Business is getting slower
"I feel this year is getting slower and slower. There are almost no new customers in the store. Most are previous members who come to use their cards for treatments. When we try to sell new packages, very few are willing to buy." said Wang Meng (pseudonym), who runs a mid-to-high-end hair care salon in Beijing. Born in the 1980s, Wang Meng joined this leading hair care franchise in 2018. "At that time, I thought this industry was booming, and there were no professional hair care salons nearby. Plus, this industry wouldn't be impacted by e-commerce, so I decided to open a store." She said, "When it first opened, we relied on friends and acquaintances to come and support us, and business was okay. But unexpectedly, after the pandemic restrictions were lifted, business got worse and worse." Wang Meng said that previously, customers were very willing to recharge membership cards with thousands or tens of thousands of yuan, but now new customers are scarce, and even old customers hesitate when faced with newly introduced packages in the three-digit range. "I feel that business is getting slower every year," Wang Meng said helplessly.
According to Wang Meng, the brand she joined is a genuine mid-to-high-end brand targeting the middle class. Membership recharges have never been below four digits. Previously, after customers used up their stored value, they would readily pay to buy new packages without any sales pitch. "Under the wave of consumption downgrade, the store has also introduced three-digit packages, but what's worrying is that even after hours of hard selling, it's hard to close a few deals." Wang Meng said that the store's clients are mostly middle class, but after the pandemic and changes in the overall environment, the impact on the middle class has been significant. "It's already obvious that this year's revenue is much worse than last year, and last year's revenue was much worse than during the pandemic. It's getting worse every year." It is understood that Wang Meng's store has nearly half the staff compared to last year. "Business is tough, consumers are unwilling to spend, but the industry is getting more competitive, and franchise stores are increasing, especially in places like Guangzhou and Shenzhen." Wang Meng shook her head and said that according to peers in the communication group, some stores have added ear cleaning services to attract customers. "It's really tough. To attract new customers, a professional hair care store has added products that shouldn't be there. They are really pushed to the limit." Wang Meng said.
Next door to Wang Meng's store is a high-end yoga chain, and across the street is a mid-to-high-end hair salon. But after surviving the pandemic, the yoga studio closed in mid-2023, and then the hair salon also closed, both replaced by mass-market restaurants. Wang Meng said that since the second half of last year, consumers have noticeably become resistant to recharging large prepaid membership cards. She estimates that the continuous scandals and runaways in the industry have made consumers lose confidence in the industry's integrity, but this is also a fatal blow to high-end professional stores that rely on membership recharges to survive.
"Now we are constantly adjusting, using online traffic generation, and launching 19.9 yuan and 29.9 yuan experience vouchers to attract customers," Wang Meng said. "We'll grit our teeth and hold on a bit longer. Maybe after the storm, we'll see the sun."
Closing after nearly 800,000 yuan in debt
Besides Wang Meng's store getting slower, Tony老师们 (hairdressers) in Beijing are also having a hard time. Wang Tao (pseudonym), born in 1990, closed his store in Fengtai District, Beijing, at the end of April after nearly five years of operation. "From being a shampoo boy to accumulating enough capital to open a store, only I know how difficult that process was. I spent nearly one million yuan before and after opening, and by the time I closed, I was in debt of nearly 800,000 yuan." Wang Tao said that since opening the store, he fell into endless anxiety. The industry competition is fierce, and retaining customers is difficult, which drained all the expectations and enthusiasm he had before opening. "I'm still confused about the future, but I'll find a way to pay off the debt first, then start over. But I won't easily open a store again." Wang Tao said.
Similarly, Zhang Peng (pseudonym), who took over a high-end hair salon in 2021 through a friend's introduction, which he considered a bargain, is now full of regret. Facing daily revenue that can't cover rent and labor costs, he is also at his wit's end.
Zhang Peng, born in 1980, worked as a hairdresser in Jinan for nearly 20 years and also served as a technical director at a chain enterprise, with some savings. "During the pandemic, hair salons suffered a heavy blow. Many stores couldn't sustain and chose to close or transfer. At that time, my judgment was optimistic. I thought the industry would recover after the pandemic. Everyone was transferring at ultra-low prices, which was a good time to pick up bargains. I thought prices wouldn't be this cheap after the pandemic, so I took over a store with relatively high-end decoration." Zhang Peng said. He said that after opening, the store positioned itself as a high-end hair salon. The store manager and technical director charge 399 yuan for a haircut, followed by 299 yuan and 199 yuan. Stored-value members get corresponding discounts like 50% or 30%. "When it first opened, foot traffic was low, and daily revenue just passed 1,000 yuan. We started running promotions and sales, and performance improved, with daily revenue around 3,000 to 4,000 yuan. But after deducting rent and labor costs, we were still losing heavily." Zhang Peng recalled.
