The Sephora Story: The Retail Success You Can’t Make Up

INNOVATION IN SELLING COSMETICS, SKINCARE, HAIRCARE

While LVMH was celebrating ten years with Sephora and reporting record gains in 2007, the global financial crisis was just beginning. Soon after Lehman Brothers’ announcement of their own collapse on September 15, 2008, the US stock market crashed and global markets soon followed, leading the world into the Great Recession for the next several years. Areas first affected were the housing markets and banking, but soon all major industries were impacted. The unemployment rate skyrocketed, and so too did evictions, foreclosures, and household debt. Declines in consumer wealth were estimated in the trillions in the US alone.¹ Credit availability was at an all-time low and overall international trade declined as well. However, one area that seemed to be unscathed by the economic downturn was the beauty industry.

In his 2008 LVMH Annual Report, Bernard Arnault said, “The 2008 results demonstrate the exceptional reactivity of our organization in this period of economic crisis. The group has always emerged stronger from previous economic downturns thanks to the dynamic innovation of its brands, the quality of its products and the effectiveness of its teams. LVMH approaches the challenges and the opportunities of 2009 with confidence and determination and has set the objective of increasing its leadership position in the worldwide luxury goods sector.” Included in his highlights, he reported record increase revenue and profits, continued growth across all major brands, “excellent performance” of the Perfumes and Cosmetics groups and Sephora. While the world markets were crashing, LVMH Selective Retailing group (which included Sephora) registered organic revenue growth of 9 percent. And despite the economic crisis, Sephora still had plans to grow and expand in key market areas. It also boasted growth in online sales in France, the US, and China. Finally, the report attributed Sephora’s success to its “continued differentiation strategy with a more innovative and exclusive product offering, complemented by a large range of in-store services and treatments.”²

End of the Levy Era and Leadership Transitions

But the company was also going through transition internally. Levy stepped down as CEO of Sephora in March of 2011, and passed away shortly after from a long illness on January 1, 2012.³ On March 31, 2011 Christopher de Lapuente, who led P&G’s global hair care division and served in various capacities there for twenty-eight years, became the global president and CEO for Sephora. Bernard Arnault, LVMH founder, chairman and CEO, was hopeful about the new leader and was counting on his international experience to help with their expansion goals, stating, “Joining LVMH as a member of the executive committee and head of Sephora, Christopher de Lapuente will bring to the group a wealth of international experience; his know-how will be a precious asset for the global growth of Sephora and add to the continued success of LVMH.”⁴

Kendo Brands & Global Celebrity Partnership with Rihanna

Soon after, Lapuente began to make organizational shifts. In 2014, he asked David Suliteanu, who had successfully led Sephora Americas since 2001 through a period of rapid expansion, to become the CEO of Kendo Brands, which is the LVMH “Beauty Brand Incubator.” Kendo is a play on the words for “can do” and is the creativity hub for the next generation of beauty product development for global Sephora channels and selective retailers outside of Sephora. Suliteanu was asked to lead the San Francisco-based Kendo to help develop, collaborate, and acquire new brands for LVMH, that at the time included Bite, Kat Von D, and Marc Jacobs Beauty. Shortly after taking charge at Kendo, Suliteanu partnered with pop star, model, entrepreneur, and beauty vlogger Rihanna to launch a unique inclusive cosmetic line, Fenty Beauty, designed to match every single skin tone. It debuted to wide acclaim and sensational sales in 2017 (over one hundred million dollars in sales in the first few weeks).⁵

Everything Rihanna touches turned to gold, or should we say: Platinum. She is the youngest solo artist to achieve fourteen number one singles. She has sold more than 250 million records worldwide, and has won nine Grammys, twelve Billboard Music Awards, and thirteen American Music Awards. Forbes has ranked her among the top ten highest-paid celebrities and she was named by Time in both 2012 and 2018 as one of the 100 Most Influential People in the world, thanks in large part to her impressive social media following, even by celebrity standards. She has over 6.5 million followers on YouTube alone. Today, her official Instagram account, Fenty Beauty by Rihanna, has over 8.5 million followers, which has the second largest following of LVMH cosmetic brands (Benefit has 9.7 million followers). At the time of the signing, Suliteanu had high hopes for the brand, “Fenty Beauty by Rihanna is a beauty rocket ship that will appeal to a huge and diverse global audience. We are aiming for the stars.”⁶

Suliteanu partnered with pop star, model, entrepreneur, and beauty vlogger Rihanna to launch a unique inclusive cosmetic line, Fenty Beauty, designed to match every single skin tone. It debuted to wide acclaim and sensational sales in 2017 (over one hundred million dollars in sales in the first few weeks).

