23 data to include in the business plan of your cosmetics shop

This article was written by our expert who is surveying the industry and constantly updating the business plan for a beauty supply shop.

Our business plan for a beauty supply shop will help you build a profitable project

Ever pondered what the ideal product margin should be to ensure your cosmetics shop thrives?

Or how many units of skincare products need to be sold during a promotional weekend to meet your sales goals?

And do you know the optimal inventory turnover ratio for a beauty retail store?

These aren’t just nice-to-have figures; they’re the metrics that can determine the success or failure of your business.

If you’re crafting a business plan, investors and financial institutions will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll explore 23 crucial data points every cosmetics shop business plan should include to demonstrate your readiness and capability to succeed.

Inventory turnover for beauty products should occur every 30-45 days to ensure freshness and avoid obsolescence

A lot of restaurants' inventory turnover is crucial, but for beauty products, it's even more important to ensure freshness and avoid obsolescence.

Beauty products often contain active ingredients that can degrade over time, which means they need to be sold and used while they're still effective. If products sit on the shelf for too long, they can become less effective or even unsafe, leading to customer dissatisfaction and potential health risks.

Therefore, a turnover period of every 30-45 days helps maintain the quality and safety of the products.

However, this turnover rate can vary depending on the type of product and its shelf life. For instance, natural or organic beauty products may require even faster turnover due to the absence of preservatives, while products with longer shelf lives, like certain powders, might not need to be turned over as quickly.

Beauty supply stores should aim for a gross margin of 40-50% to maintain profitability

Insiders often say that beauty supply stores should aim for a gross margin of 40-50% to maintain profitability because it provides a healthy buffer to cover operating expenses and unexpected costs.

This margin range allows stores to manage inventory costs effectively while still offering competitive prices to customers. It also ensures that the store can invest in marketing and promotions to attract more customers and grow the business.

However, the ideal margin can vary depending on factors like location, target market, and the specific products being sold.

For instance, stores in high-rent areas might need a higher margin to cover their costs, while those focusing on luxury beauty products might naturally achieve higher margins due to the premium pricing. Conversely, stores that cater to a more price-sensitive clientele might have to operate with slightly lower margins to remain competitive.

Staff training should focus on product knowledge and customer service, with a budget of 2-3% of revenue annually

Most people overlook the fact that staff training in a beauty supply shop is crucial for both product knowledge and customer service.

When employees are well-versed in the products they sell, they can offer personalized recommendations that enhance the customer experience. This not only boosts customer satisfaction but also increases the likelihood of repeat business.

Allocating 2-3% of revenue annually for training ensures that the staff remains up-to-date with the latest trends and products.

However, the specific budget and focus of training can vary depending on the shop's target market and size. For instance, a high-end beauty supply shop might invest more in training to provide a luxury experience, while a smaller shop might focus on cost-effective methods to improve basic customer service skills.

High-end beauty products typically have a markup of 60-80%, while drugstore brands range from 30-50%

It's worth knowing that high-end beauty products often have a markup of 60-80% because they are associated with luxury and exclusivity.

These products typically involve premium ingredients and extensive research and development, which contribute to their higher cost. Additionally, the branding and marketing efforts for high-end products are usually more elaborate, further justifying the higher markup.

On the other hand, drugstore brands have a markup of 30-50% because they focus on affordability and accessibility.

They often use mass production techniques and less expensive ingredients, which help keep costs down. However, specific cases can vary, such as when a drugstore brand releases a limited edition product or collaborates with a celebrity, potentially increasing the markup to reflect the added value.

The average customer spends 20-30 minutes in-store, so optimize layout for easy navigation and impulse buys

Maybe you knew it already, but the average customer spends about 20-30 minutes in a beauty supply shop, which is why it's crucial to optimize the layout for easy navigation and impulse buys.

When customers have a limited amount of time, they appreciate a store layout that allows them to find what they need quickly, so placing popular items in easily accessible areas can enhance their shopping experience. Additionally, strategically placing impulse buy items near the checkout or along the main aisles can increase the likelihood of additional purchases, as customers are more likely to grab these items on a whim.

However, the time spent in-store can vary depending on the customer's purpose for visiting.

For instance, a customer who is browsing for new products might spend more time exploring different sections, while someone who knows exactly what they need will appreciate a clear and direct path to their desired items. By understanding these different shopping behaviors, beauty supply shops can tailor their layouts to cater to both types of customers, ensuring a pleasant and efficient shopping experience for everyone.

