SpaChina issues report on the impact of coronavirus outbreak to SPA industry.
By Fifi Kao
At the beginning of 2020, as all Chinese people were expecting a joyful Spring Festival (Chinese New Year), but the outbreak of Novel Coronavirus Pneumonia changed everything. In response to the governments’ call to prevent the wider spread of the disease, many enterprises agreed to suspend their business. By the time this article was written, the reopening date of many enterprises is not yet clear.
From January 21, many hotels began to receive cancellation calls from guests. As the situation worsened, hotel spas were required to close down one by one. The reopening date, except of those in Hubei province, was estimated to be the end of February. However, many hotel spa managers remain doubtful of this for they don’t see much hope for reopening in the near future. In certain cities, some day spas and salons can apply for reopening in the week of February 17. But they have to firstly go through an examination process and get the approval of the government. The final decision will be made depending on the reopening risk assessment done by the government. Optimistic predictions come from some experts, believing that the epidemic will be basically over by the end of April, echoing the Education Bureau’s possible decision of starting the school term in May.
This epidemic outbreak is an unexpected blow to an array of industries, among which are hospitality and tourism industry that in previous years see the Spring Festival as a great chance to increase revenue, as well as spas and salons that do offline services, and relevant products, training and also logistics companies. For day spas and boutique hotels, for instance, the more outlets they have, the more influence they will get, and accordingly the bigger pressure in paying rent and distributing salaries.
Most day spas are privately-run and owned and are located in business zones, shopping malls, and residential areas. It is impossible for them to enjoy rent-free privileges or to give staff double pay when they are gaining no revenue themselves. The reckless bosses who had previously promised a double pay finally “wisely” changed their tune by making new policies for staff who couldn’t return for work during the period, such as using annual vacation first, making appropriate salary cuts – no more than 20%…
After interviewing 50 spa operators, SpaChina prepared this industry report during the special period, hoping to tide over the difficulties with all industry friends.
Meanwhile, in order to help people better understand the coronavirus outbreak’s impact to China’s consumption and the consumption rebound afterwards, the article will also include information from a survey conducted by Kantar on 1,000 people about their consumption intention once the epidemics is over.
The Coronavirus Outbreak’s Impact on SPA Industry and Rebound Prediction
During the outbreak, out-of-home dining, out-of-home entertainment and travel have been hit worst because people cannot leave home: about 75% consumers have cancelled all planned spending related to these industries, and another 17% have reduced their spending. According to the SpaChina survey, 99.8% of surveyed consumers have cancelled all their planned visits to any spa or salon. Even though many spas and salons in areas which are little influenced by the outbreak haven’t closed down completely but have shortened business hours and provided services to members only, as well as strictly carried out disinfection measures, there are scarcely any visitors.
The good news is that the potential level of rebound spending of out-of-home dining, out-of-home entertainment and travel is huge. According to the Kantar survey, 82% respondents said they will resume their cancelled OOH dining spending once the outbreak is over, 78% will resume their cancelled spending on travel and 77% resume OOH entertainment. The SpaChina survey shows that 94% of spa and salon guests are willing to give themselves a great pampering when the epidemics is over by enjoying more treatments at spas and salons.
66% of Surveyed Day Spas Can Survive Only Three Months
The coronavirus outbreak is undoubtedly a catastrophe for day spa owners. Fifty surveyed spa operators honestly share their current business state with SpaChina. Respecting their wishes, the article will keep their names anonymous.
66% of surveyed day spa and salon operators said they could survive only 3 months based on their current turnover and resources. Further, if the epidemic situation doesn’t improve and they fail to restore business by the middle of March, they will have to carry out measures to reduce expenditure and stop losses.
Such measures include: dismissal of staff who have less contribution, close down outlets which have bad performance, cut salary of management personnel first, and cancel staff perquisites since no revenues will be generated during the period. At the same time, they will strive to keep a strong cohesion with customers by actively launching online health and epidemic prevention guidance, shifting business focus on product retail, encouraging staff to communicate with guests online and do online services, and even provide big discounts or launch presales of certain products and treatments to regular customers and members.
34% of surveyed operators believe that they are able to stay well until the end of May even without doing any business. Among them, some operators have other businesses which can support the loss of the spas. Yet this will also be based on a reduction of costs and personnel as much as possible. Some others will depend on advance payments they received from membership sales or thanks to the strong marketing they had previously carried out.