Suliteanu’s expectations were on target. Within one year of Fenty Beauty’s launch in 2017, Fenty Beauty reportedly made 570 million dollars in sales in its first fifteen months—nearly a tenth of LVMH’s entire perfume and cosmetic line, which includes established brands like Guerlain, Acqua Di Parma, Parfums Christian Dior, Givenchy Parfums, Perfumes Loewe, Benefit Cosmetics, Makeup For Ever, Kenzo Parfums, Fresh, Kat Von Beauty, Maison Francis Kurkdjian, Marc Jacobs Beauty, and Cha Ling. The entire Fenty Beauty operation is said to be worth three billion dollars.⁷ According to Forbes, Rihanna is now the “World’s Richest Female Musician” and is said to have amassed over six hundred million dollars. For those keeping count, that’s more than Queen B’s fortune. (Beyoncé’s net worth tally is four hundred million dollars sans her husband Jay-Z’s billion-dollar fortune according to Forbes.)⁸

The decision to partner with, and launch, Rihanna’s Fenty Beauty is a testament to the power of celebrities not just with massive followings—but ones with an iconic and inclusive brand. Rihanna reaches out to all generations, all races, and all backgrounds. By releasing forty shades of foundation, she and her brand, according to Stephanie Wissink, a research analyst for Jeffries, “challenged the standard convention that you only needed a very defined set of shades to satisfy a market. Not only did Fenty Beauty achieve meaningful sales, but it potentially changed the industry permanently.”⁹ That’s exactly what Rihanna hoped to do when she launched her beauty line in the first place, saying on LVMH.com, “Fenty Beauty was created for everyone: for women of all shades, personalities, attitudes, cultures, and races. I wanted everyone to feel included. That’s the real reason I made this line.”

In 2018, LVMH extended an offer to Rihanna to reach beyond her cosmetics brand and to join their fashion house and become the first black woman to run a major luxury fashion house and the first new LVMH house in more than thirty years. In an interview with the New York Times Style Magazine, Rihanna said, “They extended the offer to me and it was a no-brainer because LVMH is a machine. Bernard Arnault was so enthusiastic; he trusted me and my vision.”¹⁰ Keeping with her inclusive ideal, the new luxury brand has sizes that go up to a US 14. Wissink believes that Rihanna is poised to shake up the fashion world, just like she did the beauty world. “What Fenty Beauty did to beauty, Fenty lifestyle is going to do to fashion. It’s going to raise the bar for what it looks like to build a brand that’s inclusive, game changing, global and iconic.”

Inclusive, game changing, global, and iconic are certainly words the Sephora brand wants to be associated with. It was hoping to capitalize on being a leader in these areas, and it was hoping do so with its new leaders.

The decision to partner with and launch Rihanna’s Fenty Beauty is a testament to the power of celebrities not just with massive followings—but ones with an iconic and inclusive brand. Rihanna reaches out to all generations, all races, and all backgrounds. By releasing forty shades of foundation, she and her brand, according to Stephanie Wissink, a research analyst for Jeffries, “challenged the standard convention that you only needed a very defined set of shades to satisfy a market.”

Calvin McDonald Heads Up Sephora Americas

Lapuente then hired Calvin McDonald to take over for Suliteanu as CEO of Sephora Americas’ role. In the press release announcing his new role, McDonald was lauded by his new employer, “In addition to his focus on exceptional consumer experiences, he is known for his collaborative leadership skills, strong vendor relationships, and ability to drive revenue while managing businesses efficiently and effectively.”¹¹ Prior to joining Sephora Americas, McDonald served as the president and CEO of Sears Canada in 2011, (the separately listed Canadian business of Sears). According to a Sephora press release, he was tasked with “turning around the business [Sears Canada], which had lost more than $1 billion in revenues (bringing it to $4.5 billion) and had seen significant gross margin decline.” During this time, he successfully led employees across both its retail and direct businesses, and developed a “transformation growth plan focused on product, innovation and improving culture.”¹² LVMH was counting on McDonald’s abilities in business growth, leadership, and innovation. In a statement, Lapuente said, “Calvin McDonald has established himself as a visionary and highly talented industry leader at two of Canada’s largest and most important retailers. We are delighted to welcome him to Sephora Americas. He will focus on building on the extraordinary growth of the business in new and existing markets and continue Sephora’s exceptional track record of industry leadership driven by David Suliteanu.”¹³

McDonald added, “It is thrilling to be joining Sephora Americas, which is known across the retail industry for not only having revolutionized the beauty business but also for delivering a consistent stream of innovation in terms of merchandise, experience and digital capabilities that excite and inspire customers. I am looking forward to working with the exceptional Sephora team to build on what they have accomplished under David’s leadership. Sephora Americas is an amazing success story, and I am proud and privileged to work with our cast members, brand partners and customers and colleagues worldwide as we work to take Sephora Americas to the next level of innovation and growth.”¹⁴

That “next level” of innovation and growth went hand-in-hand with the rapidly changing digital world.

