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Sephora’s Consumer-Centric Approach

The retailer, which has led the innovation charge, has tripled its business worldwide since 2010.

In a fast-changing beauty landscape, Sephora has led the innovation charge, with new brands, categories, ways of selling and manners of communicating with beauty consumers, exemplifying the theme of the 2018 WWD CEO Summit, “Beauty Unlimited, the Power of New.”

During their keynote speech that kicked off the conference, company chiefs discussed Sephora’s evolution over the past 20 years.

“The business is almost 10 times bigger than it was then,” said Christopher de Lapuente, global president and chief executive officer of Sephora. “Since 2010, we’ve tripled the business worldwide. We’re in 32 countries, [are] market leader in about half of them and [are] two, three and four in a few others.

“But in answer to the question [as to] whether we are challenger or leader, the attitude is still the same,” he continued. “At the end of the day, what we aspire to do is to delight customers better than anyone else.”

De Lapuente added that the vision for Sephora “is to create the most loved community” — including for the retailer’s 34,000 employees, brand partners and customers.

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“The more the customers are delighted, the more they love us, the more loyalty they have, the more successful we will be for Sephora and the whole prestige beauty industry,” said the executive. “So that’s what we aspire to do.”

But it hasn’t always been smooth sailing. In the early Aughts, times were tough. “The investments to launch Sephora in certain markets of the world were extremely punishing,” he said.

“There were a lot of people at LVMH that will tell you that they wanted to sell Sephora and stick to luxury,” continued de Lapuente, referring to the retailer’s parent company, LVMH Moët Hennessy Louis Vuitton.

Cut to today, and Sephora’s business is booming. Two decades after its launch in the U.S., the retailer reportedly ranks first countrywide with $5 billion in sales, including its bricks-and-mortar and online business. Revenues have doubled in the last five years.

Calvin McDonald, president and ceo of Sephora Americas, said that pole position has never been the goal. The focus and obsession has been the client, he said, adding that’s as “it was [when] we started 20 years ago [in the U.S.]. It’s really what shaped our innovation through a disruptive spirit, never-stop attitude, remaining curious and very action-oriented. We will continue to be focused 100 percent on the client for the next 20 years.”

During the current period rife with change and the continued growth of e-commerce, Sephora keeps investing in brick and mortar. “We continue to open stores all over the world,” said de Lapuente, referring to about 150 locations. “It’s how we build our brand equity. It is where customers come to discover what’s new, what’s great, what’s interesting, what are the latest trends.”

Sephora’s top 100 stores have been upgraded globally. “What we are investing in more and more is the experience the customer has in-store,” he said.  That involves the likes of beauty studios, workshops and digital tools to up the excitement factor.

About one-quarter of what Sephora sells yearly is new products. “We really have to show them in ways that are fun, exciting,” said de Lapuente. “At the same time, we know that we need to invest in e-commerce and create what we call an omnichannel ecosystem.”

E-commerce and bricks-and-mortar stores coexist, he explained, and it’s for people to decide what works best for them. “The customers that love Sephora the most are the customers that shop online and in-store,” said de Lapuente. “They’ll go online to do their research, to see the reviews, to see the product ratings. They’ll come in-store for the experience.”

The tactile element is important for prestige beauty products, he believes.

When asked about how Sephora is combating the rise of other online prestige beauty sellers, such as Amazon — which is forcing other groups to prioritize and think of convenience differently — and Tmall, McDonald said that with competition in retail, as in any business category, “the client wins.”

He explained there are numerous ways Sephora angles to be the most loved beauty community. Differentiated products is a critical one. “We want to keep making beauty personal through our loyalty program, CRM and exciting initiatives,” said McDonald, as well as in-store experiences and services across all of Sephora’s channels.

McDonald noted that Sephora has fantastic longterm partnerships with many brands, and that Sephora Collection is positioned as an entry point into prestige, to excite consumers.

“Every market will choose what is appropriate,” he said, adding there are no set category breakdowns for what’s found in stores worldwide.

What moves markets in one geographic zone isn’t necessarily the same elsewhere. For example, the color cosmetics segment has been softening, although still generating growth in the U.S., while in a country like China, it’s on fire, up 30 percent to 40 percent.

He also noted that a lot of the cool indie makeup brands created in the U.S. are resonating in markets such as France and Spain.

Sephora has recently re-entered Germany, and China represents a huge opportunity for the retailer and its partners, with its sales notching 30 percent growth in 2017 and 25 percent gains this year.

“There’s some extraordinary e-commerce capabilities being developed in China,” said de Lapuente, whose mandate when joining Sephora was to take it global.

He ticked off names such as Tmall, Alibaba and JD.com. “You go to many Sephora stores in China, and everyone is paying on their mobile phones. I’m extremely optimistic about China. I’m optimistic about Southeast Asia,” said de Lapuente. “I think there are huge opportunities there.”

So, too, are Canada and the Middle East considered very promising. The executive said he believes Sephora has the potential to be in every market in the world. Today it’s in 34, with a couple opening annually.

“We’ll do it in a very steady, measured approach,” said de Lapuente. “But yes, I dream of Sephora being present in every country of the world.”

For the U.S., the aim is to double sales yet again, with growth coming from new categories, services and brands — especially in existing stores, where gains are already being registered.

“Skin care is on fire,” said McDonald, also mentioning strategies including investing in technology support and in-store client experience. “We try to differentiate fragrance.”

Sephora over the past two years gained share in the hair category — its largest growing business. “I think it really is playing to the strength of Sephora again in terms of the product differentiation,” he said. “So [we’re] really excited about building those out. That will drive productivity in stores.”

In the U.S., Sephora is opening more stores this year than ever before. “We are in the best malls in the country, but we are branching out into off-mall locations and having huge success,” continued McDonald.

The retailer just debuted its second Beauty Studio in a 2,000-square-foot location in Hoboken, N.J. “The store is crushing what we thought it would do,” he said. “We see an opportunity for 100 of those, and those are small stores penetrating very dense neighborhoods, so we can get that walk-in traffic.

“We’re really excited about the levers we’re pulling,” said McDonald. “We feel they’re healthy. They’re driving the productivity of the business. They are back to building prestige and creating demand. We are confident and absolutely on a trajectory to double the business again.”