you with less cash on your end to spend on operating costs, which tend to rise during recessions. 

Keep an eye out for these early warning signs so you can plan ahead and pivot quickly. 

Increased demand for promotions and sales

Promotions are always popular — as they’re meant to be — but if your promo email opening and redemption rates are going through the roof, month after month, it could be a sign of something deeper. Clients may be feeling insecure about their finances and trying to get in on as many deals as possible, which could be a harbinger of fewer bookings down the road. 

Your pivot point: Speak to your client’s concerns. If clients are worried about money, adjust your marketing copy to talk about your services as affordable luxuries. Now is also the time to stress lower-cost services or bundle more expensive services with other perks in order to help clients feel like they will get the most bang for their buck by visiting your business.

Declining sales for more expensive services and products

Your shelf is stocked full with high-end hair products, and it kinda… stays that way. If your highly sought-after treatments and products drop in demand and no other changes have taken place, clients may be reining in their spending in anticipation of a recession.

Your pivot point: You may need to run some promotions to clear inventory through engaging marketing tactics. Bundle some products together and create small events (skin care for Spring!) at your locations to build up excitement (and get some clients back in the door). 

Lower engagement with content

You’re seeing email click-through rates slow, or maybe your social content is not getting as many likes and shares as it used to. There could of course be lots of reasons for lagging engagement, but if nothing you’ve tried before is working, something else may be afoot. Clients may be dealing with financial worries and are concerned about triggering spending by paying close attention to your IG reels. 

Your pivot point: Take a page out of Brad Mondo’s book by making short educational videos on TikTok or IG about some hair care, skin care, or other self-care topics, based around your products or services. Lean into helpful and inspiring content as much as possible to reassure your clients that you have their back during difficult times. This is also a good time to send more targeted advertising to your regulars, to remind them that they’re valued, even if they can’t make their appointments as often as they used to.

Your operating costs are creeping up 

Your vendors may have already raised prices due to high inflation rates, but if prices are going up again, chances are things are taking a turn in the economy. No one wants to operate a business with lower profits and higher costs, but there are some workarounds.

Your pivot point: Buy in bulk when you can and re-evaluate your vendors to see if you can find better deals. It’s also a good idea to take a look at your spending and cut back on discretionary expenses. You may be tempted to rein in your marketing to save on costs during recession, but thoughtfully reaching out to your target audience during a slump is crucial to maintaining a loyal set of clients. If your cash flow is feeling the pinch, financial assistance is also an option. 

Your team is fielding more cancellations or no-shows

Your stylists, aestheticians, and other beauty pros are the first ones to see the impact of declining bookings. If your team finds themselves with more blank space on their schedules, a sluggish economy could be to blame. 

Your pivot point: Have a genuine, open discussion with your team about financial constraints, and focus on employee retention. Layoffs are harbingers of a bad economy, but they’re not very efficient in the long term. A better strategy could be adjusting your operating hours by cutting out slow times, taking a salary cut, or implementing no-show fees for clients who cancel at the last minute (or just don’t show up). 

Lean into your data  

Look to your salon software analytics and reporting tools to help you track important data points about your business. Recessions can bring on panic and pressure to make quick decisions, but looking at your numbers can help you tell a more objective story. Whether you’re a recession veteran or gearing up for your first round with a bad economy, keep in mind that tough times, as hard as they are, can bring out your creativity and make you a better business owner.

More services booked, fewer no-shows, and higher tips?! Discover why Boulevard's modern client experience platform is a no-brainer for beauty and wellness enterprises. Get a demo now.

FAQs:

How do the warning signs mentioned in the article specifically manifest in different sectors or industries of the economy?

The warning signs mentioned in the article, such as declining consumer spending and rising unemployment rates, can manifest differently across various sectors or industries of the economy. For instance, in the retail sector, a decrease in consumer spending might result in reduced sales and inventory buildup. In the housing market, declining home sales and decreasing property values could indicate economic instability. Understanding how these signs affect different sectors can provide insights into the broader economic landscape.

Are there historical precedents or case studies that demonstrate how these warning signs have led to past recessions, and what were the outcomes?

Historical precedents and case studies offer valuable insights into how warning signs of recession have unfolded in the past. By examining past recessions, such as the 2008 financial crisis or the dot-com bubble burst in the early 2000s, researchers and economists can identify patterns and correlations between warning signs and recession outcomes. Analyzing these historical events can help predict potential outcomes and inform decision-making strategies for individuals, businesses, and policymakers facing similar economic challenges.

What proactive measures can individuals, businesses, and policymakers take to mitigate the impact of a potential recession based on these warning signs?

Proactive measures can be taken by individuals, businesses, and policymakers to mitigate the impact of a potential recession based on the warning signs highlighted in the article. For individuals, this may involve creating an emergency savings fund, reducing debt, and diversifying investments to cushion against economic downturns. Businesses can focus on improving operational efficiency, diversifying their customer base, and implementing cost-saving measures. Policymakers can enact fiscal stimulus measures, such as tax cuts or infrastructure spending, to stimulate economic growth and mitigate the effects of a recession. Additionally, regulatory reforms and targeted interventions in key sectors can help stabilize the economy and promote long-term resilience.