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Will Sephora’s 4 Ingredients for Success Continue To Work?
Despite being part of LVMH’s selective retailing division, Sephora, the French beauty retailer, rarely discloses the details of its financials. However, Guillaume Motte, the global president and CEO, recently shed light on the company’s growth and shared his recipe for success during his keynote at the World Retail Congress in Paris.
Motte highlighted significant growth rates across various regions:
- North America: 27%
- Europe: 23%
- The Middle East: 28%
- Southeast Asia: 27%
- Latin America: 43%
- China: 2%
Motte emphasized that Sephora’s broad-based growth is a testament to its global success. “We didn’t slightly beat the markets, we smashed some of the numbers. We grew twice to six times faster than the prestige beauty market in most geographies,” he explained.
During the keynote, Motte also shared four key ingredients behind Sephora’s success:
- Product curation: Sephora prioritizes quality over quantity. It curates brands that resonate with the company’s vision, often collaborating closely with brands to foster global growth. Notably, about half of the brands at Sephora are exclusive to the retailer.
- Experience: The in-store experience remains central to Sephora’s strategy. Motte called it “the heartbeat” of the company. With around 200 new stores opening yearly, Sephora believes in creating lively and engaging retail spaces. It incorporates technology, like skin diagnostic tools, to enhance customer interactions.
- Community: Sephora boasts a vast customer base of 160 million, with 60 million being “hyperactive,” according to Motte. The company focuses on creating exceptional experiences for its loyal customers, such as the Sephoria beauty event, which has expanded to global locations like New York, Paris, and Shanghai.
- Team: Motte believes that the team is pivotal to Sephora’s success. “Retail is a people business. People make all the difference,” he stated. With a people-centric approach, Sephora invests in its employees, offering growth opportunities and innovative scheduling, like the move to a five-day workweek in the Middle East, where six days is the norm.
In late 2022, Guillaume Motte was appointed as the new CEO of Sephora, succeeding Chris de Lapuente. With five years of experience at both Sephora and LVMH, including roles as deputy CEO of the LVMH Fashion Group and CEO of Sephora’s Europe and Middle East division, Motte brought a wealth of retail expertise.
His appointment came as Sephora started to expand more aggressively into Kohl’s stores, intensifying competition with rival Ulta. According to Kohl’s, the Sephora shop-in-shops surpassed $1.4 billion in sales in 2023, and there are plans to open 140 new shops by this summer, which will bring the “total Sephora at Kohl’s fleet to more than 1,000 stores and is the latest step in achieving a full Kohl’s chain rollout by 2025.”
Not all has been smooth for Sephora, however. TikTok videos show “Sephora kids,” pre-teens causing disruptions in beauty stores. They pressure parents into buying products promoted by influencers, raising concerns about using harsh skincare products at a young age. Influencer culture and the lack of tween-focused stores contribute to this trend. Calls for age restrictions in stores have grown, but this also highlights opportunities for age-appropriate skincare education.
This year, Sephora has also returned to the UK market after an 18-year hiatus. Previously, Sephora exited the UK “due to market challenges and fierce competition from homegrown retailers like Boots and Superdrug.”
Now, as it re-enters the market, Sephora faces significant challenges, including intense competition from established players and emerging brands like Glossier and Cult Beauty. Despite these obstacles, Sephora’s unique positioning as a one-stop shop for a diverse range of brands and its investment in digital transformation, including AI-powered tools, could give it a competitive edge.
However, maintaining a strong presence in the UK will require Sephora to differentiate itself through unique product offerings, exceptional in-store experiences, and outstanding customer service. With the financial backing of luxury goods giant LVMH, Sephora has the resources to navigate these challenges and potentially succeed in reclaiming market share in the UK.
Moreover, Sephora is exiting the Korean market, phasing out its online shop, mobile app store, and offline store operations starting May 6. Loyalty members will lose unused points, and their information will be deleted. The customer service team will operate until mid-August for returns and refunds. This move comes amid increasing competition with rivals like Ulta, which is expanding into Mexico. Sephora has also seen recent leadership changes globally, including a new CEO for North America and the departure of the head of Greater China.
Discussion Questions
How can Sephora balance localized strategies with its global brand identity for sustained growth?
How can Sephora integrate AI and augmented reality to enhance customer engagement online and offline?
How should Sephora address the challenges posed by influencer culture among younger demographics while promoting responsible marketing practices?
