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I Smell a Rat

The more things change, the more things stay the same, and that's especially true when it comes to diversion and the ongoing struggle to eradicate it for good. Despite the best intentions of many in the industry, sales of professional products in unauthorized outlets, which first began in the early 1980s, have snowballed to epic proportions in the last couple of years. In fact, BusinessWeek reported in December 2004 that nearly $800 million of the beauty industry's $29 billion annual revenue from the sale of professional products may be diverted or counterfeit.

Brett Vinovich
Brett Vinovich

In this issue we present our sixth annual look at diversion. This time around, we decided to ask you to weigh in on this vital topic that impacts your livelihood. One of the things we wanted to know was whether or not you've seen positive changes in the diversion problem in your area. We also asked you what your salon is doing to play a more active role in the fight against diversion. Our executive editor, Kelley Donahue, started a blog on the National Cosmetology Association's Web site so you'd have a forum in which to sound off, and sound off you did. What we heard was that many of you are frustrated by what you perceive to be a problem that's never going to go away so long as companies stand to make a profit by diverting their own product. "Do we think these companies are going to let go of this kind of money?" wrote Keith. "It's much easier to advertise they're against diversion—but still take the money."

Craig bemoaned the fact that getting hairdressers to retail was never easy but that "diversion has made it harder." Jonathon Goldhill told us we're wasting our breath, but he did suggest that change might be possible if salons get more involved. "The only way to change the industry is to be the change," he wrote. "Start now. What are you going to do?"

Another blogger, P.R. Thompson, who says he's been in the industry as a manufacturer for more than 25 years, informed us that he continually gets calls from mass retail outlets wanting to carry his product. His solution to the problem: "If manufacturers really want to stop diversion, stop selling to them."

You dirty rat: It's not unusual to see inflatable rats at businesses in New York City that hire nonunion workers. Maybe we should start "ratting out" diverters. What would your clients think if they saw one of these in front of their local Target or CVS?
You dirty rat: It's not unusual to see inflatable rats at businesses in New York City that hire nonunion workers. Maybe we should start "ratting out" diverters. What would your clients think if they saw one of these in front of their local Target or CVS?

Kimberlee, on the other hand, has decided to beat the mass marketers at their own game. Her philosophy: Don't get mad, get even. She not only tells her clients that she carries the best at a better price than the drugstores, but also that she's got a professional staff to back it up. "We win by not swimming against the tide but with it. We carry the most diverted products. Our theory is to give the people what they want at a place that's convenient." So is it working? "We do more retail than ever," she says. "About half of our sales are to walk-ins who aren't even having services. We use our windows to display products, copying Supercuts because we see how well they do with retail. We can't stop diversion, but we can benefit from it by turning lemons into lemonade."

Jonathon's response to Kimberlee's post? "It's nice that you can make a profit selling grocery store brands. Good luck moving the inventory when the grocery stores start offering your products below your wholesale price. You'll need to invest in a feather duster to keep your nonprofessional beauty products looking good."

Strong stuff, but then diversion is a complicated issue. To find out more about what the industry is doing to fight diversion and to see how companies are responding to the problem. We'd also like you to visit salonlife.blogs.ncacares.org, read the story called "Risky Business," then post your own comments about this very important issue. —Brett Vinovich, publisher, bvinovich@questex.com

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Brett Vinovich

Brett Vinovich