Sephora’s Digital Transformation

Sephora was an early e-commerce adopter when it launched its first website in 1998. But, their transformation and adaption to the mobile revolution is due in large part to the leadership of Julie Bornstein, who was hired by Suliteanu to be Sephora’s CMO & chief digital officer in 2007. According to a 2014 Harvard Business article “How Sephora Reorganized to Become a More Digital Brand,” Daniel McGinn interviewed Bornstein, and asked her how she updated Sephora and brought it into the digital age.

“It’s hard to imagine now,” Bornstein recalls, “but I joined Sephora when mobile shopping was something of the future. E-commerce players were still figuring things out, and brick-and-mortar stores weren’t really experimenting with technology. Yet based on my own experiences, I believed we could use technology to make shopping more efficient.” She went on to explain that the original Sephora.com was largely outsourced and she didn’t even have an internal development team when she joined. Bornstein explained that one of the first things she did when she came on board was to bring web development in-house, adding, “I’d recommend [bringing web development in-house] to any who’s serious about building a digital brand.¹⁵ The reason for doing so was because she recognized the need for a “stronger, more flexible foundation in order to drive digital into the future.”¹⁶

A crucial part of building an in-house web department was building the talent that could execute it. “We scouted the right talent, and put in the blood, sweat and tears,” Bornstein explained. “We later re-launched the website, taking it far beyond product specs and shopping carts. We built something that would give our clients access to better images, better information about products, and ways to communicate with each other. We’re constantly evolving mobile and web experiences to stay current and adjust based on our own analytics. Having an in-house team is critical.”¹⁷

Besides having an in-house team that could be agile, flexible, and work immediately to meet the needs of customers, Bornstein attributed their holistic approach to digital as the true key to their success. “Not even a decade ago, companies like Nordstrom ran Nordstrom.com as an entirely separate business. The impact that had on the operations and culture was significant. At the time, it served an important role, and that was to create a start-up within an established company. The companies that did this have much bigger online businesses today. But ultimately, that structure isn’t customer centric. Digital being silo’d today is the result of legacy brands tacking on digital. But I believe that if you’re going to be a successful retailer—or business in general—digital must be enmeshed at the highest level.” Having digital “enmeshed at the highest level” however wasn’t easy, she adds. “It required significant shifts in our own thinking, in structure, and in hiring the right talent. And because of that, we’re far better set-up for success.”¹⁸

Change isn’t always easy, and there is always resistance. For a company that had been so focused for years on the in-store experience, getting everyone at Sephora onboard to think “digitally” required a new way to approach the customer. In her mind, it was simple and in some ways very similar to the way Sephora’s founder Mandonnaud had approached retail when he first started: Put the customer at the center of the experience. “We also try to think like customers—how would I want to shop, what would make my experience better, how do my kids’ interactions with technology predict the future? And then we brainstorm. Marketing and internal IT expertise are both at the table. Each group can imagine things are possible that the other might not have dreamed of,” Bornstein explains. “Unfortunately at many big organizations, some of the best ideas never come to fruition because the right IT expertise isn’t there. We’re lucky to have an amazing CTO with a deep knowledge of e-commerce and strong desire to partner with the business, and a strong team behind him.”¹⁹

For a company that had been so focused for years on the in-store experience, getting everyone at Sephora onboard to think “digitally” required a new way to approach the customer.

She also is proud of the fact that when others in the beauty retail industry were purporting that mobile was best served as “a content engine” and “mobile shopping would take years to take off,” Sephora “dove-in head first.” She adds, “We were one of the first to develop a mobile site, and mobile sales have grown +100% each year in the past three years. You have to back-up the hunches with the right talent and right investments. For us, it’s paid off.”²⁰

When asked how she specifically was able to pull it off, she explained, “We re-established structure between traditional marketing and digital marketing teams. That may seem easy, but anyone who’s run a large organization knows it’s no small feat. It required months of planning and puzzle-solving.” This too, she admitted, was not easy and a “work in progress” at the time of the interview. “By merging teams, we make the most of our investments across all channels and do things more efficiently, more powerfully. We also move faster—which, in this day and age, is what makes all the difference. I firmly believe that this will be the way of the future. Marketing and digital must be hand-in-hand.”²¹

Bornstein argues in the article that most companies should have a tightly integrated chief digital officer and chief marketing officer, if not one-in-the-same. “An analytics and creative organization support both the e-commerce and store marketing efforts. . . . It won’t just help operationally; it will impact the bottom line.”²²

Another challenge of adopting to the digital age was simply keeping up since the pace of the digital age was lightning fast. “There will always be something else to solve, something else to build,” Bornstein says. “There will always be a new Pinterest, a new Instagram, a new desire from your customers to connect. And as the next generation of shoppers grows up, they’ll have different needs as well. We’re constantly evaluating new technologies and platforms. Sephora is headquartered in San Francisco, where we eat, breathe, and live digital. We can test things early, and help influence the design. The minute we stop looking for the next consumer touchpoint is the minute we become like those who said ‘mobile shopping will never exist.’”²³

Being on the lookout for the next consumer touchpoint required a new way to approach their business structure, namely by becoming what they termed an “Omni Experience and Innovation” leader in the industry.