Poll
Loading …BrainTrust
Kristin Shane
EVP Chief Merchandising and Marketing Officer, The Guitar Center
Ananda Chakravarty
Vice President, Research at IDC
Sephora is a fantastic retailer that ticks a lot of boxes. It has interesting and innovative ranges which are regularly refreshed with new brands. Service is excellent. Stores are vibrant and stimulate browsing. And it has a good loyalty program. All of these things help it to win and have been augmented by select physical expansion, including via Kohl’s.
Of course, Sephora has also benefitted from being exposed to a very fast-growing part of the market: beauty. This has also benefitted other retailers, like Ulta. Interestingly, there are now signs that beauty is slowing down which is of some concern. However, I believe Sephora can continue to take market share in the US, especially from channels like department stores.
With regard to the UK, I think there is significant potential here. However, Boots is a formidable competitor: it has fantastic locations, is highly trusted, has one of the strongest loyalty programs in the UK, and has invested a lot in enhancing its beauty offer. Success for Sephora will not come as easily as it has in the US.
I think Sephora is its own animal. I think Ulta is too large ,assortment is too wide. Sephora is big enough, box size and curates their assortment carefully and thoughtfully. it’s funny you mention Boots- last time in the UK I saw more beauty/cosmetics than I had seen and supporting promotions to draw attention to it. They even had cosmeticians to assist customers. With the exception of Selfridges, Harrods. etc there aren’t a lot beauty stores in general, so good for them taking up the slack.
Sephora needs to focus on making themselves more available, and less about the impact of AI.They can be successful anywhere they want, if they really want to make an impact in that market. Without this focus, Sephora just becomes another retailer who is “going through the motions” and will fail in that market. This points to their issues in the UK and their eventual return to this market so many years later. They must stay focused, maintain excellent service and product availability, as well as refreshing their brands before they can proclaim success in any market.
I think Sephora will do OK ‘cross the Pond, at the very least – why wouldn’t it ? (unless a renewed bout of Francophobia breaks out) – but I’m more interested in how it will affect existing retailers. High end cosmetics were one of the last holdouts for department store exclusivity, and while that doesn’t necessarily end with Sephora – witness their (former) partnership with JCP – I would have to think this will hurt.
Sephora: Redefining beauty through curated excellence and inclusive innovation worldwide. The retailer can balance localized strategies with its global brand identity by tailoring product assortments, introducing regional brands, customizing store & digital experiences, hosting local events and marketing campaigns to suit each market’s preferences while maintaining its core values of quality, inclusivity, and innovation, ensuring sustained growth and relevance worldwide.
Sephora can integrate AI for personalized skincare routines and virtual makeup try-on online. Offline, they can use AR for in-store skin diagnostic tools and virtual makeup stations, enriching customer experiences with interactive technology. Sephora can address influencer culture by promoting responsible marketing. They can vet influencers who align with their values, prioritize education over promotion, and offer age-appropriate skincare guidance to younger demographics, fostering trust and ethical consumption. Sephora’s return to the UK signifies a transformative leap, offering diverse beauty experiences tailored to British consumers’ unique tastes and desires
It’s important to note that Motte gets what some in leadership tend to forget while on the road to growth .. “Retail is a people business. People make all the difference,” I love that his fourth ingredient is about the people. None of it works if the team doesn’t feel part of the solution. Kudos!
As a “guy” I’m not a Sephora customer but as a consumer goods and retail expert, I’m a huge fan, and that might be an understatement. Sephora is one of my favorite retail chains because they know exactly who they are and do most things exactly right.
There is no retailer that builds the in-store experience better than Sephora. The customer feels empowered when she walks into a backlit, “heavenly,” Sephora store. With Sephora’s merchandising approach, all of the barriers to purchasing makeup have been eradicated, allowing them to become a huge success. Don’t underestimate the ambience because that is part of what makes Sephora an “experience.”
Sephora understands that consumers are exhausted by the makeup aisles in pharmacies, and high pressure sales in department stores. To the contrary, low-pressure, accessible shopping is part of the Sephora alternative. Each Sephora retail assistant is trained to work holistically with customers to find products that best fit their needs. Inside the stores, retail assistants are trained to know when to step back, as well.
The Sephora approach is personalized, which is something Millennials covet. In addition, Sephora has made their personalized shopping experience digitally available, which is a major tool to keep customers loyal.
Sephora’s “VIB” loyalty program provides members with free gifts, in-store events, and discounts after purchases. It is “VIB’s” ability to ask members about their complexions, skin types, and preferences that makes it amazingly effective. Based on this data, Sephora creates a curated set of product recommendations.