Beauty supply stores should aim for a break-even point within 12-15 months to be considered viable

Believe it or not, beauty supply stores should aim for a break-even point within 12-15 months to be considered viable because this timeframe allows them to establish a solid customer base and manage initial costs effectively.

During this period, the store can gauge its market demand and adjust its inventory and marketing strategies accordingly. Achieving break-even within this timeframe also indicates that the store is capable of covering its operational expenses and generating enough revenue to sustain itself.

However, this timeline can vary depending on factors such as location, competition, and the store's initial investment.

For instance, a store in a high-traffic area with little competition might reach break-even faster, while one in a saturated market may take longer. Additionally, stores with a larger initial investment might have more resources to accelerate their growth, whereas those with limited funds may need more time to reach this critical milestone.

Seasonal promotions can boost sales by 15-20%, especially around holidays and major beauty events

Experts say that seasonal promotions can increase sales by 15-20% in beauty supply shops, particularly during holidays and major beauty events.

During these times, customers are often looking for special deals and are more inclined to purchase products they might not usually buy. This is because holidays and events create a sense of urgency and excitement, encouraging people to spend more.

Additionally, beauty supply shops can capitalize on these periods by offering exclusive products or limited-time offers that are only available during the promotion.

However, the effectiveness of these promotions can vary depending on factors like the target audience and the specific products being promoted. For instance, a promotion on skincare products might perform better during the winter months when people are more concerned about dry skin, while makeup promotions might see a boost around events like New Year's Eve.

Online sales should account for at least 20% of total revenue to capture the growing e-commerce market

Few restaurants' online sales should account for at least 20% of total revenue to capture the growing e-commerce market, and the same applies to a beauty supply shop.

With the rise of digital shopping trends, more consumers are turning to online platforms for their beauty needs. This shift means that beauty supply shops need to have a strong online presence to remain competitive and meet customer expectations.

By ensuring that at least 20% of revenue comes from online sales, beauty supply shops can tap into a broader customer base that extends beyond their local area.

However, this percentage can vary depending on factors such as the shop's target demographic and the level of competition in their area. For instance, a shop located in a bustling urban area with a tech-savvy clientele might aim for a higher percentage, while a shop in a rural area with less internet access might find 20% challenging to achieve.

Store rent should not exceed 8-12% of total revenue to avoid financial strain

Please, include that in your business plan.

For a beauty supply shop, keeping store rent between 8-12% of total revenue is crucial to avoid financial strain. This percentage ensures that a significant portion of revenue is available for other essential expenses like inventory, staff salaries, and marketing.

If rent exceeds this range, it can lead to cash flow issues, making it difficult to sustain operations and potentially forcing the business to cut corners in other areas.

However, this percentage can vary depending on specific circumstances, such as the shop's location and size. For instance, a shop in a high-traffic area might justify a higher rent percentage due to increased sales potential, while a smaller shop in a less busy area should aim for the lower end of the range to maintain profitability.

Effective merchandising can increase sales per square foot by 10-15%

A precious insight for you, effective merchandising can boost sales per square foot by 10-15% in a beauty supply shop.

By strategically placing products, you can guide customers through a carefully curated journey that encourages them to explore more items. This not only increases the likelihood of impulse purchases but also enhances the overall shopping experience, making customers more likely to return.

Moreover, using attractive displays and signage can draw attention to high-margin products, effectively increasing the average transaction value.

However, the impact of merchandising can vary depending on factors like store layout and customer demographics. For instance, a shop with a younger clientele might benefit more from trendy, eye-catching displays, while a store catering to professionals might see better results with a more organized and informative setup.

A successful beauty supply store turns over inventory at least 8 times per year

This is insider knowledge here, a successful beauty supply store turns over inventory at least 8 times per year because it indicates a high demand for products and efficient inventory management.

When a store frequently turns over its inventory, it means that products are selling quickly, which is a sign of a strong customer base and effective marketing strategies. Additionally, frequent turnover helps in keeping the stock fresh and up-to-date, which is crucial in the beauty industry where trends change rapidly.

However, the rate of inventory turnover can vary depending on the specific products and target market of the store.

For instance, a store specializing in high-end beauty products might have a slower turnover rate due to higher price points and a more niche market. On the other hand, a store focusing on affordable, everyday items might experience even higher turnover as these products are purchased more frequently by a broader audience.

