Despite booming online sales — $3 billion, according to chief executive officer Jean-André Rougeot — Sephora sees a huge white space in brick-and-mortar.
In a virtual conversation on Wednesday between Rougeot and Kohl’s CEO Michelle Gass, hosted by CEW, the two executives outlined the catalysts for their partnership and the advantages posed by each.
The duo, dubbed a “power couple” by moderator and CEW chairwoman Jill Scalamandre, listed their respective wins during the pandemic, too. “We had a very significant e-commerce business before the crisis,” Rougeot said. “It grew dramatically during it. We are approaching $3 billion [in North America], which makes us the second largest beauty website in the world, behind Tmall in China.”
For Kohl’s, the pandemic didn’t slow brick-and-mortar momentum. “We were strong going into the pandemic, and our stores are healthy,” Gass said — “90 percent of them generate over $1 million in cash. When you talk about trends in the pandemic, convenience has only accelerated, but that doesn’t just mean only digital.”
Where Sephora gains its edge in the partnership — which will include 850 Sephora stores inside Kohl’s over the next three years — is in off-mall real estate. That brings Sephora’s door count in the U.S. to over 1,500, roughly triple its current standing. “Ninety percent of American consumers will be within 10 miles [of a location]. I still am a huge believer in physical retail. In-store is picking up, but there are still major traffic challenges,” Rougeot said, adding that he expects the partnership to give Sephora access to over 65 million more consumers.
“We believe there’s a huge space for Sephora with a smaller footprint in neighborhoods. That’s an area where I think we can have a huge upside in various cities,” Rougeot continued.
Although each claimed their target demographics are similar, Kohl’s shoppers don’t have the same access to Sephora. “We have many consumers who don’t shop us regularly because they can’t drive to one of our locations,” he said. “Tatcha, Drunk Elephant, Fresh — those brands are hugely appealing to that consumer. Brands like Olaplex have been hugely successful for Sephora and customers are going to go crazy for them.”
In return, Kohl’s gains more credibility in beauty, which is an area of interest for Kohl’s consumers, Gass said. “We’ve had our eyes on us getting into beauty pre-pandemic. [Consumers] have been voting with their wallets, we’ve done a ton of surveys, and they want elevated beauty.”
Sephora will aim to bring its full experience into the Kohl’s environment. Each location will take up roughly 2,500 feet of floor space, and will feature Sephora-trained beauty advisers. Gass said that construction will prove an optimal time to revamp other Kohl’s locations. At Kohl’s locations with two doors, one door will feature Sephora branding. “I’m old-school, but prestige beauty needs to be sold in a certain type of environment,” Rougeot said.
Sephora’s store-within-a-store will feature about 85 percent of the range of stockkeeping units as freestanding Sephora locations, as previously reported by WWD. Rougeot said brands have been eager to sign on. “Clients will have access to a wide range of more than 100 brands across our prestige beauty categories including makeup, skin care, body care, hair and fragrance,” he said.
Asked what keeps him up at night, Rougeot quickly answered, “Amazon.”
“One of my concerns is Amazon,” he said. “From a beauty point of view, Amazon today is not yet significant, but they have a very decent business, especially in hair care. [Amazon] is very good at many other things, like convenience and speed. I understand their traction, but we have to be super careful in our industry because we have a lot of examples of industries that were demolished by Amazon,” he said.
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