Deep discount sites might mean major pains for spa industry
We have all heard about it, and apparently, many of us have tried it. From Groupon to LivingSocial to WagJag, group discount sites are flooding the internet, and the spa industry, in particular, is putting itself on the deeply discounted market. These daily deals are so dramatic, it sounds almost too good to be true—and in fact, it just might be. While spa-related deals are accounting for at least half of all daily discount options, many in the spa industry are worried about the long-term impact. It has become such an issue that Leading Spas of Canada is taking a stand on the topic, warning spas about the potential risks involved in using online group discounting sites. “As much as consumers are getting a good deal, at the end of the day, our industry is taking a hit,” says Tazeem Jamal, spa director, Skindulgence The Urban Retreat Ltd., in Vancouver, British Columbia and chair of the Membership Committee for Leading Spas of Canada. “These deeply discounted deals will be detrimental for all spas. They are creating consumer behaviours that we don’t really want to see. If you get something for $40 one day, what is the likelihood you’ll go back for the same treatment, at $140? It’s creating a ‘spa hopping’ effect that doesn’t help build our client bases at all.” Financially speaking, spas are offering these deals at a loss, Jamal says, adding the importance of knowing the facts before offering a deal. There are a number of points to consider: • Overhead costs remain the same, regardless of the discount • Too large of an influx of discount shoppers can disrupt schedules, alienating loyal clients • A large portion of the sales goes to the deal site—typically at least 50 per cent of the sale price • It is huge exposure, but are these customers likely to be repeat clients? Before offering a deeply discounted deal, Jamal suggests you are careful with how it is structured. “I think the lure is that it doesn’t cost anything upfront, but you need to consider your costs down the road as you honour thousands of these discount coupons,” she says. “For example, a G.M. Collin Vitamin C facial costs around $29, for the products alone. Then there’s the therapist, support staff, linens, and so on. So what’s the price at the end of it all? You might have made $30,000, but it will cost you $42,000. But if you structure your deal properly—perhaps offering a discounted yoga class, in which you can pack many people, with only one instructor, you’ll recoup more of your costs.”
Not All Doomsday
But not everyone is worried. In fact, for some, these sites have quickly become a key advertising vehicle for their spa. Carol St. James, owner of Spa St. James in downtown Montreal, says her experience offering deals on the LivingSocial site has been wonderful.
“It’s a loss leader, no doubt, but we sell thousands at a time,” she adds. “How else can we get our name out there like that, without this type of exposure?”
Last December, Spa St. James offered a treatment package (60-minute pedicure, with a 60-minute facial or massage—a total value of $190, for only $65), and they offered a second deal—$150 of services for only $65—this spring. That’s not all. Spa St. James also sold a package (body exfoliation, body wrap, and hydrating facial, value $250 for $100) on SwarmJam this spring. These deals are the St. James’ chosen advertising format.
“I have nothing but good to say about it,” St. James says. “Maybe it’s because we have the best-case scenario. Our staff are amazing at what they do, and we’re downtown, so highly accessible. People come here, they see our services, and we’re likely to get repeat visits. If you have good staff and can handle the people—it’s not a problem.”
The key is to really work with the clients that come for the deal. St. James (Carol, as well as her son Jordan who co-runs the business) is always at the front desk to ensure that when a client leaves, they go with a discount on something to bring them back. “When our LivingSocial (and other deal) clients visit, we give them discounts to come back,” St. James explains. “We work with them, treat them like fully-paying customers, and inform them about all our services offered. This way, we have had many repeats already from our deals.”
Though no concrete tracking is done to fully analyze the repeat business, because the spa is relatively intimate and the St. James man the front, they know their clients. And many of the LivingSocial clients have booked appointments to return right as they are leaving, so the St. James know immediately that they have won over a new client.
St. James admits the percentage that goes to the deal site is a little hefty, and she hopes it can be reduced over time, with ongoing deals offered. And an added benefit of offering these deals is it keeps people coming through the door, filling up the quiet times.
“Clients like to see there are other clients,” she says. “All in all, so far, we’ve been able to handle it.”
Meanwhile, Jamal suggests before jumping on the extreme discount wagon, spas should consider their options, and remember the golden rule: focus on maintaining your clients. “How good is it to be recognized as an industry known for giving deep discounts,” she says. “Instead, we aim to raise the bar in terms of professionalism and in the consumer’s eye for what we do. Simply put, give value, love your customers and make them love you in return.”