July 2008

Lisa Kind - Editor

Blue Highways | by Jerry Tyler


The Diversion Dilemma

The word diversion denotes a departure from the intended course or the endpoint of intended arrival.

The continued and constant diversion of professional hair care products within our industry has many aspects and no easy solutions. Many times just when you think you have a conclusive end to the problem a new dynamic appears. Like most viruses, it mutates to survive.

Researching this dilemma reminded me of the movie Chinatown. John Huston plays Noah Cross and challenges 1930’s detective Jack Nicholson as Jake Gittes with the famous line, “You may think you know what’s going on, but you don’t.” What appears on the surface as regards to product diversion is often not what is really behind it.

Anyone who has dealt with diversion will agree that it has no lasting benefit except to those who intentionally divert products. The negative affect on the industry is not only financial; it also undermines the integrity of the salon profession as a whole. The loss to the industry is in the hundreds of millions.

Professional products are professional by virtue of the fact licensed salon stylists prescribe them to their clientele. It is also due to the fact they either are sold directly by a distributor or direct to the salon, with the intent this will be the final point of sale.

These products are often the brainchild of fellow stylists, designed with the specific needs of the working stylist in mind. That is the beauty of many salon professional products. They are created by stylists for stylists. Many carry their now famous names: Mitchell, Rusk, Toni and Guy, Sorbie. The credibility these artists worked so hard to establish and share with the industry comes in the form of great styling tools. These are made with the intent they should be professionally prescribed and purchased by salon clients.

It is often the buzz created by the professional stylist helps create a demand for professional products, due their use of the products in the salon. It also creates a demand in areas outside the salon. Some in the industry bypass the professional market and take their high-end products to the consumer directly through retail stores and home shopping networks.

Most new high-end product companies target the top two to five percent of salons as they have the most industry credibility. Their endorsement sends a clear message to the industry as a whole saying, “This is the next big thing.” This message then works its way down the pyramid to the mass beauty market creating demand, often outside the professional market.

The pressure by companies continually to produce newer and more products creates a situation where there is more product available than salons can absorb. This creates the temptation to sell to whoever will buy, to make way for new product.
Then there are those that over order salon products for the specific purpose to divert sales, although these are often found out through company audits—resulting in terminated contracts.

The main point in diversion is the intended point of sale. How many times has a client told their stylist they saw their salon-only product in a pharmacy, grocery, discount retail outlet or online?

Then to add insult to injury, they question why the price point was less than that of the direct salon purchase. They do not realize that diverted products are often collected and sold far below the manufacturer’s suggested retail price. This is another negative aspect of diversion. It undermines the integrity of the product’s brand by lessening its perceived value to the customer.

Product safety is another concern where diversion is present. If the store is willing to carry diverted products, are they willing to carry counterfeit professional brands as well? Do they verify the source and integrity of the product?

What can the product companies do to prevent and combat diversion?

Many offer by-back programs to lessen the temptation for salons and distributors to dump unsold or overstocked products into the diversion pool. They can terminate contracts with partner salons and distributors that divert products. They can regularly audit shipments from distributors to salons. They can insist all distributors and salons sign non-diversion agreements and enforce them. They can also code and track products to identify potential diversion.

Who pays the price for diversion? We all do. We lose the integrity we created for a professional product when our clients find it in a retail store at a lower price. It is no longer a professional product when it is purchased outside the salon. Once in the black or gray market customers are at risk from tainted or counterfeit products.

Professional product diversion aids only the diverter and hurts everyone else.

Jerry Tyler’s column Blue Highways is his “Road Less Traveled” perspective on the solutions and challenges facing the beauty industry. Jerry Tyler has been a stylist since 1975 serving as the former artistic director for Vidal Sassoon Academy and currently as Director of Education for Carlton Hair salons. He is also a licensed cosmetology instructor and has served as President of the California State Board of Barbering and Cosmetology.