MiniLuxe – “Starbucking” the nail salon
MiniLuxe – a Boston-based company aiming to “Starbuck” the $9 billion dollar nail salon industry by providing self-care services with great quality and consistency.
Business Model
For quite a few years, the nail salon industry had remained relatively stagnant and lacked innovation. Many treated the service as a low-involvement utility; a necessity in order to appear presentable and well-groomed. As such, customers generally selected providers along functional criteria such as the cost and proximity of service – branding did not play a big part.
Fast forward to today, when MiniLuxe is hoping to change the game. MiniLuxe is a nail salon concept aiming to “Starbuck” the $9 billion dollar nail salon industry by changing the largely fragmented market of low-cost providers and delivering top-quality service with integrity and consistency. There are many issues with today’s status quo: corner “chop-shops” have unsanitary practices, unclear pricing, low service levels (e.g. language is often a barrier), and inconsistent quality so the customer never really knows what she or he is going to get. MiniLuxe solves this by implementing cutting-edge hygiene processes, “wow-inducing” service levels, and standardized pricing so you know exactly what you’re getting no matter which store you visit. Also, MiniLuxe places a strong emphasis on empowering the nail technicians who, according to The New York Times, “are routinely underpaid and exploited, and endure ethnic bias and other abuse.” MiniLuxe prides itself on arming its technicians with extensive training programs, ongoing mentorship, and market-competitive pay.
While the “what” of their business is charging for high quality manicures, pedicures, waxing, and other beauty services, the “why” is focused on the idea of “self-care”. MiniLuxe’s message and value proposition to its customers conveys the importance of taking the time to “press pause” and focus on one’s health and wellness. This higher level concept of customer value capitalizes on the trend that nails and other beauty services are increasingly a means of self-expression and identity for young women and men (94% and 6% of the market, respectively).
Operating Model
The first distinguishing aspect of MiniLuxe is that although it is a franchise concept, all the stores to date are company-owned rather than franchises. This structure allows management to have a high level of control over new stores and the ability to ensure that they all adhere to and reinforce the MiniLuxe brand. Direct ownership of the stores, especially at an early stage of brand-building, is the most effective strategy to achieve reliable and consistent service, a key part of the business model.
Additionally, in deciding new store locations, the MiniLuxe team spends significant time and resources on understanding the demographics of the neighborhood, the composition of surrounding businesses, and other location-based characteristics that are likely to affect business in that designated market area (DMA). This information is crucial towards identifying must-have opportunities that could boost the business versus weak opportunities that should be passed on. Further, if the location is ultimately selected, the DMA profile will be crucial in determining appropriate store-specific operating characteristics, such as operating hours and staffing levels. By understanding the nature of each DMA and customizing the operations at each location, the operations team can ensure that the business model remains profitable.
Once a new location has been decided upon, there is a real focus on being extremely capital efficient in building out the new storefront. A key metric the team focuses on to monitor and improve capital efficiency is each store’s “payback period”. Payback period is defined as the time it takes a store to recover its initial build-out cost with earned operating profits. As a benchmark, less than two to three years is decent, but clearly the lower the better. By minimizing real estate and build-out costs, the firm is able to conserve cash and scale its network more rapidly.
More recently, MiniLuxe has taken advantage of mobile technology in order to maximize in-store labor utilization. One solution in the works is an on-demand mobile-app based booking service through which clients are able to make appointments directly through their phones. On the back end, the system is able to assess customer demand and immediately adjust technician compensation to incentivize greater or fewer nail technicians to come into work. By matching demand with available labor in real time, the company can ensure that the customer is always satisfied without incurring the costly burden over-staffing.
Summary
Because of the strong alignment between MiniLuxe’s operating model and business model, the company has performed very well and experienced impressive growth. Top line revenue for the company is expected to almost double in 2015, and all 8 Boston-based locations have already achieved store-level profitability. On average, the network of stores has generated 20% same-store year over year sales growth, which is high by industry standards. Most recently, MiniLuxe has recently expanded into Dallas, a new market that is yielding fantastic results to date.
Sources:
[1] http://files.nailsmag.com/Market-Research/NABB2014-2015-Stats-2-1.pdf
[4] http://www.npr.org/2015/05/21/408407217/boston-based-minilux-aims-to-be-starbucks-of-nail-salons
Thanks for sharing, Andrew! It’s definitely an interesting concept that is sure to create buzz as it expands into new cities.
During your research, were you able to pick up how much of a premium MiniLuxe charges compared to the average mom/pop style nail salon? I love that this company is focused on providing a better experience for its nail stylists (including higher wages), but the nail industry has had a long history of treating this lever with lowest priority in order to maintain margins for ‘cheap’ mani/pedi specials. I’d be curious to see how MiniLuxe segments the market and which segments they truly believe they can capture with this business model.
With all the press about employee conditions, I wonder if they can somehow get their operating model in front of prospective customers. I know I’d be interested in going to them, even if it means paying a few extra bucks, if I heard about all the great things they’re doing for their employees. Will be fun to keep track of how this company performs over the next few years, hopefully I can try them at some point while in Boston!
This is an interesting business model, Andrew! I would like to tell you about a Spanish player, Depiline, which has also managed to create a standard chain of beauty salons in a largely fragmented market of providers that have an uncertain quality. Unlike MiniLuxe, Depiline doesn’t differentiate itself by offering a “premium” experience to customers, it is known for providing good value for money and convenience. Depiline has managed to offer very competitive prices by obtaining economies of scale: its salons are located in high-traffic areas, there is no need to book a service in advance (it is a first-come, first-served model) and employees are trained to deliver the service as fast as possible in order to maximize turnover. I thought that it was interesting to share this model to see how two companies have responded differently to a similar market situation and a similar unfulfilled customer need.
Hi Andrew! I really enjoyed learning more about MiniLuxe via your post. While it seems that they have done a great job and testing and rolling out in Boston, two questions come to mind for me (as a regular consumer of their core product). (1) How will they evolve their business model to effectively compete within a very saturated industry in other cities? As Ritika mentioned, this is one luxury that consumers are conditioned to pay little for and it will be difficult to change that behavior unless the MiniLuxe experience is markedly better than competitors who already have loyal customers.
(2) Are they doing anything special in their operations to differentiate themselves from competition? The general mani/pedi process seems rather straightforward but I think there are several opportunities to innovate and make the process more efficient. For example, many salons struggle with managing the balance between reservations and walk-ins. Perhaps they could dig deeper into understanding the demand trends for each and staffing better accordingly. Additionally, is there a better process for collecting payment? Often, the experience is interrupted by transacting which can be awkward for the customer. Perhaps there is an opportunity to use digital solutions to solve this issue.
Great post and I look forward to continuing to follow the company!
This is a great post on how MiniLuxe makes a service both luxurious and convenient, yet efficient and not prohibitively costly. What I do think is difficult is differentiating a firm when it lies on the middle of the scale in terms of factors such as price, experience and convenience. It is super clear from your post how Miniluxe is able to differentiate itself from lower-end salons. But, for a service that isn’t subject to huge pricing variability, how is MiniLuxe able to differentiate itself from higher end salons? From personal experience, I have found the actual service to be efficient and of high-quality, but because the operational model is so focused upon making sure that technicians are always occupied, this often translates to longer wait times. I would also be curious as to your perspective on the variety of services that MiniLuxe offers. Obviously, Starbucks has had some challenges with this, but has successfully been able to refine processes such that they can offer a wide range of menu options, but still maintain an efficient process. Spa services are not necessarily amenable to the same sorts of modifications. Do you think MIniLux would be best to stick to what they do best– nails– or continue offer massages, waxing and other services?