Challenges to Spa Profitability

 

Ease of entry into the spa industry

  • Increasing competition from the medical, hospitality, beauty, and fitness industries

 

  • Inherited beauty industry traditions

    • Extensive use of independent contractors (booth rental tradition)

 

  • Out of control compensation costs that create ever-increasing losses

 

  • Low margins;

    • Similar to restaurants, spas have traditionally low margins (2% to 7% return on investment is common, vary rarely higher than 15%)

 

  • Poor retailing skills and high commissions on retail

    • 10% commissions in the spa industry versus 2% to 3% commissions at a department store cosmetic counter

 

  • Escalating treatment costs

 

  • Missed opportunities of client retention

    • Lack of rebooking clients before they leave the spa

 

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