NEW DELHI, India — After a slow start, Sephora has changed its game in the Indian market.
This story first appeared in the October 31, 2014 issue of WWD. Subscribe Today.
“It has been a huge re-beginning in India,” Afif Haddar, general manager of Sephora in Southeast Asia, said. “One of the big changes is that our new partner has an enormous understanding of retail in India. We want it to be a successful store and an unbelievable shopping destination.”
Having changed partners in December 2013, a little more than a year after its first launch in India, the French perfumery chain is on the growth track. A new 5,000-square-foot flagship opened in May in Ambience mall, Gurgaon, and there are now a total of three Sephora stores in India, all in the New Delhi area.
Sephora first opened in January 2013 in India with a franchise agreement with Indian company Genesis Luxury. The first store, at Select City Walk mall in New Delhi, brought more than a dozen brands into India for the first time and gave existing brands such as Estée Lauder, Christian Dior, Clinique and others an additional point of sale in a market where real estate is at a premium.
There was only one Sephora store in India before the new partnership was signed.
The new flagship has several features that a lot of beauty retail in India lacks — it’s huge sparkling space and dedication to beauty; a varied collection including fragrance, makeup and cosmetics all in one store, and its location, in malls close to large, affluent customer bases, especially in Select City Walk, Saket and Ambience mall, Gurgaon.
“We plan on opening five to seven stores a year,” said Timmy Sarna, managing director and director, DLF Brands, the new Indian partner for Sephora, said. “But within these formats we have a lot that is happening. We will launch several new brands for the Indian market at these stores in the coming months,” he said.
DLF Brands is a subsidiary of DLF Ltd., one of India’s largest real estate companies, which owns malls and other retail spaces, as well as the only luxury mall in New Delhi, Emporio. The company also has enormous strength in both residential and office development. Their retail space is growing as well, with a total area of leased operational shopping mall space of about 1.4 million square feet, which is projected to triple over the next two years.
Although beauty analysts have been ambivalent about Sephora’s financial success in the Indian beauty market, given the history of failed perfumeries in the country in earlier years, Sarna is upbeat about its prospects.
He discounts the view that Sephora in India may be overshadowed by its lackluster performance in the first year — with empty testers, glaring holes in display units and beauty advisers who still needed training — and that, like Genesis, DLF Brands has experience with fashion, but not beauty retailing. There are other challenges that Sephora is up against in India, including a long process of product registration. In addition, sales of premium beauty have been relatively slow over the last two years, as the Indian economy has faltered.
Sarna remarked that lack of experience in beauty retail was not a game changer: “We have extensive experience with fashion and global brands and that is far more difficult — it means being able to handle 15,000 sku’s for one store,” he said. DLF Brands also has partnerships with Forever 21, Accesorize and Sunglass Hut and revenue has grown at more than 15 percent a year. The company has had a foray in luxury, bringing Giorgio Armani to the Indian market, but then shifted away from the category.
He also appeared unfazed about the history of failed perfumeries in India and the challenge of selling premium brands that are not well-known in the Indian market.
“To be honest, we never went into how the beauty market was doing before we signed up with Sephora, but I can tell you that it’s going well for us. China has 119 Sephora stores. I believe we should have 50 Sephora stores in India in the next five to seven years. That is a good business for us,” he said.
Sephora is convinced about the promise of the Indian market as well.
“The Indian customer is crazy about makeup,” Haddar said. “Customers in India appear to be happy with the choice of skin-care brands, but they want to experiment with new makeup brands. Today, in India, more than 65 percent of the business is [done in] makeup. The best way to capture the trend is to have more exclusive makeup brands, to bring in offers they cannot get anywhere else.”
Haddar said that one of the lessons of the last two years in India has been to have a stronger focus on training. “Training may not be so crucial for other retailers, but we have 70 different brands in our stores in India, and we don’t have separate beauty advisers for each,” said Haddar. “The key challenge is to transfer the Sephora DNA to India, so that a customer will feel the same sense as in Moscow, Europe or the U.S.”
Sephora in India is expected to learn other lessons from the growth across Asia as well. “Today we are successful in Southeast Asia — we bring in the most-successful brands in the U.S. but also add many others,” said Haddar. “For instance, one of the most successful brands in Singapore is SK-II. You will not find that in Sephora stores in Europe. There are many other successful brands from Asia — from Japan and Korea — that customers want. In India, there is an interest in more brands, such as Marc Jacobs for men, which we will be launching soon.”
Brands like Benefit and Stila are relatively new to the Indian beauty market, having launched in the country for the first time in 2012, and are relying heavily on Sephora’s growth. Jason Araujo, director of sales of Stila, said that over the last two years, the brand has tweaked, changed and steadied itself to embrace the Indian customer. “We have a huge presence in Southeast Asia, but India is really different,” he said. “The way women wear makeup, the products that are popular, the reception to our products is different. Eventually, as we learn about the market here, we may customize just for the market here.”
Although there are more than 300 sku’s from Stila at Sephora, just like in other countries, Araujo said that there are some key differences in consumer demand. The liquid eyeliner does well in India, and is the number-one seller in North America, he said, but the biggest seller in India, as in the rest of Asia, is the one-step primer.
Other trends? “Brighter colors are popular here and our metal eye shadows that people in the U.S. would shy away from do well. In Singapore and Malaysia, they’re very conservative with makeup and don’t want it to be seen. They love the browns and the grays, but here the browns and the grays don’t sell at all,” he said.
Araujo said that Asia has been opening up over the last three to four years. “We’re still going strong, still double-digit increases month after month in the U.S., but there are steeper increases in Asia,” he added, pointing out that the brand was also growing with the Sephora openings. “We’ve just launched Indonesia this year and we have new stores in Malaysia. Even in Singapore, the sales match up with our store in SoHo [New York], so the volumes have begun to match door by door,” he said.
Phoebe Simmonds, Benefit’s Southeast Asia account manager, noticed the differences as well. “We’re a global brand, but we’ve definitely noticed that some products work better in the Indian market than in others, for example, our tints do better here than anywhere else,” she said. “And the mascara is a big seller here.”
Simmonds pointed to Asia overall as a fast-growth market as well. “Southeast Asia is a very exciting market for us, it has huge potential. In Thailand, Singapore and Malaysia we went in before Sephora, with separate boutiques. India is one of the first markets in this region where we have entered the market with Sephora.”