Okay, this is the internet so I have a right to talk about subjects on which I know next to nothing and pontificate on matters where my opinion is totally uninformed. So here is a blog post about a business I have never used and have no intention of using any time soon. I noticed the buzz on Twitter about the completion of this year’s Apprentice series in the UK. It reminded me that last year the contest had been won by a young doctor called Leah Totton whose business idea was a chain of (relatively) low cost beauty treatment outlets on the high street.
It seemed like a pretty reasonable business idea. Take a service that people are willing to pay for, and streamline it to reduce costs. You can then sell it at a competitive price while still making enough money to turn a good profit and to invest in brand building advertising. It is basically the model that McDonalds pioneered in catering and which continues to work well.
The trick with this approach is of course volume. Setting up the first outlet costs a lot. You have to do a lot of work on getting everything just right. You are aiming to spread the costs of product development and branding over a wide range of outlets eventually, but at first you are going to have a lot of outgoings covered by relatively few incomings.
So I wasn’t surprised to read that Dr Leah’s company has pulled in a loss of £50,000 on the first year’s trading. In fact, I would have thought that the loss ought to be a bit bigger than that. They have only got one outlet so far, if their website is up to date. It is going to take a lot longer than 12 months to determine whether or not this is going to work.
Looking at the website again, the treatments certainly seem to be conforming to the McDonalds model. They are clearly defined. There are relatively few of them. And they are affordable. (If you don’t know much about this sector you might wonder about a £200 price tag for a basic botox treatment, but rest assured there are plenty of places charging much more.)
But there are a couple of questions still. I wonder if even Alan Sugar has the pockets for this project. The whole concept only works if you can achieve a big enough scale, and that inevitably means many years of not making any real money. Starbucks has yet to turn a profit in the UK market. Is the treatment market really large enough to support the kind of multinational operations that are common in catering?
The other question is whether people buying beauty treatments really want to spend money on a relatively down market offering. Many people turn their noses up at a cheap burger in principle, but still buy one if they are hungry and/or that is the only option. I must say that I don’t find fast food appealing very often but you can’t beat it on a long motorway drive. But beauty treatments are quite such an impulse purchase.
And you are quite likely to build up a rapport with the people you interact with in your treatment outlet of choice. One of the whole points of the McDonald’s approach is to deskill every task so you can hire the cheapest labour available. This inevitably means high staff turnover. Of course Dr Leah will not taking on the totally unqualified but they can’t simultaneously offer low prices and high wages.
This last one seems to me to be a real Achilles heal. If they let customers and practitioners develop a relationship, then the chances are that the customers will follow the people rather than the brand. A business that regular loses a tranche of customers is a tough proposition.
I don’t think there is any way of knowing whether these objections are real or not without actually trying it, which is what Dr Totton and Mr Sugar are doing. They have got one huge advantage in the UK over anyone else who might want to try it. They are both well known – Alan Sugar is a household name and Leah is one of the few Apprentice winners you’d actually trust to get something done. Most of them you wouldn’t let near anything sharp. This is in effect a branding exercise, and brands are all about trust so they are off to a good start.
We’ll have to wait and see how they get on, and give it a good 5 years at least before we know the answer.