Omnichannel Leader

Over the next several years, Sephora double-downed on innovation and expansion and by 2016, especially in the US, it represented 45 percent of all LVMH’s business—for all their groups. It had also continued to grow online and was now available in Singapore, Scandinavia, Switzerland, Mexico, and the Middle East (United Arab Emirates).²⁴ Their physical footprint increased as well, opening stores in Germany for the first time in 2017 and then in India in 2018, with its sights set on New Zealand. In their 2017 Annual Report, LVMH once again reported double-digit revenue growth and gained market share worldwide for its Sephora group, stating: “Its particularly remarkable performance in the United States propelled the brand to the highest echelon of the selective beauty market.” It also inaugurated several iconic locations, including La Canopée in Paris and the newly opened World Trade Center in New York City.²⁵ They attributed this success this time to “digital engagement and services” noting that “The brand’s strategy was more omni-channel [sic] than ever, with efforts focused on developing mobile applications, offering in-store digital features and reducing delivery time.”²⁶ This is the first time that the reports use the term omnichannel in regard to Sephora’s strategy.

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. It’s considered to be an interactive communication and business strategy that uses several channels as a means to support one another and be more cooperative rather than competitive. In other words, Sephora’s online channel doesn’t compete with Sephora in-store retail experience rather it helps 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. As mentioned earlier, it was one of the first retailers to launch a retail website in 1998, and later, as retail was taking a hit after the Great Recession and most brick and mortar shops were closing up and moving strictly into the online retail space, Sephora continued to expand in the physical retail space. But it took the omnichannel game one step further in 2015, when it launched its Sephora Innovation Lab in the Dogpatch neighborhood of San Francisco. The new physical office space was also a place that offered programs that would, according to the press release announcing itself to the world, “foster the culture of innovation and development along with the grooming of Sephora’s next generation of leaders.”²⁷

On the Search for Newest and Best Technologies

Excited about the new venture, President and CEO Calvin McDonald stated, “Innovation has always been in our DNA. We disrupted beauty by being the first to offer clients access to premium beauty out from behind the department store make-up counters, and we want to keep that spirit and bold tenacity alive. The new Lab will tap the collective creativity of our fourteen thousand employees nationwide, grow the next generation of leaders, and elevate Sephora’s digital future.”²⁸

According to McDonald, the Innovation Lab would be a place where the team “can ideate, test, dream, experiment and learn. As new ideas surface, the Lab team will be responsible for sourcing, developing, evaluating, testing and eventually launching new offerings and technologies for shopping in the store and on-the-go.”²⁹ In the announcement, he stated that it had teamed up with Google, Apple, and others in the past, and further planned to “evaluate additional strategic alliances in the future, through the Lab program.”³⁰

In addition to new technologies and alliances, Sephora also announced that it already had created a think tank program in the Innovation Lab that would “groom the next generation of leaders, who will be developing the ‘next big idea’ in retail.”³¹ This think tank team meets monthly and works to solve for “the way we shop five years from now,” according to McDonald.³²

In addition to the think tank, the Lab would also oversee what it called “Idea Central,” an employee-driven idea program that gathered ideas from all employees nationwide regardless of their function within the company.³³

“We’re completely focused on making shopping more efficient, intelligent and fun for our clients,” said Bornstein about the announcement of the Innovation Lab. “We spend a lot of time walking in the shoes of our clients as inspiration for dreaming up new technologies and partnering with technology companies in the Bay Area to develop innovative solutions for new ways to shop.”

In the announcement of the Innovation Lab, it also unveiled four specific digital experiences created by the Lab already, The first was the use of beacons, or a personalized alert system for clients who opted in. Shoppers could receive birthday alerts, loyalty program updates, and be notified of trainings and ongoing services on their phones while in the store. Another was a “Pocket Contour” experience. Getting onboard the Kardashian-fueled contour craze, Sephora partnered up with Map My Beauty, which according to the press release was “the first-of-its-kind cross-platform personal virtual make-up artist application.”³⁴ By analyzing a photo on mobile, the app can help beauty consumers identify their face-shape, and give them a personalized step-by-step guidance on how to apply make-up with a contoured look they wanted to achieve.

