“Only for today, we have a $500 package for 12 keratin treatment sessions…only for you.”
“Ehh, it’s okay.”
“Only for you, I’ll give you $20 off—”
“I’m good. Really.”
I’m sitting askew in an uncomfortable seat stretched with (presumably faux) suede, batting off a hairdresser’s desperate attempts to upsell a useless package.
I don’t blame him, though; when a salon offers $3 haircuts, how else might they turn a profit?
The Appeal of the $3.80 Haircut
It’s no secret cheap haircuts are a draw for Singaporeans, with each ranging from $3 to $5 a pop.
My observations — gleaned from casual strolls past the likes of Snip Avenue and Ecoin.SG — have led me to believe that customers are i) either male or middle-aged, and ii) don’t give a hoot about hard part haircuts or anything fancy.
But how I ended up in a hair salon replete with gaudy diamond-studded mirrors and fluorescent-lit chandeliers is beside the point.
It’s the bevy of returning customers that fascinates me, despite the occasional stories you might’ve heard about botched haircuts.
To that end, here’s a closer look at how these businesses sustain themselves.
Quantity Over Quality…?
It’s true a lower price means more customers — and, conversely, more sales per hour.
But rather than rely solely on volume (read: more haircuts in a shorter time) to cover costs, the secret to these hair salons’ longevity lies in securing transactions with a higher profit margin.
To better explain this, let’s first estimate the revenue from haircuts at a Snip Avenue outlet that operates from 10am to 8.30pm with five hairdressers at any one time.
|No. of haircuts per hairdresser daily||No. of haircuts per salon daily|
(Assuming five hairdressers)
|Total||19 haircuts/hairdresser daily||95 haircuts daily||$361|
|10am - 12pm||2||10||$30|
|12pm - 1.30pm |
|1.30pm - 6pm||5||25||$75|
|6pm - 8.30pm|
$381 in revenue for 95 haircuts is paltry at best, considering the myriad of incurred expenses, from overheads and salaries to utilities.
Which is where packages and add-ons come into play.
Mark-ups and Packages
Membership fees are a good way of locking consumers in, given these require upfront payment to entice a customer.
Like IKEA and its affordable meatballs, offering a product or service — as in the case of a $3.80 haircut — at a lower-than-normal cost is not uncommon, and often encourages a consumer to spend more.
Rather than spend silly amounts marketing their businesses, Snip Avenue and Ecoin.SG bank on the fact that more walk-ins increases the probability of a customer purchasing a higher margin product.
Discounting the haircut itself, the business model essentially translates to customer acquisition for just $3.80.
At Ecoin.SG, a standard haircut goes for $5 and $6 on weekdays and weekends, respectively.
That goes down to $3 and $4 a haircut when you sign up for membership, although you’ll need to commit a minimum of $40 in credits.
The same is true at Snip Avenue; cuts go for $3.80 to $4.80, but a $38 membership includes 12 haircuts — or just $3.10 per haircut.
Tricks in a Bag
Membership packages are a lure, but not the end-all.
If you’ve ever felt pressured into scalp or hair treatment add-ons and packages, you’ll know where I’m coming from: these extras are where the money’s at.
Snip Avenue, for instance, offers services ranging from scalp treatments ($10) and hair colouring ($24.80) to digital perms ($49.80). These remain substantially cheaper than regular hair salons, but are a means of covering costs.
Let’s now assume 50% of Snip Avenue’s customers spend an extra $25 – a ballpark figure, based on service and treatment costs — in addition to a standard haircut.
|No. of haircuts per salon daily|
(Assuming five hairdressers)
|Cost per haircut||With add-on treatment||Revenue/day|
With an estimated daily revenue of $2,736 per outlet, it’s easy to see how a hair salon like Snip Avenue is able to comfortably cover costs, despite (or, ironically, because of) its $3.80 haircuts.
The final one’s a seeming no-brainer: setting up shop in the heartlands means lower rental, plus the chance to capture a wider demographic.
Unlike atas hair salons that require customers to travel to them, businesses like Snip Avenue and Ecoin.SG plonk themselves in densely populated neighbourhoods.
It’s clearly proven to have worked thus far, though.
Whether you hate or love our investment content, give us your feedback!