Why has everything in China gotten more expensive…except for haircuts?

Posted in Barbershop at 11:56 am by Benjamin Ross

Yesterday I was introduced to Lao Fang, the owner of a chain salon, with over 30 locations across Fujian province. Li Wen Zhong introduced him to me as “the most successful hairstyling laoban (boss) in Fujian,” and this isn’t necessarily an exaggeration. While finding a employment as a hairstylist in Fujian is as easy as ever (unemployment is virtually 0%, due to the demand for labor outstripping the supply), being a successful boss is not. Whenever I ask a salon laoban about the state of the industry, I am invariably told “There are far too many salons.” IMG_5363
There is simply not enough business to be shared by the proliferation of salons, and so profits have been stretched too thin. Of course, there has always been competition in this industry, but the new variable which has come into place is rising costs: from both labor, and rising rents. Recently, I met up with Adamum, who you may remember from my stay at the Red Sun in 2007. Shortly after I had finished my stay, Adamum left as well to open up a salon nearby. “I was doing it for a couple years, being a laoban, and it was going well. It was a small salon, and the rent was 3,000 RMB. Then suddenly, one year after Spring Festival, my landlord told me he wanted 8,000. So I just closed my salon. I couldn’t have made any money with rent so high.”

Labor costs are rising too. Lao Fang, who has been in the industry since 1998, told me that

Back in the day, the student would have to pay the master (stylist). The master had the power. If you wanted to learn the trade, you had to work as a 学徒 (apprentice), and do a lot of free labor for the boss. These days the roles are reversed. The boss can’t find anybody to do his labor. They have to pay at least 1,000 per month just to get an assistant (low level worker). And now, a lot of the work in the salon is outsourced because there aren’t enough assistants, like towels. It used to be that the assistants washed and dried all the towels. Now this is done by an outside company.

I hadn’t even thought of this. Back when I was an assistant at the Red Sun, one of our primary tasks had been the towels. Nowadays, I hardly ever see any in-house labor touch the towels at all. All over Fuzhou, the numbers of in-house staff at salons has shrunk, which as Lao Fang mentions as well, is a testament to the rising costs of labor in the industry.

This leads to a vital predicament. As Lao Fang puts it, “The weird thing about this industry though, is that although wages have gone up, and rents have gone up, the price of a haircut and hairstyling have remained at about the same as they were 10 years ago.”

Back in 2007 (this was right before China’s inflation and housing bubble picked up), a haircut at the Red Sun was 30 RMB. Today, at Li Wen Zhong’s salon, it’s 38 RMB, despite the fact his rent is several times higher than it had been back in 2007. Even in Beijing, for a mid-range salon, I still get a haircut, with a wash, for around 30 RMB, despite average rents much higher than Fuzhou. As Lao Fang tells me “These days a lot of laoban, they say that we are basically 替房东打工. (laboring for the landlord).”

One reason for the stagnation of prices, commonly suggested to me by those in the industry, is what they call 恶性竞争, which I loosely translate as “immoral competition.” There is a general ethos within the industry that when one salon lowers prices, all salons lose, as market competition leads to lower prices for everybody. While most stylists view this practice as immoral (不道德生意), in the intensely competitive market over-populated with salons, it only takes one salon to keep prices bottom low.

The stagnation of prices is probably the single most crucial issue facing the hairstyling industry in China today. In addition to shrinking profits, it is also shrinking the labor pool, as less and less youth enter the industry, due to the low profit potential, which in turn raises labor costs even more. Some stylists are seeking a solution, via nascent trade associations, while others are simply holding out. In theory, as the labor pool shrinks, eventually demand will reach a point that the cost of labor sold on the market (i.e. a haircut) will rise as well. When, and if, this happens, the entire industry stands to win. The key question IS when, and if? And how many stylists will wait around long enough for it to happen.

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