The up-trend in China’s GDP per capita rate is leading to an upgrade in consumer behavior and a shift in the profile of consumers. The SPA industry is facing a new challenge, a need to reconfigure its service offerings. By Fifi Kao
According to surveys and data collected by SpaChina Magazine from 2017 to June 2018, the business of hospitality, Day SPA, beauty and body shaping, nail & eyelash beauty and the medical beauty industry collectively saw an annual increase of 14.8% in 2017. What is more, the beauty and body shaping market was worth RMB 360 billion in 2017 the nail & eyelash beauty market RMB 120 billion, and medical beauty RMB 180 billion, according to China Beauty Industry Report issued by Mei Tuan big data,. But Mei Tuan’s report did not cover most high-end hotels and resort SPA, so SpaChina has carried out separate research covering this group. The result is: the market of hotel and resort SPA is valued at about RMB 23 billion, accounting for only 3.5% of the whole market.
For newly-opened and pre-opening 5-star hotels and resorts, 98% of all proprietors and management companies feel it is necessary to have SPA in their property. 36% further advocate the integration of wellness into the whole hotel concept instead of only building an independent SPA. Everyone wishes to gain the benefit of the national Comprehensive Health policies.
According to industry data and the SpaChina report, however, the rate of newly-opened beauty and SPA outlets in 2017 was 39% while the rate of outlet closures was 34%. The situation is not so positive. There are three main reasons for the closure of hotel and resort SPA: 1. high staff costs and the lower-than-expected revenues; difficulty in recruiting management and ordinary staff; lack of innovative concepts. Also, many hotels rent their SPA site to self-employed SPA people or beauty salons, and reach a mutual state of noninterference, leaving the status of the SPA unclear and unsatisfactory.
SpaChina’s research also indicates that from the perspective of consumers, hotel and resort SPA enjoy the following advantages: hotel SPA has a strong brand impact and they don’t force guests to buy products or treatments. Moreover, they boast tidy environment and high quality skincare products. Although the treatment prices are higher, they are more trustworthy. However, they also have weaknesses. For example, the treatments are not innovative or popular enough; the staff fail to give clear explanations of the treatments and products; there are no surprises in the services of the therapists.
From the perspective of hotel SPA, the most annoying thing for operators is how to compete with day SPA, which are more flexible and keep renewing their hardware, within the limits of the often fickle management regulations of the hotel.
Today’s SPA industry is an highly competitive industry. In cities such as Beijing and Shanghai, there can be three or five five-star hotel SPA within one square kilometer, even offering the same products, equipment and treatments. At high-end shopping malls in different parts in China, you will also easily see similar outlets crowding together on the same floor, such as beauty and hairdressing, skin management, SPA, nail & eyelash beauty, slimming, chest care, sun tanning, fitness and yoga, all competing for guests.
The GDP per capita increase leads to consumption upgrades while consumption upgrades cause a change in consumer profiles. Now, the SPA industry is facing a need for a rejuvenation of service offerings. They need to upgrade product structure and service modes to find a better direction for development. SpaChina’s research indicates that even more changes are occurring to the SPA industry in 2018, as well as the emergence of new problems caused by these changes. We would like to share with you part of the research.
SPA Consumption Group Classification
With the adjustment of population structure, the rise of middle class, the increasingly individual demands of young customers, it is necessary for the industry to study and analyze more about the social stratification and lifestyle classification.
For example, the 1970s generation differs from 1980s generation in their demands. The former emphasize health maintenance and loves TCM and essential oil body massage, while the latter develops multiple new requirements such as anti-aging, acne removal and body shaping. The 1980s generation will be the most important consumption force in the next decade. The 1990s generation, however, is known as the “want to and dare to try everything” group. Cleansing, moisturizing, acne removal, body shaping and fitness are their major demands. SpaChina’s research reveals that 89% of hotel and resort SPA present treatments are aimed at satisfying the 1970s generation only. This is why customers say their treatments lack innovations.
The 1970s generation is also the group who love body-heart-soul treatments most. Their social experience lead them to have a higher preference for spiritual health. 1980s generation people have a higher preference for yoga than other groups. And 1990s generation people are keen on essential oils and perfume DIY. They love things that can help with their selfies. Hotel SPA needs to consider how to satisfy the 1980s generation while also offering some treatments to target the 1990s generation.
Indistinct Boundary between SPA Line and Retail Line
Five years ago, SPA goers were required to use the products niched exclusively for SPA which could not be found in shopping malls. They believed such products boasted more advanced ingredients and formulae, with higher concentrations and longer lasting effects. But now, as indicated by SpaChina research, the boundary between the SPA Professional line and retail products has become more and more indistinct. Increasingly top retail skincare brands also pursue natural and organic formulas and are not inferior to SPA products at all either in quality and effect.
Retail brands such as Guerlain, Volmont and Cha Ling, a new brand which is heading towards popularity, and SPA product brands like Clarins, Natura Bisse and Aromatherapy Associates all now set foot in both areas, the SPA professional line and the retail line. This is entirely understandable because the product brands will surely benefit in terms of brand awareness, professionalism and revenue performance.
To the hotel SPA, this tendency has both advantages and disadvantages. The advantage is that they don’t need to explain the superiority of the products too much because the customers already know of it from other retail shops. But the disadvantage is that customers may choose to buy the products at retail shops offering discounts instead of from the SPA.
Furthermore, when the products are placed online, the last wall between the SPA professional line and retail line collapses. However, the pricing system online is much more disorderly. There are all kinds of domestic agents and overseas buyers, and customers find it hard to tell whether their products are authentic. As a result, the industry rules need to be rebuilt. There are some alternatives. For instance, dividing products into different lines and delivering them via corresponding channels; let SPA take the role of one of the distributors, and give sales commissions to the spa as well, even when the customers buy products at other stores; or divide the market into SPA zone and retail zone, and the former provides treatment experience while the latter sells products.
To customers, these changes are really good news. They can buy the products more conveniently at different places and go on enjoying the treatments using the same products at their favorite SPA.
IT Technical Improvement and Industrial Upgrading in SPA Industry
China’s Beauty Industry Report 2017 shows that, in the past four years, O2O, SAAS (Software-as-a-service) and Internet marketing have become the main IT tide pushing change and reform in the beauty industry. IT technology improvements make it possible for chain brands to experience a rapid development and provides a lot of support to the brands in both store management or customer management.
Hotel SPA, however, basically fail to gain any benefit from SAAS and Internet marketing. They are required to use the same software as the hotel. It is of course more standard, yet it also deprives the hotel SPA of the chance of developing their own e-commerce management. For example, the customers which access via WeChat marketing are not allowed to pay the bill via WeChat. They cannot use the advanced software to share with other spas under the same hotel brand customer resources, inventory or human resource, like day spas do.
It’s not hard for China’s hotel SPA to buy SPA management software. But the problem is how the software can be localized for China’s market and truly play a role in business management and marketing.