They also announced that they would soon be offering an augmented reality feature via the Sephora-to-Go mobile app for iPhone. With the app clients would be able to engage with custom content by hovering over various brand founder faces, like Laura Mercier, Josie Maran, Kat Von D, and others featured in the Sephora windows and display cases. By scanning each image with their phones, customers could experience interviews with brand founders, product videos, animated GIFs, various YouTube playlists, and product pages on Sephora.com, all without leaving the app. And finally, it also announced Sephora Flash, which was designed for frequent shoppers. Those who signed up for Sephora Flash could enjoy free two-day shipping on all products and was free for Rouge Beauty Insider Members, much like the hugely popular Amazon Prime that offers free shipping to their Prime members as well.

“The Innovation Lab and dedicated management team gives us an incredible opportunity to drive the future of innovation,” added Bridget Dolan, the then vice president of the Sephora Innovation Lab who was tasked with leading the Lab and team. “Given our location in the heart of the digital and tech scene, we have strong visibility into the players and trends, both on and offline, that could be molded into Sephora-centric experiences. We have a relentless hunger for developing technologies and networking with emerging technology companies that might seem unexpected now, but could define the future of retail.”³⁵

Rolling Out the New Technologies

Even before the Innovation Lab was officially called “the Innovation Lab” Sephora had been spending a considerable amount of time and resources dedicated to creating digital and tech-enabled experiences. One of the first was its Sephora-to-Go mobile app. “We recognized that mobile was the key to unifying our gifting program across all retail channels and supporting the omnichannel experience our customers were already seeking,” said Dolan.³⁶ It had already become part of Apple’s Passbook in 2012, but with the launch of the Sephora-to-Go app, they could leverage a cloud-based platform operated by CashStar, a mobile gifting app, to offer mobile digital gifting.

Instead of plastic gift cards, which up until then could not be redeemed online and were the bane of many a Sephora devotee’s existence, Sephora could now offer digital gift cards. Dolan acknowledged that mobile shopping was an “important way in which customers were researching products, creating wish lists, and making purchases.”³⁷ With this new technology offering, shoppers could send, redeem, and store digital and plastic gift cards in either the Sephora-to-Go mobile app or their preferred mobile wallet app, like Apple’s Wallet. In addition to being able to send digital gifts from any tablet, smartphone, or computer, customers could also personalize their digital gift cards with their own preferred photos or videos. They could also upgrade their gifts and add Beauty Services eGift Cards, which awards the recipient with an in-store 45-minute makeover.³⁸

Since implementing the mobile app, according to a study done by their vendor CashStar, Sephora digital gift cards “gained a higher initial value, faster redemption velocity and a higher basket value at redemption. But the most significant result was a Sephora digital gift card revenue growth that was eight times faster than the growth rate the prior year. Digital gift transactions also went up by 90 percent just one year after the program was launched.”³⁹ Dolan considered this a huge success, further adding, “51 percent of our digital gift cards are redeemed within just one month, compared to 33 percent of our plastic gift cards. . . . We expect digital gifting to become a key differentiator for retailers working to drive omnichannel growth, and we look forward to staying at the forefront of this movement.”⁴⁰ Sephora-to-Go is simply now called the Sephora app, where customers can shop, play with makeup virtually, view exclusives, check out the Rewards Bazaar, and even activate the “store mode.”

Taking the App and Omnichannel Experience a Step Further

Today most companies we interact with have omnichannels and apps. Again, we take for granted that we can do everything from our banking to our grocery shopping either in person, online, and through apps. We can even complain about or rave about and communicate with companies via social media. But Sephora truly was on the vanguard of this approach, leading the way not just for the beauty and cosmetics industry, but retail as a whole.

In an October 2017 Glossy article “Sephora Head of Omnichannel Retail Mary Beth Laughton: ‘We need to over-deliver,’” Priya Rao interviewed the newly named head of Sephora’s new division Omnichannel Retail. In the interview, Laughton explained her new position and said her goal was to fully wed Sephora in-store and e-commerce properties in order to offer customers a “full-fledged” omnichannel experience.

The “full-fledged” experience she was talking about specifically was launched in January 2018 and debuted as the Sephora Store Companion app which served what its name promised: an in-store shopping companion as soon as the customer enters the store. “It puts past purchase information and personalized product recommendations at their fingertips,” says Rao.⁴¹ Rao also explains how Sephora also partnered with Google to bring the Google Assistant and Sephora’s popular YouTube content together on the Google Home Hub voice assistant device. “I have been in this role for a little over a year, and pulling our stores and digital groups together with our consumer at the center has been our biggest accomplishment,” Laughton contends. “The whole philosophy starts with doing what is right for the consumer and making easy, personalized experiences for her across our channels.”⁴²

The whole philosophy starts with doing what is right for the consumer and making easy, personalized experiences for her across our channels.”

