What Retailers Can Learn From Sephora's Success

Sephora Studio.jpg

In a retail environment where many retailers are struggling Sephora is leading the way. Prestige beauty sales in the US rose by 6% to reach $17.7 B in 2017.  This is higher than the 4.2% increase in retail sales in the US in 2017.  Sephora’s focus on personalization and experiences are among the many reasons it is the number one speciality beauty retailer in the world. 

Personalization

The power of personalization is often discussed but many organizations struggle to get it right.  Sephora, on the other hand is a leader in this area.  At Sephora, personalization is about giving customers products and experiences that are tailored made for them.  In the beauty industry this could not be more important because the makeup that is best for you is not the makeup that is best for someone else.  

Sephora’s innovative mobile app contains a Virtual Artist. The Virtual Artist uses facial recognition technology to allow customers to digitally try on products.  Customers scan their face using the app.  Then they can try on different shades of makeup using the app. If a customer likes their simulated look they can quickly and easily buy the products through the app.  Within the app customers can also take makeup tutorials.  For example, if a customer takes a contouring tutorial the app will overlay the contouring look on the customer’s face digitally.  It is an excellent example of personalization at an individual level.  In the first four weeks after the app was launched in 2016, Sephora had over 2 million unique visitors.

Additionally, Sephora uses digital tools such as its Colour IQ service to more accurately determine what products to use on a customer’s skin.  The handheld device is used by a Sephora beauty advisor to take a picture of the customer’s face.  Then the device determines the perfect lip, foundation and concealer matches for the customer.  Clearly ahead of its time Sephora launched Colour IQ back in 2012. 

Some of these services at first glance may not seem like they are out of the ordinary.  But how many retailers can say that they can provide a custom and tailored experience each time a customer walks into their store? Or when the customer is on their own at home?  You cannot have better customer service than a service that is made just for you.  The level of service that Sephora provides is usually reserved for customers of end stores where you can get a personal shopper to provide you with a very customized look.  Sephora has done a phenomenal job of serving a mass audience with a personalized touch.  Even more impressive is the fact that a number of its personalized services are offered to customers free of charge (i.e. the Virtual Assistant).

Experiences

Last year Sephora opened its first small format store called Sephora Studio in Boston. It is a 2,000 sq. ft store its smallest store format in the US. The typical size of a Sephora store is 5,500 sq. ft. Customers can order products in-store and receive free standard shipping or reduced next day shipping.  Customers in the Boston area can make orders via the Sephora app and pick up the product the same day at the Sephora Prudential Center location.  It is one of the first Sephora stores to offer same day pick up of online orders. Employees can also retrieve Sephora.com ratings for customers for any product.  Services offered in this store format include skin consultations, custom makeovers and facials.  The store does not have cash registers.  Instead employees check out customer purchases using their phones.

72% of millennials are more likely to spend money on experiences than on material possessions.  The experiences that Sephora offers provide insight into the types of experiences that are resonating with customers. With cashier free stores Sephora appears to be taking a page from Apple’s retail store playbook. Sephora is effectively leveraging technology to provide a better customer experience and differentiate itself from competitors. 

Check in weekly for articles on digital transformation and customer experience innovation to learn what strategies businesses are using to accelerate their sales growth.

Sources

https://www.npd.com/wps/portal/npd/us/news/press-releases/2018/us-prestige-beauty-industry-sales-rise-6-percent-in-2017-reports-the-npd-group/

https://www.cnbc.com/2018/01/12/us-retail-sales-rise-while-core-sales-are-revised-sharply-higher.html

https://digiday.com/marketing/color-iq-sephoras-shade-matching-skin-care-tool-boosts-brand-loyalty/

https://www.businesswire.com/news/home/20170721005154/en/SEPHORA-Pioneers-New-Retail-Innovation-Launch-Small-Format

https://www.fastcompany.com/40442598/sephora-is-experimenting-with-a-boutique-format-to-prepare-for-the-retail-apocalypse

https://www.cnbc.com/2017/07/21/sephora-rolls-out-smaller-store-concept-with-high-tech-beauty-upgrades.html

https://www.cnbc.com/2016/05/05/millennials-are-prioritizing-experiences-over-stuff.html

http://business.financialpost.com/news/retail-marketing/embrace-digital-technology-or-become-irrelevant-canadian-retailers-told-by-sephora-ceo

Tricia McKinnon