Amazon launched a beauty store for professionals Monday, going head-to-head with Denton-based Sally Beauty Supply, a primary supplier to beauty salons for decades.
The decision to sell directly to professional stylists, barbers and estheticians comes as Sally Beauty has spent millions of dollars over the last year investing in its digital platforms for both consumers and its wholesale customers.
Sally Beauty is the largest supplier to the fragmented beauty salon business, which still has tens of thousands of independent stylists. It had sales last year of $3.93 billion. The next largest in the wholesale business is L’Oreal’s SalonCentric.
Sally Beauty didn’t address Amazon directly but said in a statement that it has “fundamental strengths” in the distribution of premium branded products for professionals. Separate from Sally Beauty Supply stores, the company’s Beauty Systems Group operates 1,400 wholesale locations for professional salons and has one of the largest networks of professional distributor sales consultants in North America, the company said.
Amazon, with its Prime membership, was already taking customers away from traditional salon distributors and now it has formalized the effort. Professional-use-only products require a license to purchase, and Amazon said stylists can create a free Amazon business account to upload their certifications to gain access to those brands.
Sally Beauty entered into an agreement with Amazon in early 2017 to be the local partner in its Prime Now one-hour and two-hour delivery service in North Texas. With Sally Beauty stores throughout Dallas-Fort Worth, Amazon drivers used the stores to pick up products on their way to customers. That program is still in place and the arrangement is under review.
Amazon’s entry “doesn’t bode well for the salon retail and wholesale business,” said Cyrus Bulsara, president of Profession Consultants & Resources, a research firm for the beauty and salon industry.
Market share is going to shift, he said, adding “the industry is at a major inflection point.”
Amazon launched the new online business with brands that Sally sells, such as OPI nail products, Rusk hair shampoos and conditioners, and Wella Color Charm hair dye.
Those types of overlaps will be among the first where Sally Beauty will take its initial hits, Bulsara said. “The company needs to develop new products and more exclusive products in order to make up the loss.”
Sally Beauty’s stock fell $2.49, or 17%, to close at $12.29 on Monday, a price it hasn’t seen since 2010 as it recovered from the Great Recession.
The company has been spending on new technology, including new mobile e-commerce apps for Sally Beauty and its Beauty Systems wholesale operation.
It also adopted a new distribution center system, and it’s working on building capabilities for its more than 5,000 stores to handle the pick up of online orders as well as shipping capabilities. So far, about 4% of Sally Beauty’s total sales are online and the company has said it has a target of 10%.
Also, Sally Beauty has been trying to position itself over the last year as the destination for the DIY home color business by going after baby boomers who shop for box color while doing their grocery shopping or at the drugstore. Sally Beauty has added its own private brand of hair color and products from new independent brands such as Good Dye Young, a vegan, cruelty-free color line co-created by Grammy Award winner Hayley Williams and stylist Brian O’Connor.
Competition in the beauty business has accelerated with Ulta Beauty aggressively opening new stores. But even Ulta’s shares were hit by the news, and it closed down 9.3 percent to $346.54 a share.
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