Customer loyalty programs can increase repeat business by 25-30%

Most of the restaurants' success with customer loyalty programs can be attributed to the fact that these programs create a sense of exclusivity and reward for repeat customers.

In the context of a beauty supply shop, a well-designed loyalty program can encourage customers to return by offering discounts on future purchases or exclusive access to new products. This not only makes customers feel valued but also incentivizes them to choose your shop over competitors.

However, the effectiveness of these programs can vary depending on factors such as the target demographic and the specific rewards offered.

For instance, younger customers might be more motivated by social media shoutouts or influencer collaborations, while older customers might prefer direct discounts or free samples. Tailoring the program to meet the preferences of your customer base is crucial for maximizing its impact.

Shrinkage due to theft or damage should be kept below 2% of revenue

Not a very surprising fact, but keeping shrinkage due to theft or damage below 2% of revenue is crucial for a beauty supply shop's profitability.

Beauty products often have high retail margins, so even a small percentage of shrinkage can significantly impact the bottom line. Additionally, beauty supply shops typically carry a wide range of small, easily concealable items, making them more susceptible to theft.

By maintaining shrinkage below 2%, the shop can ensure that losses don't eat into profits excessively.

However, this target can vary depending on factors like store location and security measures in place. For instance, a shop in a high-traffic area might experience more theft, necessitating stricter controls to maintain the same shrinkage rate.

Beauty supply stores should allocate 3-5% of revenue for digital marketing, focusing on social media and influencers

This valuable insight suggests that beauty supply stores should allocate 3-5% of their revenue for digital marketing, with a focus on social media and influencers, because it effectively targets their primary audience.

In today's digital age, consumers spend a significant amount of time on social media platforms, making it a crucial space for beauty brands to engage with potential customers. By leveraging influencers, beauty supply stores can tap into established trust and credibility that these personalities have with their followers.

However, the percentage of revenue allocated can vary depending on the store's size, target market, and specific goals.

For instance, a smaller store might allocate a higher percentage to stand out in a crowded market, while a larger store with an established customer base might focus on maintaining brand loyalty. Additionally, stores targeting a younger demographic may find social media marketing more effective, whereas those targeting an older audience might need to diversify their marketing strategies.

Staff turnover should be kept below 50% to maintain consistency and customer relationships

This insight highlights the importance of keeping staff turnover below 50% in a beauty supply shop to ensure consistency and strong customer relationships.

High turnover can disrupt the continuity of service that customers expect, leading to a decline in customer satisfaction. When staff frequently change, it becomes challenging to maintain a personalized shopping experience, which is crucial in the beauty industry.

Moreover, experienced staff are more likely to have in-depth product knowledge, which helps in providing better recommendations and building trust with customers.

However, the impact of turnover can vary depending on the size of the shop and the complexity of the product range. Smaller shops or those with a more specialized inventory may feel the effects of high turnover more acutely, as each employee plays a critical role in maintaining the shop's reputation and customer loyalty.

Offering in-store beauty services can increase foot traffic and sales by 10-15%

This data does not come as a surprise.

By offering in-store beauty services, a beauty supply shop can create a more engaging and interactive experience for customers, which naturally draws more people into the store. These services, such as makeup consultations or hair styling, provide an opportunity for customers to try products before purchasing, increasing the likelihood of a sale.

Additionally, customers who come in for a service are more likely to browse and make additional purchases, boosting overall sales.

However, the impact of these services can vary depending on factors like the location of the store and the specific services offered. For instance, a shop in a busy urban area might see a larger increase in foot traffic compared to one in a suburban location, while offering unique or trending services can further enhance the appeal and effectiveness of this strategy.

A well-designed loyalty program can increase average transaction size by 10-20%

Yes, a well-designed loyalty program can indeed boost the average transaction size by 10-20% in a beauty supply shop.

When customers know they can earn rewards or discounts for spending more, they are often motivated to add extra items to their cart. This is especially true in the beauty industry, where customers are frequently tempted by new products or exclusive offers.

Additionally, loyalty programs can encourage customers to try higher-end products they might not have considered otherwise.

However, the effectiveness of a loyalty program can vary based on factors like the target demographic and the specific incentives offered. For instance, a program that offers points for every dollar spent might work better for frequent shoppers, while a tiered system could appeal to those who make larger, less frequent purchases.