Describing how Sephora’s integration of the in-store experience and digital experience helped both sides of the business, Laughton says: “In today’s retail environment, ‘omnitude,’ or approaching everything from the omnichannel perspective, is really critical because our consumer has high expectations. We cannot just deliver, but we need to over-deliver and make it really great for her. We want to serve the client the best way we can, regardless of where she is shopping with us.”⁴³

She added that Sephora recognized that “mobile is now at the center of everyone’s life” and was the main driver of consumer behavior. Using the data they have captured from their various touchpoints, Sephora knows not just where their customers shop, but what they buy and how they go about it. “Our consumer starts with researching at home or on the bus on her way to work on our app,” she explains. “Then, oftentimes, clients do make their first purchase in brick-and-mortar stores. We see a mixture, though: Some shoppers only shop with us in the physical setting, while others see the store as an introduction—where she gets familiar with our brand—and then do all of their shopping online.”⁴⁴

In a further effort to link both the physical and online experiences for the customer, Sephora launched “Happening at Sephora.” While it is a digital hub, it is linked to the retail environment in that, Laughton says, “it showcases everything happening in our physical stores, like events, classes, services and brand launches. . . . And then, of course, when she is in the store, there are a lot of digital tools that draw back to that experience.”

Adding Digital Tools to the Physical

One thing Sephora has managed to do well as an omnichannel leader is bring the digital to physical. In addition to their Sephora app and Happening at Sephora digital hub and other simulation feature, Sephora also launched a Sephora Virtual Artist app, an augmented reality application available in select stores. Customers could “snap and try,” meaning they can take a photo of virtually anyone’s look by uploading an image of it and layer it over their own face. Customers can also “try on” a bunch of Sephora Collection products.

However exciting for the company, this new technology did invite a whole new level of unforeseen complications. In 2018, an Illinois woman sued Sephora and Modiface, Inc. (the software company that creates an augmented reality platform that enables beauty look try-on simulations) for what she alleges is a “violation of her privacy” and claims the Virtual Artist “take more than pictures.” According to the Cook Country Record, Auste Salkauskaite filed a complaint individually and on behalf of similarly “situated individuals” in the Cook County Circuit Court, citing the Illinois Biometric Information Privacy Act.⁴⁵

The plaintiff alleged that when she entered the Virtual Artist Kiosk, she was “required” to give personal information and that information was “disseminated in an attempt to sell her Sephora products.”⁴⁶

According to the records, Salkauskaite holds Sephora USA Inc. and Modiface Inc. responsible for failing to inform consumers in writing that their “biometrics were being collected and the terms under which their biometrics would be captured, collected, stored and used.”⁴⁷ According to the record, the plaintiff requested a trial by jury, and seeks “injunctive and equitable relief, statutory damages; monetary damages, equitable relief, and punitive damages; and pre- and post-judgment interest.”⁴⁸ As of this writing, the case is still ongoing and raises the questions: Are consumers aware of how their data is being collected? And do they understand that when they use such devices—or at any time interact with a company through any one of their channels—understand that is primarily for the purpose of data collection and further marketing?

The Biometric Information Privacy Act (BIPA) that was passed in Illinois in 2008 is the only law that allows private individuals to file a lawsuit for damages stemming from the violation. The BIPA requires that all companies doing business in Illinois comply to several requirements, among them are obtaining consent from individuals if the company intends to collect or disclose the identifiers, destroy biometric identifiers in timely manner, and securely store them.⁴⁹

Sephora made no comment to the Cook County Record. But it appears as though they are continuing to flight the claim, as the case was moved from the Cook County Circuit Court to the US District Court for the Northern District.

Despite dealing with the lawsuit, Sephora seems undeterred from bringing data and the digital experience into the physical environment. Another way they have brought the “digital to the physical” is by fully integrating otherwise physical experiences into the digital world. All Beauty Advisors (Sephora employees) are fully trained and all have mobile phones that allow them to interact with their customers. If a client is having a makeover done in-store, a Beauty Advisor can enter all the products used and send an email to the customer after the service, so if the customer wanted to they could reach out to the Beauty Advisor when she gets home or even buy more products. “It is about creating that personalized touch across all our channels,” Laughton adds.⁵⁰

Personalization and Creating a Customized Shopping Experience

Sephora isn’t the only one who acknowledges personalization is an increasingly important trend in beauty. It’s pretty much a trend everywhere and has been for the past two decades, and there are no signs that will change. Consumers have come to expect custom and personal experiences. We expect Netflix to queue up the next movie they think we will like best based on our previous bingefest. We expect our phones to know we are headed to Starbucks every morning on our way into the office (and to let us know how many minutes it will take us to get there with traffic). We even expect our refrigerators to tell us we’re short on almond milk and White Claw. There is no going back to the guesswork. We expect not just our friends and families to know us, but companies and things to know us as well. Laughton believes, “The future is a very personal, in-person interaction that turns into a just-as-personal digital interaction, and vice versa.”

