NEW YORK — Sephora USA is out to move beyond color, skin care and fragrance.
The retailer has made a first, preemptive strike in the hotly contested hunt among specialty beauty retailers for the ideal blend of services and shopping, teaming with Klinger Advanced Aesthetics to meet consumer demand for spa treatments.
In a crowded and dynamic specialty channel, the LVMH Moët Hennessy Louis Vuitton-owned chain is making an effort to break away from a pack that includes Limited Brands’ Bath & Body Works chain and The Body Shop, which L’Oréal agreed to buy last week.
This summer Sephora will move its 4,125-square-foot store in Dallas’ NorthPark Center to what will be a nearly 5,200-square-foot location in the same mall. At roughly the same time, a Klinger Advanced Aesthetics location will be opened immediately adjacent to the new Sephora unit.
The plan is to “attach” the two stores, according to David Suliteanu, Sephora’s president and chief executive officer, who discussed the retailing and marketing union during an interview here Tuesday.
“[Spa] service at the highest levels is not our [area of] expertise,” Suliteanu acknowledged. However, he added, “With Klinger we have a partner truly dedicated to a higher level of services.”
Suliteanu said Sephora and Klinger would be “funneling clients back and forth,” saying, “It’s products and services in one place. [Customers] can shop while waiting for facials.”
When asked if the store designs will be fused, he replied that it will be obvious from the outside that the two stores are “linked.” As for the future, Suliteanu said he “would like to find a couple more locations to do this.” Suliteanu made it clear that he strongly believes in the viability of the concept.
“The leaders in the industry are looking for ways to differentiate,” said Karen Grant, senior beauty industry analyst for NPD Group, and “services have become a valuable component of differentiation.” She noted Bergdorf Goodman offers manicures just off its beauty aisles and that Macy’s West has Benefit Cosmetics brow bars in selected stores.
“Women aren’t loyal,” so if there’s a point of difference, a “holistic experience” or an “escape,” retailers stand to attract customers and expand within their existing base of operations, according to Grant, who added she expects to see more examples of retailers integrating spa services in the future.
The Klinger “prototype” is one of three major initiatives for Sephora this year, Suliteanu noted. (See sidebar for more on the Sephora-Klinger retail pairing.)
As part of a second endeavor with Klinger, Sephora plans to install skin diagnosis devices in 12 of its stores in May, a program called Skin Physical. Thirdly, like its sister chain in France did three years ago, Sephora USA has begun a customer loyalty program called Beauty Insider in 11 stores.
Meanwhile, as Sephora continues to open new locations — it expects to end this year with 144 stores, 25 more than it had at the end of 2005 — the retailer is also fine-tuning retail operations by going back and relocating and enlarging key stores. While the company does not disclose revenues, industry sources speculate the chain could approach $1 billion in sales volume by yearend.
Eight years after opening its first store in the U.S. in Manhattan’s SoHo neighborhood, the retailer contends its concept is now working outside of major urban centers. Sephora opened a store in Columbus, Ohio, 16 months ago; in Fresno, Calif., three months ago and in Nashville, Tenn. — the first Sephora in that state — a week ago.
“We ventured off the beaten path a little bit [but] the response has been tremendous, whether it’s [urban or] middle America,” said Suliteanu, who joined the company in 2000. He noted Sephora’s store in Columbus — where BBW two years ago opened a pilot C.O. Bigelow store — was beating expectations by 50 percent. He called the Nashville opening the “fourth best opening we’ve ever had.”
Suliteanu contends that Sephora’s “model as a beauty superstore” differentiates the chain from specialty players like BBW, which has opened flagship apothecary formats that carry third-party brands, and Victoria’s Secret Beauty. Contrasting the Limited concepts with Sephora, he contended that one is a mix of intimate apparel and personal care, while the other is a largely “promotional” business, saying, “I don’t think [it’s] competition; they’re different.”
And, while Suliteanu refers to the retail pairing with Klinger as a “prototype” rather than a test due to his confidence in its viability, other retailers have tried special service formats with an inadequate degree of success.
For instance, Boots in the U.K. decided in 2003 to close its 12 Wellbeing centers, which offered Botox injections, massages, makeovers and manicures; it was a rethink of a strategy that was once proclaimed as a major move into beauty and treatment services, but it ended up operating at a loss.
