Sephora is global, but its consumers are local. How does the world’s largest prestige omnichannel beauty retailer successfully leverage this dichotomy?
The triumvirate of pioneering female presidents – Artemis Patrick helms North America, Alia Gogi oversees Asia and Sylvie Moreau in charge of Europe and the Middle East – spoke about the strategy with Jenny B. Fine, Beauty Inc editor-in-chief and beauty editor-in-chief at WWD.
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Collectively, the three executives of the LVMH Moët Hennessy Louis Vuitton retailer oversee 52,000 employees and approximately 3,000 points of sale in 34 markets.
In North America, Sephora is posting double-digit revenue growth, with gains in both e-commerce and physical stores. Patrick called that “pretty amazing considering the base we were dealing with over the last few years.”
The retailer expects to add locations in 100 more Kohl’s stores this month and generate $2 billion in sales next year, while distribution would be handled entirely by Kohl’s. She said this would unlock “incredible marketing opportunities.”
More men and families shop at Kohl’s at Sephora than at traditional Sephora stores. Kohl’s also does a good job of engaging consumers during key shopping periods like Back to School, which is a plus for Sephora.
Meanwhile, it continues to invest in e-commerce, for example through user-generated content and frictionless checkout.
“But the biggest project we’re going to embark on… is the complete revamp of every single store in our distribution network, across the US and Canada,” said Patrick, explaining that they will have new furnishings and layouts.
The process will begin this fall and will take at least five to seven years.
“This is not a Sephora design project; it is a merchandising-driven project,” says Patrick. “It’s a lot: how does the consumer shop? How do they navigate? How are the products classified?”
Internally this is called the perfect future footprint.
“It is the largest capital project Sephora has ever undertaken globally,” said Patrick of the more than half a billion dollar company.
Gogi also sees strong gains in her zone.
“For Asia, we had very robust growth outside of China last year, particularly in Southeast Asian markets, growing in some cases to [seven times] market growth,” she said.
The retailer’s turnover in China increased last year, although the country’s recovery is taking longer than expected
“What it forces all brands to do, including Sephora, is to be very focused on our strategies,” Gogi says, explaining that the retailer is doubling down on its “differentiated portfolio strategy.”
Curation is the key here. Over the past two years, Sephora has hosted well-received launches in China for the likes of Anastasia Beverly Hills, Hourglass and Tatcha. Drunk Elephant and Fenty are launching this month.
“The Chinese consumer really appreciates localization,” says Gogi.
Fenty, for example, praises inclusivity while talking about Chinese skin color matching.
Meanwhile, Sephora is working with homegrown brands that specifically target Chinese consumers.
On the retail front, Sephora will launch its ‘Stores of the Future’ in Shanghai and Singapore.
“These are testing labs to drive a lot of experiential retail,” Gogi said. “The reality is that this doesn’t just apply to China; experiential retail is the future.”
Addressing the beauty brand community at large, she advised: “Be patient. One of the things about China is that if it comes back, you have to be agile – that will be even more important – and it will come back very quickly.”
However, Gogi believes the next one to two years will remain a challenge there.
In Europe and the Middle East, Sephora has posted annual profits of more than 20 percent over the past two years. According to Moreau, Sephora is performing two to six times better than market growth.
What has been crucial to Sephora’s disproportionate profits is the idea “that the store is our first medium,” said Moreau, who called it “the heart and soul of the retailer.”
In Europe, Sephora has renovated stores and opened stores – 15 last year, including the reopening of the iconic Champs-Élysées flagship.
To ensure that beauty remains top-of-mind for and celebrated by consumers, Sephora leverages its facades and exteriors during key periods, such as Ramadan. It meets consumers where they are, like at the beach in the summer. A new retail concept called Sephora Playa is popping up in seaside resorts such as Málaga, Moreau said.
The retailer offers its consumers a mix of global and local experiences.
“You’ll see similarities in every store around the world,” Patrick said. That includes implementing Sephora’s brand codes. Yet the stores are also specific to a place, in terms of how they are organized based on the penetration of the product categories.
Differentiation has always been paramount at Sephora from an overarching brand perspective, and brand exclusivity is important.
“It’s a big part of our DNA,” says Patrick. “We say we’re in the kitchen – and we really mean it. It’s not just the traders, it applies to the entire supply chain.
“The consumer is asking that of us,” she added. “They are looking for what is hot, new and what is trending. At the same time, it is our job to make the brands we already have successful. In return, we do ask for differentiation.”
To make things easier for its nearly 500 brands, Sephora has created global merchandising and marketing functions. But that does not mean that brands go international from day one. They need to establish and grow in their domestic market before they can expand to other markets where Sephora has a presence.
“We don’t want you growing too fast,” Patrick said. “Every brand is a snowflake. Each plan is tailor-made for that brand.”
In terms of product categories, Gogi noted that makeup is currently recovering faster than the market in China.
“From an Asia perspective, and especially in China, makeup will become very popular, and we are happy to educate the market,” she said.
According to Moreau, body care is the fast-growing category within EME, which strives for an overarching European plan for each activation.
On a global level, it is critical for Sephora to remain a purpose-driven company.
“You have to be super authentic in who you are,” Patrick said.
She, Gogi and Moreau meet often and noticed a similar corporate culture worldwide.
“The culture is everywhere and shared very sincerely,” Moreau said.
That’s despite Sephora’s values – such as ‘lead with passion and heart’ and ‘don’t forget to dance’ – not appearing on a company poster.
“But we live with it every day,” Moreau said.
The three women understand the meaning of their leadership. For Patrick, who assumed the role of president and CEO on April 1, this marks a meaningful moment both professionally and personally, as she came to America from Iran at a young age.
“I definitely know what it feels like sometimes to feel like you don’t belong,” she said. “I feel a great sense of responsibility to continue building a culture at Sephora in North America where everyone feels like they belong and that their voice matters.”
Ninety-six percent of Sephora employees are women.
“So it’s all about equal opportunity,” Moreau said. “Fifty-fifty doesn’t work for us. Eighty percent of our leadership overall is women, diverse, and that matters.”
“When we look at our leadership, we talk about the message,” Gogi added. “We’re excited about where we’re going.”
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