The future is a very personal, in-person interaction that turns into a just-as-personal digital interaction, and vice versa.”

Sephora has responded to this need in a few different ways. First, like most companies, they use the data available from their CRM (Client Relationship Management) tool that tracks every touchpoint a customer has with Sephora. They gather everything—from where the customer came to the site (through an ad on Instagram, an influencer, a Google search, an article, an ad, an email campaign) to what pages they peruse, how much time they spend there, to what products they research, and even to what products they eventually put in their cart. Sephora is also able to capture data outside the scope of normal CRMs. They have other digital tools at their disposal as well. One in particular is their Color IQ device. Color IQ is a hand-held device only available in stores. Beauty Advisors are able to hold the device up to a customer’s face and perfectly match his or her skin tone. Once the data is captured and added to the customer’s Beauty Profile, Sephora can send emails, mobile push messages, or even offer complimentary products, with the best products that match his or her skin tone.⁵¹

Reaching Customers through Distributive Commerce

Another way they attempted to personalize and reach their customers is through what Laughton calls, “distributive commerce” or “this idea that customers want to increasingly engage with brands and retailers in the same way they engage with their friends.”⁵² That means “chat, text, social and voice assistance are where customers are spending their time, especially this younger generation.”⁵³ Laughton recognizes that it is important for Sephora to be a leader in these channels. One way they have executed this is by being virtually omnipresent on social media, mainly through the use of influencers, beauty vloggers on YouTube, and bloggers who promote their products and store for them. But one of its key differentiators is that Sephora has also built its own community on its website, where shoppers can build their own profile, join groups and follow various topics and connect with fellow members, join conversations, ask questions, talk directly with brands, and keep up with breaking beauty and health news. It also has a complete photo gallery where community members can browse, post, and get inspiration based on the looks created by other members. Members also have access to exclusive events and “community meetups IRL” (in real life).

According to their Beauty Insider Community webpage, the community is, in their own words, “Real people. Real time. Real talk. Find beauty inspiration, ask questions and get recommendations from members like you. You ready?” There are over forty-two groups, ranging from “Skincare Aware” to “Everything Eyes” to “Best Hair Ever” to “Lip Lovers.” There is also the popular “Trending Now” group that features the latest beauty updates and releases. Other groups are for those dealing with particular skincare issues, “Acne-Prone Skin,” “Combination Skins,” “Oily Skins,” “Dry Skins,” and “Age Defiers.” There are groups divided by lifestyle as well, “Makeup Minimalists” who like to keep their routine simple and “Savvy Shoppers” who are looking for deals, and even one for “Moms Only.”

There are also inclusive groups like “Deeper Shades” for the “melanin blessed. Beauty Obsessed” as well as the “Trans is Beautiful” for the “Femme, mask, non-binary. Beauty your way.” And there is even a “Men Who Makeup” group, which promotes itself as “Your favorite tool kit might be the one with a kabuki brush.”

Their Customer Service group offers real-time live support between 6 a.m. and 10 p.m. PST Monday–Friday, 8am-9pm Saturday-Sunday. However, this seems more like a curse than a blessing for Sephora. On a quick glance of topics on their page, unhappy shoppers take their complaints to the public forum without a hint of reservation. One topic “$100 Rouge Award is Trash” is where several Sephora shoppers took their frustration with redeeming awards to the page. (Apparently, it’s quite the issue.) “Frustration on 10. This is the 4th Tuesday I’ve used my lunch break to stalk the Reward Bazaar to cash in my points for the $100 Rouge Rewards and have failed. . . .” The poster whose handle is “Domos” wrote a lengthy post about her various attempts and failures to redeem her points. Others joined in sharing similar complaints and empathizing with Domos. And much like on other social media sites, group members can reply, view, and like.

For their part, Sephora customer service responds to and attempts to resolve these issues. It’s gotta sting to see the proverbial dirty laundry hanging out for the neighbors to see, but the advantage of such a forum like this is Sephora hears about and can respond to customer issues in real time. Another advantage is, since only Beauty Insider Community members can follow the groups, it’s not as public a forum as say Facebook or Instagram—though shoppers certainly feel free to voice their opinions on those channels as well. Most of the groups, however, are positive, friendly, and helpful. Community members advise others on their purchases and what works for them, often influencing others to purchase their favorite products. Which of course, is the point.

Using Influencers, Podcasts, and YouTube to Spread the Brand Message

If you happen to be one of those unicorns who has never been on social media or heard of influencers, they aren’t employees at Sephora. In some cases they aren’t even paid by Sephora (though there are professional paid/sponsored influencers as well). The majority of influencers, however, are what Sephora calls “microinfluencers” or regular people who try out products and share and post about their experiences on social media channels (Facebook, Twitter, Instagram, and Pinterest), and hashtag and/or mention their products and the #sephora name. Those who are paid influencers go through an extensive application process and are known officially as #SephoraSquad.

