Following its recent decision to enter Brazil, Sephora is taking a second step into Latin America with plans to open stores in Mexico.

This story first appeared in the October 29, 2010 issue of WWD. Subscribe Today.

The San Francisco-based Sephora Americas is teaming up in a joint venture with Grupo Axo of Mexico City. David Suliteanu, president and chief executive officer of Sephora Americas, said the Mexican venture provides “an opportunity for us to broaden our reach.”

He noted that the Mexican beauty market bears some resemblance to the U.S. 12 years ago when Sephora arrived in New York from France. There is a large population in Mexico with a sizable middle and upper-middle class, a significant mall-based department store infrastructure and no specialty store service aspect to speak of, Suliteanu said. The final point was expanded upon by Alberto Fasja, co-president of Grupo Axo, during a phone interview from Mexico City. Many Mexican consumers, particularly young women, will be more comfortable shopping in the assisted self-service specialty store environment where all the brands are presented together with an absence of the pressure selling tactics often encountered in department stores, he said.

The Mexican beauty market includes mass and class segments, plus a large direct-selling market, adding up to an estimated $500 million in annual retail sales. “It feels like a natural place to do business,” observed Suliteanu, who added that the American chain now gets a lot of cross-border traffic from Mexico in its southern stores.

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He said Sephora aims to open the first two stores in Mexico City late next year, then follow up with more openings annually in following years, “governed by the speed with which we learn to understand the consumer.” Suliteanu added that, a big generator of the chain’s business, will probably enter Mexico about the same time. And the merchandise mix will be different.

In the U.S., Sephora’s assortment is led by color cosmetics. In Mexico, it will lean heavily toward fragrance. Moreover, the top tier of brands will be a select list of European-oriented international labels often found in Europe, including Dior, Clinique and Lancôme. The second tier will consist of an American subset, and the third tier will contain the Sephora private label collection, Suliteanu said.

Grupo Axo distributes and retails 10 top fashion and shoe brands, ranging from Marc Jacobs and Coach to Guess and Thomas Pink to Payless. “[Grupo Axo] will have a hands-on approach; we are the largest multibrand company in Mexico,” said Andres Gomez, co-president, adding that the company operates 100 stores. “We have the best spaces in the malls.”

According to the company, Sephora will lend its global beauty expertise to the venture, while Grupo Axo will weigh in with its experience in developing prestige brands in Mexico, leveraging its knowledge of local markets and its grasp of real estate, human resources, information technology, finance, retail operations, marketing and public relations. The venture will be operated by a management committee, run by a yet-to-be-hired general manager, that will report to both Sephora and Grupo Axo.

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