The missing middle

We’ve been hearing a lot about the decline of the middle class, and in recent decades we’ve witnessed the demise of many mid-market retailers. It now looks like the mid-market spa is becoming the another casualty of the recession.

The proliferation of budget-massage operations has been one of the industry’s biggest stories in recent years. “Real” spas love to look down their noses at their scrappy cousins, but they’re here to stay. Everyone loves a bargain, even if it sometimes feels like rolling the dice when you enter the treatment room with a new therapist in one of these high-turnover operations. We know discount massage spas won’t all survive, but a lot of them will.

Luxury day spas have taken a drubbing in the downturn too. The luxury market was the canary in the economic coal mine, and it started to buckle in 2007, while the financial industry was still huffing sub prime mortgage-derived “products.” High overhead operations, with their perilously narrow profit margins, were (and are) particularly vulnerable to this protracted downturn. Hotel and resort spas have reflected the even greater misfortunes of their parent properties.

But the luxury sector is coming back, with good news from bellwether retailers like Neiman Marcus (posting a modest profit for last quarter) Hermes, and others. For all the Rich-bashing that goes on in the media, the inescapable fact is that the luxury sector does much of the heavy lifting for economic recovery.

Even Target, the “luxury” Big Box, has surged back from a drubbing by Wal Mart in the deepest pit of the recession, while Wal Mart is foundering. Day spas have slowed their desperate orgy of discounting, taking a page from luxury retailers, who weaned their customers off the Junk after paring down inventories.

As the dust settles over the spa industry, and the Recovery proves to be a protracted doldrum rather than a bounce, we’re looking at a landscape choked with inexpensive semi-spas, dotted here and there with serious, well-established and top quality luxury spas, and—hey! What happened to the mid-market? Increasingly, there seems to be two price points for the "base sticker price" hour treatment in the day spa market: $50 and $100.

Unless the spa is really a job that looks like a business (which many mid market operations are, with their owners busily producing revenue in the treatment room) the mid-market spa is in danger. They’ve eschewed fancy-schmancy amenities for a more straightforward approach and more digestible price point. These modest tweaks were appealing before the burgeoning, discount-massage Tribbles began scurrying around their feet. Now it’s hard to make a case for their halfway-there value proposition. It’s the Neiman’s-Costco, high/low dichotomy. Mervyn's and its ilk are gone.

Do consumers really want to forgo the stellar wellness spa with its expert staff, or the experiential spa that makes them feel like a million bucks, for a $75 facial that’s somewhat more affordable, if unremarkable? Or would a $49 treatment do the trick? You can tolerate the high turnover of the budget operation because--well, that’s why we’re not paying $100+ for the session.

The cheap and cheerful massage spa I was in this week in LA was pretty spiffy, and it was brand new. Clean, too. It was meant to deliver the goods, not an “experience.” I got my $45 worth, and though I wouldn’t return to that therapist, I’ll try a different one next time. Heck, I saved enough to make me feel okay about my next visit to Spa Schmancy. In the “new normal” of high/low living, the middle has crumbled away.

So what do you do if your spa is navigating the hazards of the Middle? For spas in identity crisis, our consulting team uses a process called a Strategic Vision Session. It's a way to dig for your buried treasure, recommit to the essence of who you are, and  find a new, unique and more profitable path.

The length of this business drought has tested virtually every spa. Most have been weakened. Many have fallen. Unfortunately, the meager rains of Recovery have been too little, too late, for many dedicated professionals. There is another round of closures happening now. In the Kumbaya spa industry, this is rarely viewed as a good thing. But there is a silver lining. As the industry consolidates and market saturation eases, remaining spas will become stronger and more stable. Thanks to a lack of financing, new spa startups will have to meet a higher standard.

Our New Normal may be missing a middle, but the bottom line already looks better.