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STOP DIVERSION: Turning the Tide

Turning the Tide

Industry leaders weigh in from the front lines with the latest in the ongoing fight against diversion.

The world of professional beauty is populated by artists, individualists and rebels, but there’s one issue that everyone who works in the industry can agree on: diversion. The practice, by which professional salon products end up for sale online or on the shelves of mass retailers, takes dollars away from hard-working beauty professionals, undermines client relationships and limits salons’ potential for success and growth.

Happily, there are massive efforts within all segments of the industry to combat diversion, and those efforts are bearing fruit.

The Beauty Industry Fund (BIF), the professional organization dedicated to ending diversion, has published its findings for 2012, and once again the report paints an optimistic picture. According to the research, performed by Nielsen, last year the dollar volume of diverted haircare products decreased by 5.4 percent across all outlets compared with 2011. Looking at that figure on a quarterly basis from the last two years, the fourth quarter of 2012 came in the lowest by 5.1 percent versus the next lowest, in the third quarter of last year.

Overall, the figures are the latest in a series of positive diversion reports from the BIF, indicating that the practice has seen a gradual but steady decline over the last two years, and salon professionals welcome this news.

“Whenever you see the graph trending down, you can’t be anything but encouraged,” says Rick Kornbluth, a founding member of the BIF and its first president. He remains a passionate advocate for salons in the fight against diversion.

“The best deterrent to diversion is salons,” says Kornbluth. “It’s incumbent upon salons to understand the buying habits of their clients. Make sure you’re selling to your clientele in a way that’s important to them.” For example, he says, a salon in the eco-conscious Pacific Northwest may consider a manufacturer’s stance on sustainability when deciding which brands to bring in.

Kornbluth has seen changes in the face of diversion since the BIF began in 2001. “Salons are competing with much more sophisticated retailers,” he says, pointing to the growth of private label “professional” products by large chain-stores as well as the plethora of Web-based outlets selling diverted product online.

“Salons, now more than ever, should give themselves the best chance to succeed by partnering with brands that are doing everything they can to prevent diversion,” he says.

Established, reputable professional brands have joined salons and distributors in the diversion battle, and as Rebecca Okamoto, brand protection chief for Wella Professional, the North America Salon Professional Division of P&G, points out, it’s a fight being fought on multiple fronts.

“In a world where diverters operate online as well as out of back doors, it’s a continuing challenge to protect professional brands,” says Okamoto. “But our approach—to stop diversion before it begins—has proved successful quarter-to-quarter and year-on-year. Of course, we code and track product shipments like other manufacturers, but our 21st century team of investigators, data specialists and legal experts, plus Wella Professional’s partnership with regulators in many states, chokes off diverters’ supply. Hard to get? You bet.”

Reuben Carranza, Wella Professional’s CEO, describes the company’s commitment: “It’s a measure of the success of professional brands that diverters hunger for our products; it’s our business to starve them. Diversion today is big business,” Carranza continues. “We have the commitment and have invested the resources in modern technology to fight by flagging potential unauthorized distribution before it occurs and cutting off supply. We block diverters’ attempts online and in brick-and-mortar environments proactively—it’s how we achieve long-term success in protecting our brands.”

Today, the BIF’s figures indicate diverted product still accounted for almost 11 percent of the total dollar volume sold last year. And though that figure is the lowest in two years, salon professionals wonder whether more can be done.

“It’s really important that goals be reasonable and attainable,” Kornbluth says. “According to Nielsen, approximately $383 million in professional haircare products are diverted out of the salon channel into retail outlets. If we could reduce that share by just one point, it would put more than $32 million in retail sales back in salons’ pockets!”

Read on to discover the many ways the professional salon industry is combatting diversion at every level of the supply chain.

Editor: Karen Ford

Changes in Total Diverted Dollar Sales between

Q4/2011 and Q4/2012

Shampoo.............................(-6.2%)
Conditioner........................(-11.5%)
Hairspray.............................(-1.4%)
Styling Aids.........................(-2.4%)
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About the Author

Karen Ford

Contributing editor Karen Ford has been writing for the beauty industry for the past ten years. As editor of most special projects and supplements to American Salon, she specializes in bringing editorial appeal to market-driven messages. Karen also writes and edits the editorial pages of Questex's annual Green Book directory.