Among the surveyed spas, there are big ones which have many outlets and outstanding personnel teams. They are mainly located in Beijing, Shanghai and Shenzhen where rents are high. To them, the monthly expenditure can be 10 million yuan at a time when income is down at zero. It means twenty or thirty years’ of diligent operations are wiped out in one day as if going through a cruel war. It will take at least one year for them to recover. Facing such a fact, we all have a heavy heart.
The bright side is that all surveyed spa operators are convinced of the consumption rebound once the epidemic is over. So they are also doing proper planning, based on reduced personnel allocation, to deal with the possible business volume when the consumption rebound comes. Then step by step, they may restore sound business as before the disease outbreak.
This survey mainly targets the leading brands in the industry. We have not included small salons with less than 100,000 yuan monthly turnover. To owners of such small-scale salons, they have good sales capabilities themselves. And they have strong cohesion with their customers. So even if they have to close down their stores, they are able to gain money by doing many other work when the epidemic is over.
SPA Operators Benefit From Online Services
The spa operators with online platforms seem to have a protective umbrella during the period. Some spa product companies which foresaw the impact have timely launched online product training and sales. Many fitness centers have also designed online activities. Though it couldn’t be compared with offline services, it truly helps a lot in such a situation.
Spa operators are normally not interested in or good at using online platforms. But in this epidemic outbreak period, they realize the significance of online education and online trade, so many of them want to launch online services in no time. Of course, they need to consult specialists on how to do it concretely. We see a gradual cost reduction in online service nowadays. So it is a good time to combine online and offline services.
Industries in Need
Kantar’s survey mentions that people’s spending gradually increased during the outbreak and will continue to increase afterwards in industries like basic epidemic prevention (masks, disinfectant, etc.), advanced epidemic prevention (air purifier, disinfection cabinet, etc.), nutritional supplements (vitamin, grape seed, etc.) and drugs (cold cure, febrifuge, etc.).
SpaChina Tip: spa operators can include the products above into their business.
Consumption Trends Triggered by the Outbreak
The outbreak has also increased people’s spending in industries such as food and beverage (40% respondents spent more), household cleaning (48%), medical/life insurance (38%, significantly higher in Hubei than the rest of China during the outbreak). The survey shows that consumers’ demand for products of these industries will continue to be robust after the outbreak.
Overall, luxury might experience the biggest negative impact from coronavirus epidemic in both short- and middle-term: 61% surveyed respondents reduced or cancelled their spending on luxury; 21% said they would continue to reduce after the outbreak is over – higher than any other industry. This might be related to more fundamental changes in people’s attitudes towards how and why they make purchases.
Surveyed consumers said they would resume their frequent visits to offline retail channels. However, online channels will show an even stronger growth: 42% said they would buy more frequently from e-commerce platforms, only 8% said would buy less frequently. About 31% said they would buy more frequently from new retail formats, such as Hema. It is worth noticing that though O2O enjoyed a high penetration during the outbreak and 32% surveyed consumers said after outbreak they would buy more often from O2O, still 17% said they would buy less from O2O after the outbreak – higher than any other channel. O2O brands need to think about how they can retain these new consumers in the post coronavirus era.
What are stay-at-home consumers doing?
It’s not surprised to find in Kantar’s survey that watching video is the most mentioned time-killer. Watching long video (mentioned by 58%), short video (56%), linear TV (41%) are among the most mentioned activities.
SpaChina Tip: Future customers will get more and more used to obtaining information through video watching. So spa operators need to learn how to share message via videos.
Digital entertainment is also popular, such as playing mobile/online games (39%, male significantly higher than female), online entertainment (online karaoke, etc) (24%, Hubei higher than the rest of China), watching live video/livestream (20%).
It might be an exaggeration that the outbreak has turned every Chinese person into a chef, but there are 28% people cooking/baking at home (female significantly higher than male). Also 23% enjoyed their parenting time. Same amount (not necessarily the same group) of people are working out at home (female significantly higher than male again!!). Online education was mentioned by 30% of respondents, and 26% mentioned offline learning/reading.
SpaChina Tips: Invest more in females! They are the major force of the health industry.
After reading the article, do you see any opportunities and brightness after the crisis? SpaChina will join hands with all our friends and partners in overcoming the difficult moment together.