Beauty supply stores should maintain a current ratio (assets to liabilities) of 1.5:1 for financial health

Did you know that beauty supply stores should aim for a current ratio of 1.5:1 to ensure financial health?

This ratio means that for every dollar of liabilities, the store should have $1.50 in assets, which provides a comfortable cushion to cover short-term obligations. Maintaining this ratio helps the store manage its cash flow effectively, ensuring it can pay suppliers and handle unexpected expenses without stress.

However, the ideal current ratio can vary depending on the specific circumstances of the store.

For instance, a store with a steady customer base and predictable sales might operate well with a slightly lower ratio, as its revenue stream is more reliable. Conversely, a store in a highly competitive area or with seasonal sales fluctuations might need a higher ratio to buffer against potential downturns and ensure it can meet its financial commitments.

Regular staff training on new products can increase sales by 5-10%

This data suggests that regular staff training on new products can boost sales by 5-10% in a beauty supply shop.

When staff are well-trained, they can provide better product recommendations and answer customer questions more effectively. This leads to increased customer satisfaction and a higher likelihood of making a purchase.

Moreover, knowledgeable staff can highlight the unique benefits of new products, encouraging customers to try them out.

However, the impact of training can vary depending on factors like the complexity of the products and the existing knowledge of the staff. In cases where products are particularly innovative or different from previous offerings, training might have an even greater impact on sales.

Product displays should be refreshed every 4-6 weeks to keep the store looking current and engaging

This data point highlights the importance of refreshing product displays every 4-6 weeks to maintain a dynamic and engaging shopping environment in a beauty supply shop.

Beauty trends and consumer preferences change rapidly, so updating displays helps to showcase the latest products and innovations. Regularly refreshed displays also prevent the store from looking stale and outdated, which can deter customers from returning.

Moreover, frequent updates can create a sense of excitement and discovery for customers, encouraging them to explore new products and make additional purchases.

However, the frequency of updates may vary depending on factors such as the size of the store and the target demographic. For instance, a store catering to a younger audience might need more frequent updates to keep up with fast-changing trends, while a store with a more mature clientele might focus on timeless and classic products, allowing for less frequent changes.

Beauty supply stores should reserve 1-2% of revenue for store maintenance and upgrades annually

Actually, setting aside 1-2% of revenue for store maintenance and upgrades is crucial for a beauty supply shop to ensure a consistently appealing shopping environment.

Regular maintenance helps in keeping the store's appearance fresh, which is essential for attracting and retaining customers who expect a clean and organized space. Additionally, periodic upgrades can introduce new technologies or displays that enhance the shopping experience, making the store more competitive in the market.

However, the exact percentage can vary depending on factors such as the store's location, size, and the age of the building.

For instance, a store in a high-traffic urban area might require more frequent updates due to wear and tear, while a smaller shop in a less busy location might not need as much. Ultimately, the key is to balance the investment in maintenance and upgrades with the store's overall financial health, ensuring that the shop remains a welcoming destination for beauty enthusiasts.

Effective cross-merchandising can increase sales of complementary products by 15-20%

It's very common for effective cross-merchandising to boost sales of complementary products by 15-20% in a beauty supply shop.

When customers see related products displayed together, like a shampoo next to a conditioner, it creates a natural suggestion to buy both. This strategy taps into the customer's desire for a complete beauty routine, making them more likely to purchase additional items.

Cross-merchandising works because it simplifies the shopping experience, helping customers find everything they need in one place.

However, the effectiveness of this strategy can vary depending on factors like product placement and the specific target audience. For instance, younger customers might respond better to trendy product pairings, while older customers might prefer classic combinations.

Establishing a product return rate below 5% is a sign of strong customer satisfaction and product quality.

A lot of beauty supply shops aim for a product return rate below 5% because it indicates high customer satisfaction and product quality.

When customers are happy with their purchases, they are less likely to return items, which suggests that the products meet their expectations in terms of effectiveness and value for money. A low return rate also reflects well on the shop's ability to provide accurate product descriptions and helpful customer service, which are crucial in the beauty industry where personal preferences and skin types vary widely.

However, the ideal return rate can vary depending on the type of products sold and the target market.

For instance, a shop specializing in high-end cosmetics might expect a slightly higher return rate due to the subjective nature of luxury purchases and the higher expectations of their clientele. On the other hand, a store focusing on basic skincare products might see a lower return rate because these items are often more straightforward and have a broader appeal.