How Sephora Revolutionized Makeup Consumption | WSJ The Economics Of

Summary

This video explores Sephora's revolutionary impact on the beauty industry, highlighting its shift from traditional sales models to a self-service approach where customers can freely test products. Founded in France, Sephora transformed makeup retail by fostering inclusivity and product diversity. Owned by LVMH, Sephora carries over 250 brands, including exclusives like Fenty Beauty. The brand's Beauty Insider program enhances customer loyalty while its efforts in racial inclusivity and skin-tone matching technology appeal to diverse audiences. Sephora's continued growth includes partnerships like Kohl’s, solidifying its status as a global beauty leader.

Takeaways

• 💄 Sephora revolutionized the luxury makeup industry by offering a self-service shopping experience, letting customers test products freely.
• 🛍️ Prior to Sephora, most Americans bought luxury makeup through brand-specific sales representatives in department stores.
• 🌍 Today, Sephora employs over 36,000 people in 2,700 stores across 35 countries, carrying more than 250 beauty brands.
• 💼 Sephora’s success stems from adopting an assisted self-service model where customers can test products but still seek help from beauty advisors.
• 🛒 Sephora's stores display makeup products side by side, while other products like fragrance and skincare are organized by category.
• 💎 Sephora was acquired by luxury conglomerate LVMH in 1997, giving it access to a wide range of beauty brands, including its own exclusive ones.
• 🎨 One of Sephora's exclusive brands is Fenty Beauty by Rihanna, which has a significant presence in its stores.
• 📊 Sephora's Beauty Insider loyalty program has over 25 million members, with tiered rewards based on annual spending.
• 🌈 The retailer prioritizes inclusivity by featuring black-owned brands and expanding product lines for different ethnicities and skin tones.
• 🤝 Sephora is expanding its reach through a partnership with Kohl's, aiming to install 850 shops inside Kohl's stores by 2023.

Q & A

How did Sephora change the way Americans shop for luxury makeup?

Sephora transformed the luxury makeup shopping experience by allowing customers to test products freely, rather than having to rely on sales representatives to make purchases, as was common before.

What is Sephora’s assisted self-service model?

In Sephora’s assisted self-service model, customers are free to test products themselves in-store but can also seek help from beauty advisors when needed. This contrasts with the traditional service-based model where staff directly handled product sales.

What was the significance of Sephora’s acquisition by LVMH in 1997?

Sephora’s acquisition by LVMH allowed the company to quickly adapt to beauty trends and expand its brand offerings. Several beauty brands sold in Sephora are also owned by LVMH, giving the retailer a strategic advantage.

What is the Sephora Beauty Insider program, and what are its tiers?

The Sephora Beauty Insider program is a loyalty program with three tiers: Beauty Insider, VIB (Very Important Beauty Insider), and Rouge. Customers move up in tiers based on annual spending, with Rouge being the top tier for those who spend over $1000 annually.

How does Sephora use its Beauty Insider program to better understand its customers?

The Beauty Insider program allows Sephora to collect detailed data on customer purchases. This helps Sephora personalize its marketing and product recommendations for individual customers.

How does Sephora promote inclusivity in its product offerings?

Sephora promotes inclusivity by featuring a larger number of brands, including black-owned brands, and pushing brands to expand their product lines to appeal to customers of different racial and ethnic backgrounds.

What role does Sephora’s Color IQ technology play in the customer experience?

Sephora’s Color IQ technology helps customers find products that match their skin tone more accurately, enhancing their shopping experience by making it easier to select the most natural-looking products.

What is the impact of Sephora’s partnership with Kohl’s?

Sephora’s partnership with Kohl’s, which started in 2020, aims to expand Sephora’s presence by installing Sephora shops in Kohl's stores. By 2023, Sephora plans to have 850 shops, adding new customers and expanding its Beauty Insider program.

How does Sephora’s product exclusivity strategy affect its relationship with beauty brands?

Sephora’s product exclusivity strengthens its customer loyalty, but it creates tension with beauty brands. Brands rely on Sephora for sales growth, but Sephora’s own exclusive products compete for shelf space, creating a competitive dynamic.

How has Sephora leveraged social media to increase brand engagement?

Sephora has benefited from social media platforms like Instagram and TikTok, where users post haul videos showing the products they buy at Sephora, creating word-of-mouth marketing and increasing brand engagement.