Sally Beauty Goes All-In on Digital Transformation

Jamie Grill-Goodman
Editor in Chief
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The company has been investing “across the house,” with capital expenditure for fiscal 2019 expected to be approximately $120 million. 

From a new POS system and digital commerce capabilities, to testing new store concepts, a merchandising and supply chain platform, and much more, Sally Beauty Holdings is in the thick of a multi-quarter digital transformation plan. But the retailer still has a lot of ground to make up.

The company has been investing “across the house,” with capital expenditure for fiscal 2019 expected to be approximately $120 million. 

Recently, it completed the national rollout of its new loyalty program, Sally Beauty Rewards, to all U.S. and Canadian stores. The new program allows customers to enroll for free and to accumulate points for a $5 reward certificate for each $50 of spent.

“Initial results have been positive and we are seeing adoption rates in many stores that are almost twice as high as adoption rates of the old program,” said Chris Brickman, president and chief executive officer.

With the change to the new loyalty program Sally Beauty Supply stores are also executed a complete repricing, including switching from a three-tier program to a two-tier pricing model. The beauty supplies retailer achieved flat same store sales in its fourth quarter, 2018, for the first time in seven quarters.

 “As our quarterly results demonstrate, we are making solid progress on our transformation plan,” said Brickman. “We are playing to win by re-focusing our business around our differentiated core of hair color and care, improving our execution of basic retail fundamentals and advancing our digital commerce capabilities. We are continuing to drive costs out of the business, which is enabling investment in our transformation. We recognize that we still have work to do. With our key accomplishments from the quarter and the recent management changes we have implemented, we are confident that we are moving in the right direction.”

Here's a look at what Sally Beauty is working on to complete its transformation:

Point of Sale

Sally Beauty Holdings is implementing a new Oracle point-of-sale system in both business segments, Sally Beauty and Beauty Systems Group (BSG). Testing will begin in stores in both segments this quarter with a national rollout planned for the second half of the fiscal year.

“While a new point-of-sale system may not sound particularly cutting-edge, it is an important part of the customer-centric flywheel that we are creating,” said Brickman.

Digital Service Platform

Sally Beauty has completed e-commerce investments in the Sally warehouses and has begun marketing efforts around its two-day shipping capabilities to over 95% of the U.S. and one-day shipping capabilities to over 30% of the U.S.

Digital Commerce

For both U.S. segments, the company is in the process of completing design work on its new mobile-first e-commerce sites. Launching its updated e-commerce and mobile commerce capabilities is expected to be complete in fiscal 2019 with efforts for Sally Beauty completed by March.

The retailer said it sees approximately 30% year-over-year growth in both its U.S. and international e-commerce businesses, driven primarily by increased conversion rates.

Endless Aisle

The company said it will be expanding its test of endless aisle during the first quarter 2019. The retailer’s process allows for a store associate to order out-of-stock product through a store iPad and have it shipped to the customer’s home.

“This is a much needed fix to allow us to better participate in the digital world,” noted Brickman.

New Store Concepts

The retailer is designing and testing new store concepts for both business segments and said it will be rolling out all of its changes from assortment to store layout, to marketing, to technology, “all in one full market.”

Merchandising and Supply Chain

Sally Beauty will use the remainder of fiscal year 2019 to build out the infrastructure and begin testing phase one of its new JDA merchandising and supply chain platform. The multi-phase project will take place over the next two to three years. The aim is to improve product assortment by store and reduce out-of-stocks, as well as provide the merchandising team better visibility and forecasting capabilities of inventory, which may lead to a reduction in inventory levels.

“The combination of our CRM implementation which is already complete, our loyalty program which has now been launched nationally, our new digital commerce website and apps which are coming soon, and the new POS systems mean that, for the first time, Sally Beauty and BSG will be able to identify our customers regardless of channel, will be able to serve them on an individualized basis, and will be able to remove friction from the shopping experience for them,” said Brickman. “There are many moving pieces but this is a big deal for us.”