How to Price Skincare Products for Higher Profit Margins (in a Hair Salon)

While operating a hair salon, it is common for business owners to wonder how they can bring in more revenue and profit for their company. Selling retail items in your hair salon is absolutely one of those ways. Skincare products often do well in hair salons. When a customer visits a salon to get their hair done, it is very common for them to have other beauty items on their mind, like skincare products. We have the details you need in order to get the highest profit margin on skincare in your hair salon.

In order to price skincare products for a higher profit margin in your hair salon, you need to evaluate your wholesale cost for the products, keep the manufacturers MSRP in mind, add in a buffer for extra expenses, and consider your competitors skincare pricing in the area. By following these four steps, you will a higher profit margin for the skincare products that are available for purchase in your salon. 

Evaluate Your Wholesale Cost

The first step to deciding on pricing for the skincare products in your hair salon is thoroughly evaluating your wholesale cost. Without keeping your wholesale cost in mind, it is easy to price items too low, which will result in less profit for your company overall. To make sure that you keep your pricing at the ideal amount to stay as profitable as possible, it is recommended to evaluate your wholesale costs at least every 6 months. This ensures that you stay aware of any increases in wholesale costs.

As a business owner, you should have a complete list of every retail item that is sold in your salon. Along with the name of the skincare product, you should list the wholesale cost that you currently pay for the item, the recommended MSRP (manufacturer suggested retail price) if there is one, and then the price you’ve decided on selling the product for in your salon. You will want to keep this list up to date. For example: If you increase the price of a specific item or if the wholesale cost you pay increases, you will want to update this document.

Keep MSRP in Mind

How to Price Skincare Products for Higher Profit Margins (in a Hair Salon)

When you are purchasing skincare products at a wholesale price from a manufacturer and then selling the items for a retail price in your hair salon, there are some manufacturers that will have a set MSRP for each item. This stands for manufacturer suggested retail price. This price will vary on the manufacturer. Keep in mind that some manufacturers may not have a MSRP for their items. However, if your manufacturer does, we recommend keeping this price in mind when you’re setting your own pricing.

Some hair salon owners decide to stick with the MSRP when they are setting their pricing and choose to not consider any other factors. However, while we recommend keeping the MSRP in mind, we also recommend including other factors (like local competitor pricing, extra expenses, potential sales, etc.). The MSRP is like the foundation for the pricing. This will be where you set your pricing at the beginning, but then the pricing will likely change once you get to the additional steps we have included below. The MSRP helps you get an idea of where the pricing for the skincare item should be. It provides a range.

Add a Buffer for Extra Expenses

Once you have evaluated your wholesale cost and are aware of the MSRP for each product, you want to add in a buffer for any additional expenses that your hair salon may encounter while offering skincare products. When setting your pricing, it is common to keep in mind the regular expenses of operating your business. However, some hair salon owners don’t plan for the extra expenses. By not counting for extra expenses, it will result in less profit for your business.

When it comes to extra expenses, you want to keep in mind things like marketing and employee hours that are spent keeping up with the skincare items. For example: Do you plan on doing additional marketing specifically for the skincare products you’re offering? If you are doing extra marketing for these items, you’ll need to slightly increase the pricing for the skincare products to account for the marketing budget. If employees will spend a large amount of time stocking the items or doing other inventory type tasks, you also want to keep this in mind.

We recommend adding up the total monthly cost you are expecting to spend in total on the extra expenses you’ve thought of. Then you should break the cost down into weekly amounts and daily amounts. This will give you a better understanding of how much the extra expenses are costing your business regularly. To get a better idea of how much of a buffer to add into your pricing, try to come up with an estimate on how many products you plan on selling per day or per week. It’s important that you plan on selling enough products at a high enough price to not only cover the extra expenses, but to also leave your company with a profit after the expenses.


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Consider Competitors Pricing in Your Area

The last step in pricing the skincare products in your hair salon for a higher profit margin is considering your competitors pricing for similar products. In order to maximize your sales, which will also help you maximize your profit, you want to make sure that you are staying near the competitive price for similar products in your area. For example: If your price per product is $10 higher on average, your customers will likely go to a salon that has a lower price for the skincare items they want to purchase.

It is important to consider competitive pricing because the MSRP is most likely not taking into consideration what other salons are charging for the product in your specific area. The MSRP is generally set on a wide scale to work for all the salons that the manufacturer is selling their products to. The competitive pricing will be unique to your area and will give you a better understanding where your pricing should land in the range that the MSRP provides.

Offering skincare products in your hair salon is an excellent way to not only increase profits for your salon, but to also keep your customers loyal and stopping by frequently. When your customer comes in for a hair service, the amount they spend per visit will likely increase when you have the right skincare products for the right price in your salon. The perfect pricing will vary depending on the area, business goals and other expenses, but by following the recommendations above, you will be able to determine the right pricing for your specific salon and needs.

Related Questions

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1. What is the startup cost like for opening a hair salon?

The startup cost for opening a hair salon will largely depend on the location your salon will be in, the size of the salon and all the services that you will be providing. For example: If you plan on opening a large hair salon that offers a wide range of services, you will likely have a higher startup cost.

However, the basic amount starts around $60,000 and can go up to anywhere near $500,000. Since the range can vary so much, you do have some control over your startup costs (like keeping services to a minimum until you have more funds).

2. Am I required to have business insurance for my new hair salon?

All hair salons should have business insurance. The specific amount of business insurance will depend on how your business is set up. For example: If you have employees, you will need more insurance. If your stylists are set up as independent contractors, you won’t need the same amount of insurance.

To make sure that you get the right amount of business insurance, we highly recommend sitting down with your insurance agent to go over each type of insurance and the amounts your specific business will need.

Looking to start your own Salon? Get the documents you need to get organized and funded here.

Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.