Marketplaces: what is the real cost of 'free software'?

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First things first, what is a marketplace?

Imagine your salon was on JustEat or Deliveroo where people can compare prices and ratings of a takeaway and choose the one they fancy or the one with the special offer. This is a marketplace.

In the hair & beauty industry there are several marketplaces who all offer a software for your business and charge you for any clients booked via their platform. Other marketplaces (e.g Groupon) offer just a platform to advertise to win new clients and work with many sectors, not just hair & beauty.

Imagine your salon was on JustEat or Deliveroo where people can compare prices and ratings of a takeaway and choose the one they fancy or the one with the special offer. This is a marketplace.

Typically a marketplace will make their money by charging a commission fee on any new clients they bring you and by charging a % profit on the payments they take.

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The advantages of ‘free software’ & marketplaces

In order to fund the advertising and make money to pay for their services,  ‘marketplaces’ will charge a commission on that booking.

There are several benefits to this type of salon software.

Firstly, you either pay a small monthly fee or the software is free to you. This means if you have a quiet month in the salon, you don’t pay anything for your system.

Secondly, a marketplace is there to send you new clients. Their business model is to advertise their platform  (Google, social media, outdoor billboards, trains etc) so prospective clients visit their website and search for services / salons they want.

The idea is that your salon will stand out and clients will find you and book you. If you are a new salon owner who does not have a loyal client base then this is is potentially a good option as it means you will get new clients sent to you.

In order to fund the advertising and make money to pay for their services,  ‘marketplaces’ will charge a commission on that booking. Typically this is on new clients only or is a small % of each transaction

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How does the commission fee typically work?

On average a salon makes 8.8% gross profit on a service* which means that the costs for a £100 service (your electric, staff costs, wages, internet, council tax etc) cost £91. Your gross profit on this is therefore £8.80

Marketplace commissions range from 20% to 50% excluding VAT. With VAT added on top, you should budget for around the equivalent of 40-55% commission per new client.

If you deduct the commission fee from your gross profit of £8.80 then your net profit could actually be a loss of £33 per new client.

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Key questions to consider?

Do I need new clients?

If you are starting out or have opened a salon in a new area then a marketplace to help win new clients can be a good idea.

If you are an established salon then maybe you already have enough loyal clients or aren’t taking bookings for new clients.

Who owns my existing clients?

Whilst you own your clients data, the marketplace also has a relationship with them. This means they can send your clients adverts and emails promoting other businesses in your area. Think of our takeaway comparison: when you order a takeaway, both Deliveroo and your takeaway have access and can use your contact details to send you offers.

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Why does Slick charge a monthly subscription and not a commission?

It’s true, we are not a ‘free software’ platform and we’re not ‘the cheapest’ we’re incredibly proud of that (we’re also not the most expensive either!). We could fight for bottom place but we think there are more important things to fight for.

At Slick, we charge a monthly subscription. Even though we’re not ‘free software’, when we asked our customers, 80% asked us for a fixed monthly fee instead of a variable monthly bill or hidden fees.

By charging a fixed, subscription with no hidden charges, we are able to:

• give you the marketing and digital tools to retain your clients and encourage them to visit you and spend money with you.
• offer you unlimited education as part of your subscription to help you run and grow your business.
• support you with an incredible UK-based Customer Support team that answer your questions in less than 5 minutes
• allow you to keep 100% of the revenues and 100% of the profits from your business
• invest in our technology to offer you the smartest booking system in the world
• allow you to own & protect your clients data

If any of the above sounds like it fits you & your business then get in touch with us - we’d love to show you around!

Love Steph & Rob x

Slick Co-founders