In February of 2019, a new round of paid influencers who were among fifteen thousand applicants were added to the diverse “squad.” According to Elizabeth Segran, who covered Sephora’s announcement for Fast Company, “In the past, Sephora has worked with influencers for smaller projects–like advertising campaigns, brand launches, and events. But #SephoraSquad will be a longer-term collaboration, one that allows the influencers to have much more autonomy in the content they create.”

Deborah Yeh, Sephora’s current CMO, says “that they will be tasked with talking about particular products or advertising campaigns. All of this will allow Sephora to embed itself in these smaller communities and be part of the conversations already happening online.”⁵⁴ Yeh adds, “We want to hear from people in far-flung places. The more inclusive we are, the more we can represent the excitement and diversity that we see in beauty.”⁵⁵

In addition to paid influencers from a wide variety of backgrounds, lifestyles, and locations, as well as microinfluencers, Sephora has also taken on a multimedia approach as well, even getting in on the ever-popular podcast circuit. In 2018, they promoted their Sephora Collection’s newest lipstick launch by partnering with Girlboss Media, to create an inspiring podcast called #LIPSTORIES, that highlighted stories of inspiring women leaders (Girlbosses), like Molly Hayward, the founder of Cora, an organic tampon subscription service and Jen Rubio, cofounder and CEO of Away, a luggage company. The thirty to forty minute co-sponsored podcasts also included interviews leading fashion and beauty influencers and thought leaders, like Jillian Mercado, a model with muscular dystrophy and modest-style fashion blogger Marwa Meme Biltagi.⁵⁶

Sephora on YouTube

Sephora’s YouTube channel has 1.25 million followers and is a beauty-lovers treasure trove of lessons, tutorials, and tips from experts, Squad members, celebrities, and makeup and hair artists. Topics range from how to cover under-eye circles to how to perfect the best killer cat eye. While the obvious reason for being on YouTube is to sell and market products, it does so all the while educating and informing consumers and empowers them to play. But, it also seems to be great place for partnership discovery as well. Some beauty influencers have as many as thirty-two million followers. Teaming up with a beloved makeup artist or budding beauty mogul who has a built in following makes solid business sense. Huda Kattan, for example, is a makeup artist who got her start posting about her beauty and makeup routine, her favorite foundations, and how to take the perfect selfie. Today, her brand, Huda Beauty, has products in Sephora stores worldwide.

Sephora and Google

In addition to optimizing social media, onboarding influencers, and launching podcasts, Sephora found another opportunity to reach customers—through the voice-based technology like Google Home Hub. In 2018, Sephora announced its partnership with Google to “bring consumers beauty-specific commands and YouTube integrations.”⁵⁷ Owners of a Google Home Hub could now request to play any of Sephora’s video makeup tutorials using the Google Home without ever having to interrupt their own makeup application. Some examples of possible commands:

Hey Google, show me foundation tips videos from Sephora.

Hey Google, play everyday contour tutorial from Sephora.

Hey Google, play get ready with me eyebrow tutorial by Sephora.

Hey Google, show me bold lip color videos by Sephora.⁵⁸

As a part of the partnership, Sephora sells the Google Home Hub in their online store and several locations. Prior to launching the Google Home Hub, Sephora had already dabbled in the voice tech space having launched one of the first Actions for Google Assistant the year prior, which allowed users to book beauty services, play quiz games, and listen to beauty podcasts. With this new Google Home Hub, customers could shop Sephora, even use the “Sephora Skincare Advisor feature to find the nearest stores, get skincare tips, and to determine their skin type.”⁵⁹ Anne-Véronique Baylac of Digital for Sephora Europe and the Middle East commented, “The use of voice assistants and more recently of voice-activated loudspeakers has turned out to be more than just a fad. It’s paving the way to a minor digital revolution of which Sephora wants to be a pioneer. With these first functionalities, and the collaboration with Google, we plan to test the potential and the customers’ reactions to voice-assisted retailing.”⁶⁰

The use of voice assistants and more recently of voice-activated loudspeakers has turned out to be more than just a fad. It’s paving the way to a minor digital revolution of which Sephora wants to be a pioneer. With these first functionalities, and the collaboration with Google, we plan to test the potential and the customers’ reactions to voice-assisted retailing.”

At the heart of Sephora’s digital and innovation strategy is the customer. All the innovation, adoption of available technologies, and creation of digital and physical experiences are designed with the customer “center stage.” Each product and each experience is carefully designed to make buying easy, convenient, and personal. While Sephora is largely regarded as one of the pioneers of “tech-enabled retail,” it had some sharp learning curves, and outright disasters along the way, most notably recently with numerous scandals, lawsuits, and the dropping of a high-profile influencers that threatened to tarnish their seemingly “flawless” foundation.