Again, not being a customer, myself, I needed to do a hard study of Sephora’s website. What I observed is that the site doesn’t just cater to their customers’ desire to shop; it also accommodates their need have a personal experience. In light of this, Sephora.com offers sections for user-generated content, which allows consumers and experts to discuss products, as well as the “Beauty Board,” where customers can share their experiences with Sephora cosmetics.
Rather than feeling like they’re speaking to a marketing department, customers want brands that are personified, humorous, and conversational. In order to give consumers the experience they desire, Sephora is uses social media in highly skilled ways.
Sephora uses Instagram effectively. In addition to liking, commenting, and responding to posts, customers can be featured on #Sephora’s page by tagging the brand. It’s brilliant on many levels. A sincere, mutually beneficial relationship with Sephora’s social media customers has made Sephora’s truly social and engaged.
Sephora stands out in the industry. They do it right. And guess what? Sephora carries MEN’s products, too! – Db
Among all the questions here, I become concerned for Sephora losing their primary value — the stores. So along with all these other questions, Sephora will need to keep its focus on making the stores a place people want to be. Fortunately, the CEO’s list is pretty good and stays store focused. Today, though, it is far too easy for investors and other influences to focus too much attention on new shiny baubles and lose that store focus.
Sephora is a phenomenal global retailer that has managed to translate its brand promise and customer experience across multiple business models. I give special props to the “team” pillar. Some of the best experiences I’ve had in any store were in Sephora shops. I’m regularly blown away by Sephora’s sales teams’ product knowledge, proactive assistance, and friendliness. Bonus points to Sephora for knowing that celebrating diversity and encouraging individual associates to present however they like builds loyalty with its equally diverse customer base. If Sephora can knock it out of the park in the hyper-competitive US market, the UK should be a snap.
Sephora’s not-so-secret superpower is its associates. Makeup formulations have evolved dramatically, and the best way to keep up is to consult with a Sephora beauty advisor. They are a huge benefit to customers and to the company.
Sephora has a winning formula. In a fiercely competitive market, they continue to “kill it,” at least in most places. Question one: Will they dominate the UK Market? That’s a stretch in my mind. It’s really difficult to displace loved incumbent brands. But, if anyone can do it… Sephora comes to mind.
Question two: In my mind, the only risk for growth I see is their alignment with Kohl’s. In my opinion, Kohl’s longevity is very much in doubt. I’m sure they have a plan for this eventuality.
Agreed. To dominate they’d need to beat Boots (the top player) which currently has a 16.1% share of the UK market and managed to get 42.0% of the UK adult population to buy from it in 2023! That’s a really tall order and isn’t going to happen any time soon. Sephora is a fantastic retailer, but it had it easy in the US because of the weakness of rivals: that’s not the case in the UK.
Beauty is a highly personal category. Sephora can use AI and AR to tailor its assortment and marketing strategies to reflect global consumers’ range of ethnicities, complexions and skincare needs. AI-driven analyses of loyalty data can provide granular insights for personalized product recommendations that treat each shopper as an individual.
The key to localized strategies will be data, and using that data (product attributes, sales, demand signals) to increase localized demand forecast accuracy and use those forecasts to make strategic product and inventory decisions.
Sephora is a savvy retailer and has made a lot of good decisions, which is reflected in their strong performance. As a pioneer in augmented reality, they introduced the Virtual Artist app seven years ago. Their strategic product portfolio and excellent customer service have curated a loyal fan base. I am sure that Sephora is continuing to enhance the Virtual Artist app by infusing AI.
While localized stores are a great step forward, one of Sephoras best moves is a store-in-store capability. They’ve already engaged with retailers like Kohls and built smaller selections inside of other retailers to capture highly specific user sets, expanding into customer bases. A smart move on their part because of the symbiosis and ecosystem culture that such moves develop. Finding partners to work with in the UK will give Sephora an opportunity to introduce itself to the market again, without the costs of running a full store and location.
Acting locally and thinking globally is absolutely the right recipe for success. I believe Sephora’s focus and pillars are a winning combination on both sides of the pond (and beyond!).
Sephora has caught lightning in a bottle and has dominated the retail beauty scene. The omnipresent beauty retailer’s successful run has helped to reignite the reemergence of “mall culture” as teenagers and social influencers engage with the brand in its stores, social channels, and e-commerce business. Sephora has become the preeminent beauty brand, and it is a testament to the brand’s focus on the fundamentals, which include:
Having direct experience with Sephora through my teenage daughter, it’s clear that the brand’s momentum will not be slowing down anytime soon in the US. While there is a congested and competitive landscape in the beauty business, Sephora is well-positioned with its products, pricing, loyalty programs, vendors, store operations, social commerce, and store associate empowerment to keep the good times rolling.