Still, given red-hot growth rates in areas like cosmetic, medical and Botox procedures, the notion of potentially capturing incremental business from services remains alluring to specialty chains.
BBW, a $2.5 billion company with ideas of becoming a $5 billion to $6 billion behemoth by 2010, dabbles in spa services in a couple of its flagships. But the retailer’s chief executive officer, Neil Fiske, said last year in an interview with WWD Beauty Biz that he believes in order to do it right, BBW would have to either “find a partner to help us or learn it ourselves.”
In Sephora’s case, it was the former.
For Sephora and Klinger’s Skin Physical diagnostic device in 12 Sephora stores, Klinger developed the hardware and software, working with Johns Hopkins Medicine to certify the “accuracy, safety and efficacy” of the device, said Suliteanu. A technician will operate the apparatus, whose probes and printouts are intended to measure a range of skin “needs,” including elasticity, hydration and UV damage.
“Beauty is measurable, especially in skin care,” said Suliteanu, who added the machine will aid in problem-solution selling. “Results are driving the skin care category,” said Suliteanu, “and science is about results.”
The Beauty Insider loyalty program is designed to allow the retailer “to get in touch with [customers] we know are in our stores,” said Suliteanu. He added that while Sephora communicates well with online shoppers via e-mail, the goal is to develop a rapport with brick-and-mortar shoppers.
The 11 stores participating in Beauty Insider are located in the Chicago and Dallas markets. After two years of consumer research, kiosks were placed in the stores last month allowing customers to register and receive a loyalty card.
Sephora collects data like eye color, hair color, birth dates and product preferences. “We have a feeling we have a big, loyal consumer base, but we don’t have any numbers,” said Suliteanu. Participants are e-mailed twice monthly, and the program promises “perks, parties [and] presents,” including samples with each purchase, a birthday gift and shopping events. A key driver is the sampling, noted Betsy Olum, the retailer’s senior vice president of marketing.
Looking ahead, Suliteanu said he sees an acceleration in the rate of store openings. After averaging 10 openings a year from 2002 through 2004 — and opening 25 stores last year — he said 25 to 30 stores are planned for this year in markets like Rogers, Ark.; Denver; Santa Barbara, Calif.; Kansas City, and Birmingham, Ala.
“I see 30 stores a year for at least the next five to seven years,” he said.
Suliteanu noted Sephora is currently experiencing its sixth consecutive year of comparative store growth of at least 20 percent and that “a number of stores are outgrowing [their current space] and being relocated.”
While the size of individual locations varies greatly, Sephora operates stores that are generally 4,200 to 4,500 square feet. With store openings, moves and renovations, that number is surpassing 5,000 square feet.
Suliteanu cited the retailer’s South Coast Plaza store, which was moved in November, resulting in a 3,000-square-foot jump in size to about 7,700 square feet. “We’ll do that with key stores across the country,” said Suliteanu, adding that the store in Tyson’s Corner, Va., is slated to be relocated.
He pointed to the retailer’s 2,800-square-foot Ansonia store on the Upper West Side of Manhattan as a possible target for a move or revamp. There are eight stores in Manhattan today, and Suliteanu would like to open one or two stores a year here in the next three years. Some New York locations feature Anastasia Beverly Hills brow bars.
In Canada, the retailer operates its e-commerce site and two locations in Toronto. One or two more store openings are planned for Toronto this year.
Given the consolidation that’s taken place in the U.S. department store sector, Suliteanu said he believes Sephora may see an effect only in markets in which department stores are closing.
In its infancy in the U.S., Sephora’s penchant for small, hip brands initially attracted many customers under 25 years old, according to Suliteanu. Now “we attract women of all ages, three generations of women — daughter, mother and grandmother — all shopping with different objectives.”
No “wholesale changes” to the chain’s product assortment have taken place in the last two years, Suliteanu said, adding the retailer has been “selectively adding” key launches like Kimora Lee Simmons’ color cosmetics line, the Carol’s Daughter brand, Klinger’s Cosmedicine treatment line, Bare Escentuals and Fusion Beauty.