What Retailers Can Learn From Sephora's Success
In a retail environment where many retailers are struggling Sephora is leading the way. LVMH reported that in 2023 Sephora had “achieved another historic year, both in terms of sales and profit, continuing to gain market share through its distinctive, innovative range of products and services.” Companies like Sephora make retail look easy even though it’s not. Sephora was founded back in 1970 which means that for over 50 years it has stayed relevant, which is not easy by any means especially with competitors like Ulta Beauty knocking on your door.
If you have ever wondered what’s behind the happy customers and packed stores it’s several factors including a focus on personalization, innovation and a loyalty program that is so good that it has over 30 million members. All of these factors and several more make Sephora one of the most successful retailers in the world.
1. Personalization at the next level. The power of personalization is often discussed but many retailers 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 or skincare that is best for you is not the makeup or skincare 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 try on products digitally. 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 without even leaving 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. This is an excellent example of personalization at an individual level.
Additionally, Sephora uses digital tools such as its Colour IQ technology to more accurately determine what products to use on a customer’s skin. A handheld device embedded with the technology 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 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 high-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 personal touch. Even more impressive is the fact that a number of Sephora’s personalized services are offered to customers free of charge (i.e. the Virtual Artist or Colour IQ).
“Stores are a powerful way to bring experiences to life for people,” says Sephora’s former EVP of Omni Retail Mary Beth Laughton. “People are longing for personal connection,” said Laughton. “When they come into one of our stores, that's when they can interact with our Beauty Advisors. They can get this really personal, amazing advice.” 75% of customers have their first interaction with Sephora inside one of the retailer’s stores.
The level of personalization Sephora provides is seen not only with makeup applications but in many other areas. Sephora has been known for sending customers discount shopping codes based on their individual behaviour. If a customer hasn’t purchased a particular product in a long time they may receive a code to purchase that product at a discount. Sephora also notifies customers when a product is back in stock prompting the customer to make a repeat purchase. Other notifications users of Sephora’s app may receive include: reminders for customers to pick up their free gift on their birthday, location based mobile notifications that tell customers if a new product is now available but only in a store near them as well as notifications about events as a customer approaches a store where the event is taking place. All of these details make a big difference with customers. They make customers feel like Sephora cares about them and what they want and need. Sephora’s personalized touch has not gone unnoticed, it landed the top spot on Sailthru’s Retail Personalization Index in 2022.
2. A culture of giving back. One of the most effective ways to build a loyal community of customers and if you are lucky fans, is to create a culture of giving back. One of the keys to lululemon’s success over the past 20 years is offering yoga and fitness classes to consumers free of charge. Doing this enabled lululemon to gain much broader exposure for its merchandise when it first started out. lululemon gifts instructors merchandise and customers discover the products during classes. Apple also offers free classes on a wide variety of subjects.
Sephora knows that great marketing starts with great service. From skin care classes, to brow shaping classes to contouring classes Sephora is in tune with its customer base. For example, Sephora has a series of free makeup classes for customers that identify as non-binary and transgender. Human nature is centered on the notion of reciprocity, you do something for me and I will do something for you. All of the best brands know this.
3. A best in class loyalty program. Sephora is known as having one of the best if not the best loyalty program in retail. Sephora’s Beauty Insider loyalty program boasts over 30 million members for a reason. It is not your boring old program with only a few benefits. Members have a wide variety of ways for redeeming points. Some of these benefits include receiving samples from top brands, the ability to have a one-on-one meeting with the founder of a brand, the ability to be first in line for new product launches and free shipping. In the past Sephora has sweetened the deal by allowing members to participate in sweepstakes. Members can also use points to make a donation to various charities.
In 2019 a Sephora Beauty Insider sweepstakes winner won $1 million. Now that doesn’t sound like your average frequent flyer program. "We also know rewards that provide greater emotional and memorable experiences are the most meaningful for our clients, and we want to continue to deliver personalized experiences where our clients can choose what works best for their needs. The emotional component of loyalty is a vital driver of our loyalty program and what really matters most to our clients," said Allegra Stanley Krishnan, former vice president and general manager of loyalty at Sephora.
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4. A history of innovation. Many of the personalized experiences that Sephora offers are due to the retailer’s focus on innovation. It would have been easy for Sephora to stick with its Beauty Advisors making calls on which products customers should apply based on their deep training and expertise. Instead Sephora decided that it was important to provide its employees with technology in the form of Sephora’s proprietary Colour IQ, Skincare IQ and Fragrance IQ that gives Beauty Advisors a more scientific approach to the best product fit for each and every customer.
“Consumers are looking for retail stores to be creative spaces. They are looking for experiences. Digital is a critical element in retail — however, it is not just for the sake of adding new, cool technology. Our intention is to help our clients,” said Bridget Dolan, Sephora’s former SVP of omni experience & innovation.
As anyone who has ever shopped for makeup knows even someone’s expert eye can get the shade of concealer wrong. And not only has Sephora invested in elevating the in-store experience but also in augmented reality and facial recognition technology which powers the digital try on makeup applicator in Sephora’s mobile app.
5. The right products. What would Sephora be if it didn’t have the best products on the market? At Sephora’s core it has the products customers are looking for. And it also tries to stay ahead of new trends. For example, in 2018 Sephora launched Clean at Sephora. The goal is to make Sephora the place to go to for non-toxic beauty products. Clean at Sephora brands do not include ingredients such as sulfates, parabens or formaldehyde. Sephora’s North American president, Artemis Patrick, says that: "many [customers] are looking to shop brands and products that are 'free of' and Sephora is responding to help them do that, easily and conveniently in-store, online, and on mobile." All brands within the program can be identified by a "Clean at Sephora" seal.
Sephora like Ulta Beauty tries to have exclusive products. When Rihanna launched Fenty Beauty it was launched exclusively at Sephora. That launch was a huge success and generated millions of dollars in sales for Sephora and attracted new customers in the process as they tried to get their hands on a hot product. “Exclusive and limited distribution brands and products have always been part of our strategy. We do believe that the client does come to Sephora to find the latest, hottest, newest trends," said Patrick. Sephora was also the first retailer to sign up for the “15 Percent Pledge” to sell more Black owned brands.