Sephora returned to the UK in March 2023 with its first store after a nearly 15-year hiatus. What has brought the global beauty specialist back for round two and what can other retailers learn from its return?
The Retail Week team analyses five ways Sephora is set to disrupt the UK beauty market
Sephora is owned by French conglomerate Louis Vuitton Moët Hennessy (LVMH), sitting within its Selective Retailing division.
For the year ending December 31, 2022 (2022/23) revenue from the division surged 26% year on year to €14.9bn (£12.8bn) and Sephora achieved its “strongest year ever” with record sales and profits.
Sephora now spans 36 markets worldwide, with more than 3,000 points of sale and 30 ecommerce sites.
1. Beauty halls reimagined
In September 2021, Sephora acquired UK online beauty retailer Feelunique in a £132m deal, replacing its site with sephora.co.uk in October of the following year.
Sephora launched its first UK store in London’s Westfield White City in March 2023 to a crowd of more than 5,000 eager shoppers.
In its first eight weeks, the shop performed “300% better than expected”, LVMH Selective Retailing chief executive Chris de Lapuente told World Retail Congress in April.
In a shift from the traditional beauty hall, which is arranged by brand, Sephora stores are arranged by product category, allowing customers to seamlessly move between brands when browsing.
This breaks down any perceived barriers between mass-market and premium brands, making the in-store experience less intimidating than the beauty halls of many department stores.
The central hub in the White City store allows customers to choose from a selection of beauty services and acts as an anchor.
Expect to see other retailers ripping up the rulebook when it comes to beauty hall concepts, as well as upping their investment over the next few years.
Ahead of the curve is Frasers Group, which through its Flannels fascia launched beauty changing rooms – a space for customers to try out products alone in a closed space – and its Beauty Bar, which is dedicated to services.
2. Building partnerships
Internationally, Sephora has two main partnerships with German retailer Zalando and US department store chain Kohl’s.
Sephora commenced its partnership with Kohl’s in 2020, with the initial aim to reach 850 stores by 2023.
Following the success of this implementation, Sephora will now expand into all of Kohl’s 1,100 locations.
As a part of the expansion, the department store chain will open 50 smaller-format Sephora shops by the end of 2023, with a plan to roll these out to the remainder of the chain by 2025.
Kohl’s projects that its Sephora business will grow to $2bn (£1.6bn) in annual sales by 2025.
Sephora kicked off its partnership with Zalando in 2021, becoming its strategic partner for prestige beauty.
Zalando said the long-term partnership “reflects a mutual passion for innovation and providing a pioneering customer experience”.
Initially launched in Zalando’s home of Germany, expansion has followed with Italy in 2022 and more brands being added.
A UK store partnership could be beneficial for Sephora, offering a faster expansion route without having to incur the costs of standalone retail.
3. Driving loyalty
Sephora operates a simple loyalty scheme in the UK to encourage repeat spend.
Members of the Sephora Rewards programme can access 10% off two of their chosen brands with every purchase, as well as £5 off an order once they spend £75.
Sephora’s Stateside loyalty offer gives some clues as to how the retailer could build its scheme in the UK once it gathers enough insight from its website and stores.
Loyalty members in the US and Canada can become part of Sephora’s Beauty Insider programme. This allows them to gain one point for every $1 spent, unlocking several benefits depending on the customer tier they fall into – these can include end-of-year discounts, subscription delivery and access to exclusive events.
This more robust scheme sees a customer’s annual spend trigger three different membership tiers: Insider, VIB (Very Important Beauty) and Rouge.
While Insider is free to join, members need to spend more than $1,000 (£784) to unlock Rouge tier status, gaining first access to products as well as other rewards.
If Sephora wishes to take on rival schemes such as Boots Advantage Card or Space NK’s NDulge loyalty proposition (both points-per-pound-spent schemes), it may need to up the ante when it comes to its UK offer.
4. Future thinking
Sephora has been experimenting internationally with a ‘ store of the future’ in Asia.
The first of its kind opened at Raffles City shopping centre, Singapore, in September 2022. Measuring more than 4,500 sq ft, the store houses a variety of concepts, which the retailer uses as a testing ground for other locations.
Customers can attend classes at its Beauty School, bookable via a mobile app, and build a personalised skincare regime drawing upon expert advice in its Skincare Lounge.
Its mobile checkout allows customers to find a beauty adviser and pay from anywhere in the store.
Sephora opened its second store of the future in Shanghai in June 2023.
The store uses RFID sensors on panels and price tags to educate consumers on various product ingredients and provide access to customer reviews.
Shanghai houses a purpose-built Beauty Live Studio to bring together Sephora’s beauty community for exclusive events and masterclasses.
Given that Sephora boasts 4.37 million followers on Tmall, social commerce is an area the retailer is likely to invest in.
5. Unlocking revenue growth
Feelunique recorded revenues of £78.7m for the nine-month period ending December 31, 2021 (2021/22).
Having announced a second UK store opening at Westfield Stratford City (due to open in late 2023), Sephora will be keen to rapidly grow its revenues in the UK.
A differentiated product range is one of the ways it will stand out against its competitors.
With exclusive brands such as Tarte and Vegamour, as well as its own range Sephora Collection, the retailer offers customers both the newest names and its purse-friendly own-brand offer.
The Sephora Community – accessed through its website – allows users to participate in events, join test-and-review panels and join groups where users can share advice on skin concerns.
This unique part of its proposition enhances customer experience and is likely to grow engagement.
With a second UK store opening later this year, a compelling format and a differentiated product range, the Retail Week analyst team forecasts Sephora’s UK revenues will easily surpass £200m over the next few years.
No comments yet