Inside Retail Weekly: Hairhouse has recently undergone a rebrand. What did that involve?
Michael O’Connell: The rebrand is a move away from the traditional branding of Hairhouse Warehouse to Hairhouse. We’ve had that roll out over the last 12 months to about 25 of our stores which have been refurbished and really, that’s been a great success. Those rebranded stores have had great sales growth since going through the process, which has been a tremendous endorsement for our strategic direction to elevate the perception of the brand in the eyes of the consumer.
IRW: What led to the rebrand?
MO: The primary reason was to shift the business from being a discount led business to a brand and service led business.
Ultimately, the heritage of our business has been as a professional products retailer and our stores have always had salons in them. But in reality, to many of our franchisees, the salon services part of our business was secondary to product retailing. And, as you would know, over the last three to five years, there’s been a dramatic shift from transactional retailing into experiential. People want a much more personalised experience as opposed to a transaction. Our brand – the services side – has always been challenged by the ‘warehouse’ association [in our name], and we saw it as critical to our future growth that we needed to elevate our standing in the eyes of the consumer – and we couldn’t do that with ‘Warehouse’ attached to the name ‘Hairhouse’ on an ongoing basis.
IRW: Why did you decide to change the name of the business?
Emad Nayef: There are other retailers that have the name ‘warehouse’ as well and they are hardcore discount retailiers, so we wanted to distance ourselves from that. When we were born in the ’90s, the ‘warehouse’ concept was cool and on-trend, and now it’s evolved into being about discounts.
MO: By changing our name, we have now got a premium and luxury part of our business with products such as Kevin Murphy, Eleven and Evo – brands we’ve never had an association with before. We’ve now joined in partnership with them and they’re looking at long-term relationships with us.
EN: We pride ourselves on being about affordable luxury. And if we look at an airline analogy, we don’t want to be first class, we want to be premium economy and accessible to the everyday shopper. When we talk about online, there are online players that are turning over hundreds of millions of dollars online, but we believe we can still give the old-school customer service experience in our stores.
IRW: What kind of training and education do you provide your staff?
MO: The reason why we’ve been able to achieve continual like-for-like growth is because of the investment we put into educating and training the teams throughout the network around delivering exceptional customer service.
It’s pretty expansive, we’ve got an in-field ops team who are on the ground working and mentoring with our franchisees and teams on an ongoing basis. We have also worked with a number of our supplier partners. We’ve got a key relationship with the L’Oréal Group and in terms of the service standards that we uphold in our salon business, all our teams through the network are generally trained either in partnership or through matrix education programs run by L’Oréal. We also engage a number of third parties outside the business. At our conference in Melbourne about a month ago, we had presenters from three external companies come in who provided keynotes and workshops on delivering the ultimate customer experience.
EN: In the mid-90s and early 2000s, we were generally retail-focused, and over the last 10 years, we realised that people would come to us to buy products and the salon was an afterthought. Our focus is on growing the salon business. We have 1200 hairdressers – we’re the biggest employer of hairdressers in Australia – and the millions we spend on education and career paths is what excites us. You can never get a haircut or colour online!
[Hairhouse co-founder] Joseph Lattouf owned a hairdresser in Doncaster and customers would come in, spend hundreds of dollars and end up going to either Priceline or a supermarket to buy hairstyling products, so he thought, ‘What if we created a place where a consumer felt safe and it wasn’t so overwhelming to buy product?’ So then we had a small salon at the back and gave people access to professional products. Now you can buy anything online and we eventually realised that customers valued our salon, so 10 years ago, we spent a lot of money with our alliances with L’Oréal and tertiary education to growth our piercing and salon business.
A big part of the rebrand is creating a bigger footprint of salons in our business so the stores are half salon and half retail, with more chairs, more basins and more premium fitouts.
MO: Strategically, the direction of the business is to become a more aspirational brand and service-led business. Really, the rebrand is a key part of the shift of the business to become brand and service-led. It’s difficult to become brand and service-led on the upper end of the market with ‘Hairhouse Warehouse’ on your logo.
IRW: What are your plans around e-commerce in the future?
MO: We have invested heavily into our e-commerce platforms in recent years and will continue to do so as that part of our business thrives. The experience we are providing our customers online has improved dramatically over the last year and our customers are voting with their fingers. Our traffic and conversion is higher than ever and has delivered triple-digit like-for-like sales growth.
We’ve seen significant growth [over the past 12 months].
We had a strategy where we shared our e-commerce revenue with our franchise network and that’s really led to most of the network getting behind it over the last 12 months – we’ve seen significant growth there as well. Generally, we had a pretty good sales year in an environment where retail has been under significant challenges – bricks-and-mortar has had a lot of challenges in the last 12 months and all things considered, the year we had in terms of sales was quite pleasing against that backdrop. We were up like-for-like from a sales perspective across our entire business, when the retail sector is in negative growth.
But it’s not all about online sales, the level of research undertaken on our site before customers head in-store to buy is also higher than it has ever been, providing a great win for our franchisees.