Business was bad, and competition was increasing. According to Zhang Peng, several new stores opened near his, including two with high-end decoration. "The industry competition is fierce, and with the poor overall environment, lower prices are more acceptable. So we tried adjusting prices, cutting them by 40% overall." Zhang Peng said that after the price adjustment, business improved significantly, and new customers increased. But it's worth noting that people are no longer willing to recharge large membership cards, even with more discounts. "Under the hot topic of consumption downgrade, we cut prices again at the end of last month. For example, the store manager and technical director now charge 188 yuan for a haircut, and with a 30% discount membership card, it comes down to just a few dozen yuan. But I have to say, people are really cautious about spending. It's not just talk; they are really practicing it. No matter how we cut prices, the membership recharge business hasn't improved." Zhang Peng said helplessly.
High-end retail shows weakness
In the past two years, consumption downgrade has been a hot topic and a real reflection of ordinary people's lives. It manifests in all aspects of life, from big things like houses and cars to small things like food, clothing, and haircuts.
Speaking of traditional hair salons, many people complain about high prices, long wait times, and the sales pitches for cards or memberships starting from the shampoo, which is annoying. Under consumption downgrade, simple 10-yuan quick cuts have become very popular in Beijing recently.
For example, a hair salon inside a shopping supermarket in Beijing's urban area is clean, simple, and decently decorated. It only costs 10 yuan, and basically one person can finish a haircut in 10 minutes. The whole process has no sales pitches for cards, no small talk, truly returning haircuts to just haircuts. Surprisingly, in recent years, consumption downgrade is no longer limited to older men and parents of young children. More and more young people are choosing quick-cut shops, focusing on saving time and money. In their view, there's no need to spend too much time and money on haircuts; simple and neat is enough. Another surprising development in consumption downgrade is the influx of young women. Although women have always cared more about their appearance than men, and hairstyle plays an important role, some young women are also starting to choose quick-cut shops. They may be under the same economic pressure and hope to save some expenses on haircuts. Behind this phenomenon are changes in the socio-economic environment and shifts in personal needs. For consumers, consumption downgrade is both a choice and an adjustment, as well as a response and adaptation under real pressure.
In this context, some high-end and professional stores are also facing a wave of closures. For example, Xiabuxiabu (00520.HK)'s high-end barbecue brand "Censhao" began closing stores within two years. After reports that one store in Guangzhou and one in Shenzhen closed before the Spring Festival, the last remaining store in Guangzhou is about to close, leaving only two stores in Shanghai nationwide. It is reported that in September 2022, the new brand "Censhao" with the theme of "Happy Barbecue" opened stores in first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen, with plans to exceed 100 stores within three years. Unfortunately, before reaching the "100-store goal," stores in Hangzhou, Shanghai, and other cities had already closed.
Beyond high-end professional stores, globally, the high-end luxury goods industry is also in trouble. According to "World Finance" reports, London, as one of the global luxury consumption centers, is seeing weak performance in its high-end luxury retail. According to the UK Office for National Statistics, the UK economy entered a technical recession in the second half of 2023.
For example, a British local fashion luxury clothing chain closed last month, and another 14 stores will also close gradually. According to British media reports, the chain's closure of many stores is directly related to rising store rents. In the UK, not only are living costs rising, but the operating costs for luxury businesses are also soaring, making the business environment difficult. Take Bond Street, for example, a representative of London's high-end commercial streets, where global high-end luxury brands gather. Despite the economic downturn, store rents on London's commercial streets are still rising. The average annual rent per square meter on this street exceeds 12,000 pounds, and a 100-square-meter store requires an annual rent of about 1.2 million pounds (approximately 11 million yuan). The contrast between rising rents and falling sales intensifies the operational difficulties for high-end brands. It can be said that the operational difficulties of the UK's high-end luxury industry are a microcosm of the challenges currently faced by high-end professional stores.