Unbundling the Salon

The New York Times recently talked about a social event that is popular in come urban locales, Haircut parties. The event is nothing but friends arranging for a group haircut session in someones house by hiring a stylist who would otherwise charge 3-4 times the price he/she charges at these events.  This is another example of product unbundling. A New York salon, usually owned and operated by a celebrity stylist charges $500-$1000 for a haircut (NYTimes data). The salon comes as a package, with the complete experience, not to mention the drinks. Most importantly these salons have stylists who are trained by the master himself/herself and are very good at what they are doing. The haircut, even though the core component, is just one part of the entire salon experience.

While those who can afford such a luxury can spend the high amounts,  there is a group of customers who would love to get professional haircut from these trained stylists but do not want to pay for the rest of the salon. The price point these customers are willing to pay are way below what the salons charge. Reducing the price is not the right option for these salons which serve a targeted segment and use pricing as a quality indicator.

Enter stylists freelancing outside the salons in such haircut parties. Even though the salons do not approve of it, the stylists who work in these high salons and are highly skilled freelance for a much reduced price of $100-$150.  Note that the stylists get the added value from being part of the name brand salon and from the training. The haircut party organizers will not hire any stylist willing to come to these events. So by separating the stylist from the salon that adds both brand value and training the customers are practicing unbundling.

Should the salons stop these? Some do. But these are the new group of customers that will never walk into the said salons. So the freelancers are not stealing customers from the salon but rather serving a particularly different segment. Unbundling the package uncovered markets that did not exist before.