Click-and-collect is launching in October and November this year but the most significant change is the move to a ship-from-store model in 2020. Our online business is currently controlled at the franchisor level through a centralised 3PL warehouse. All orders are fulfilled from there and we provide our franchisees with commission on each sale. Ship-from-store means that our franchisees will pick, pack and send orders from their store and own the majority of the sale.
Our find-in-store functionality has proven extremely popular on our website as customers research heavily before deciding to buy, either in store or online and our click-and-collect offering is a natural extension to find-in-store. We expect up to 30 per cent of our online sales to come from click-and-collect once fully established – that is a lot of foot traffic that we are driving back into our stores, when shopping centre traffic generally is in decline. Once in the store, our franchisees have the opportunity to upsell those customers or better still, convert them into a salon or piercing customer.
The majority of our stores are in shopping centres and that landscape has been tough for the last few years with the emergence of online. Shopping centre traffic has been generally in decline and maintaining retail sales in bricks-and-mortar outlets has been difficult. Our ship-from-store strategy will provide our stores with incremental sales activity to replace what is being lost to them from declining centre traffic and underpin their profitability and long term sustainability. Even better, the system functionality has been developed entirely in-house and given us complete control over that revenue model into the future.
IRW: Do you think you’ll move your stores away from shopping centres in the future?
MO: We’ve got a dozen stores around the county that are in strip shops in local community centres, as opposed to major suburban centres. Predominantly, we’re a foot traffic business, both from a product and services perspective. The model is based on being in environments where there is a guaranteed level of foot traffic and we have no plans to change that.
IRW: What are your views on the franchise sector right now?
EN: I joined the group in the mid-90s when Hairhouse opened its first store. I became a franchisee with eight stores, and I’m now one of the two EGMs alongside Michael, so I’ve been on the journey from a junior in a store all the way to the top.
For me, what we pride ourselves on is we’re truly a family business. At the conference every year, we celebrate franchisees that have been with us for 10, 15 and 20 years, and we have a large percentage of our network that has been with us for over 10 years.
We’re quick to adapt if we have to and we’re not motivated by money. When Michael and I come to work every day, we’re motivated by the fact that we’re linked to 130 mortgages. It’s as simple as that. We can put on the franchisor and the franchisee hats. In everything we do, the first question is how does it benefit the franchisee and we work towards that.
They say ‘happy franchisee, happy network’, but for us, it’s always been the case. Being in the business for 27 years, we’ve clearly done something right and we’ve always put our team first. That’s why we have team members who have been around since the late-90s and now we employ their kids. We’ve got a big percentage of our office teams who have been with us for more than eight years, so we take pride in our family culture.
IRW: There’s been a lot of controversy around the franchise sector lately. What would you say are some of the challenges for franchisors right now?
MO: It’s not so much of a challenge but one of the key things we pride ourselves on over a long period of time is transparency. What [those problems] all come down to is a lack of transparency for those particular systems between the franchisee and franchisor.
We pride ourselves on the fact that in 27 years, we’ve never had a legal dispute with a franchisee, not one. And it’s largely because as Emad said, in every decision we make, the first question we ask is ‘Is this in the best interest of the franchisee?’ If it’s no, we don’t go any further. If it’s yes, we’ll look at the opportunities. It’s a franchisee-first mindset because ultimately, we exist because of them.
IRW: How would you describe the salon, hair and beauty industries right now?
EN: It will always stand the test of time, because everyone wants to look good, regardless of what is happening all around the world. We’re all about making people look and feel beautiful. When you go to work or a social event, the first thing you want to do is make sure your hair and makeup look good and you feel confident, so for us, the hair and beauty industry is recession-proof.
IRW: How has the salon customer changed?
EN: Customers are a lot more detailed in what they want, they’ve done their homework on their product or the look that they are searching for and they’re more savvy.
MO: The information these days is in the palm of their hands, it’s unlike anything we’ve ever seen so we know that 70 to 80 per cent of people actually research online before they complete a purchase in-store.
We used to deal with customers who would get a consult in-store and we’d provide them with information. Now we have to be aware that when they come in, they already know more and it’s changed the nature of our consultations.
IRW: What’s it like working in a business that provides both a service and product?
EN: They complement each other. It’s simple for us. It’s easy to give the customer a colour they want in the salon, but it’s important throughout the process that they have the right products for the next four to five weeks to make sure that their hair is nourished and the style they want is maintained. They work hand in hand.
MO: Ultimately, they’re not separate businesses, so we don’t think of the business as retail, salon and piercing – they’re part of the total store experience. The team in-store who are selling you retail products are also qualified hairdressers.
IRW: Tell me about the piercing side of the business.
EN: We started body piercing at hairhouse in 2001 when I realised that a lot of mums would inquire about where they could get their daughters pierced, but they didn’t want to go to tattoo parlours, so we created a safe environment where people could get their ears and bellies pierced. These days, the forms of piercing are a lot more detailed, but we’ve become the most reputable piercers in the country, and that part of our business is in double-digit growth.
MO: We’ve got more of our stores moving towards what I call full-service piercing. Emad talked about traditional ear piercing, but with many of our stores, it’s a lucrative business, it’s a place we own as a very reputable provider of services and more of our franchisees are offering full-service piercing every week.