BUSINESS LESSONS AND OPPORTUNITIES

Despite its scandals and growing pains, there have been plenty of opportunities and lessons learned through Sephora’s company history. They have definitely learned from their missteps and continues to apply growth strategies that positively enhance the customer experience, mainly by leveraging their successes and what already works for them. Sephora must be doing something right to have grown from a small perfume company in Limogoes, France, to a six-billion-dollar international prestige beauty retailer in the past fifty years. Below are seven quick takeaway lessons learned from Sephora:

       1.  Create memorable experiences. When Dominique Mandonnaud opened his small single perfume store in Limoges, France, it was virtually impossible for a customer to engage with a product. By creating a wholly new and revolutionary approach to selling cosmetics and perfume Mandonnaud put the customer’s experience above all else in the selling process. As Mandonnaud’s former chief designer, Chafik, said about Sephora, “When you come here, the place is enticing and a delight to the senses.”¹ Though now Sephora’s experiential store model as well as its full suite of events and services is being replicated by other cosmetics retailers, it also is trickling into all kinds of business. Even banking is getting in on the experiential component of retail. Capital One now has Capital One Café’s where customers can drink Peet’s coffee, talk to financial advisors, and have “experiences” rather than just make banking transactions. JCPenney has even taken a page out of Sephora’s playbook and is now creating more fresh experiences—beyond Sephora, of course—including styling services, a chill zone, coffee area, a selfie studio, a movement studio that offers health and wellness classes, and “Style + Substance” lifestyle workshops. Lululemon opened a flagship store in Chicago in July of 2019, that in addition to selling apparel, offers classes and workshops. It too includes a café, juice bar, lounge areas, and even tuning tables, where customers can “tune” their vibe. In a world that is going increasingly digital and where customers can buy anything they want on their phone, retailers are figuring out that customers are demanding “something more” when they are coming into a store. They want an experience—assisted self-service with highly trained and informed sales associates, the ability to sample products and try things on, all the while having fun, positive, and life-affirming experiences. In other words, customers are craving connection and they’re relying on their retailers to provide that for them. If they could get what they want on their phones, then making a trip to the store has to have “something in it” for the buyer—and that something is a memorable experience.

       2.  Don’t be afraid to seek out investors when trying to expand—but plan ahead. Mandonnaud was determined to grow and expand his brand. Though initially his first relationship with an investor/buyer Promodès failed, Mandonnaud didn’t give up on his dream for expansion and sought out other investors Apax Partners and Astorg. By getting backing of two private equity firms together, Mandonnaud was finally able to buyout his company from Promodès and execute his growth plan. But what is interesting is Mandonnaud began his relationship with his investors with his own exit in mind. He planned for his own retirement, and worked with his investors to sell the company when the time came. Both he and his investors were then incentivized to expand the company and to sell it for a profit, which they ultimately did when they sold the company to LVMH.

       3.  Protect Your Brand. Sephora goes to great lengths to protect their brand and image. First they do so by establishing an iconic brand image. Their iconic store fronts, interior design, and its carrying of only prestige brands immediately sets it apart from the competition. However, over the years, companies have tried to mimic the brand’s look and services. Sephora didn’t take it lying down and confronted those that infringed on their trade dress and won. Other ways they protect their brand image is by how they select and choose partners, social media influencers, and the brands that they care about. Everything online and on social media channels is as carefully curated as the brands inside the store. Sephora also maintains its visibility by advertising through numerous media billboards, press, radio, television, internet, mailings—and most effective is its use of target social media campaigns and their use of YouTube to create informative and entertaining tutorials that help expand their brand reach.

       4.  Form strategic partnerships to expand the brand. When Sephora and JCPenney announced their partnership in 2006, it turned some heads in the industry. No one was expecting Sephora in a JCPenney. Nordstrom’s maybe, Saks perhaps, but JCPenney? Not so much. Sephora wasn’t afraid to take risks and saw a massive and untapped opportunity. Because JCPenney had one thousand stores throughout the country, Sephora could have access to thousands of new and potential customers, who otherwise would not have access to a standalone Sephora store. Though the store-within-a-store model is more commonplace today, it was a revolutionary idea for the time. Again, more and more stores and industries are following suit—Samsung in Best Buy, Anthropologie in Nordstrom, and Finish Line, Sunglass Hut, and Starbucks in Macy’s. A store-within-a-store can be a “win-win situation” for the both retailer and the tenant and provides opportunities to both enhance experiences and attract customers who are eager to learn more about a particular product or brand. And for the tenants, like Sephora, it offers them a better location than a standalone store with low risk, low overhead and minimal startup costs. Today, Sephora is located in almost 650 of JCPenney’s stores across the country and in addition to its physical presence, Sephora is the exclusive online beauty product seller on JCPenney’s website and now has access to millions of shoppers who head to JCPenney.com each year.

       5.  Create brand loyalty through promotions and programs. In the 2006 LVMH Annual Report, Sephora highlighted their “strategy of differentiation and building customer loyalty.” Over the past decade the loyalty card has expanded and now boasts over ten million card holders in the US alone. It is considered to be one of the most well-known and successful rewards programs in both the retail and e-commerce loyalty communities. As a Sephora loyalty card holder, the owner becomes what is called a “Beauty Insider.” The Beauty Insider Program is Sephora’s free rewards program in the United States and Canada and it lets customers earn points on all the merchandise purchases and redeem those points for rewards. Sephora has done a superb job aligning their rewards with their prestige brand. Instead of using points for a discount, Beauty Insider members can use their points to claim more beauty products at the Rewards Bazaar. Another reason why Sephora’s loyalty brand is so successful is because of their personalized product recommendations, which are tailored to each customer based on their shopping history. Once again customization goes a long way in creating a positive experience for the customer and further allows them to feel connected and “a part of something beautiful.”

       6.  Focus on omnichannel experiences. As mentioned earlier, “omnichannel” is a word to describe the cross-channel content and physical strategy that most companies or organizations employ to provide better experiences for their customers. Sephora’s online channel doesn’t so much as compete with Sephora in-store retail experience as it does help support the consumer experience by enhancing their ability to shop where and when it is most convenient for them. Channels can include, but are not limited to, physical locations (stand-alone stores and store-within-a-store), online, mobile apps, and even social media. Sephora had long been in on the omnichannel game. Sephora does an excellent job of integrating online and digital experiences in the retail space, and making their digital spaces feel at home and a place of connection. At the store, customers can have their face and skin analyzed digitally to match them to the perfect foundation and makeup colors, and then have the information sent back to them so they can continue their shopping experience at home if they prefer. Back at home, while online, they can engage not only in online shopping, but groups online based on one’s stored personal preferences. Everything is integrated so at the core, the customer can choose whatever experience they want, when they want, where they want it, and how they want it.

       7.  Invest in innovation and technology. A crucial part of Sephora’s success is that they are innovative and always looking ahead to take advantage of the newest and best technologies available. They brought their web development in-house so they could be more agile and flexible and bring things to market quicker. They also could maintain the integrity of the site in-house as well—that means better images, better information about products, and ways to communicate with one another. They’re also constantly evolving and creating new mobile web experiences all the time in order to stay current. Besides having an in-house team that could be agile, flexible, and work immediately to meet the needs of customers, they have integrated digital and web development into the fabric of the company and leadership. Since their company structure is customer centric, they don’t silo their tech and digital departments, but rather integrate them at the highest level. They also have an Innovation Lab located in San Francisco and are always on the lookout for new brand opportunities, updates in technology, and the next big idea.