I subscribe to The Business of Fashion daily email news. While I don't fancy myself a fashionista, or anything close to it I do appreciate looking at beautiful clothes and somewhat keeping up with what is trending. The Business of Fashion articles also have some interesting tidbits about the goings-on behind the fashion world and related industries, and I think it's interesting even if you are simply interested in business in general.
Ok, so back to it...the following article caught my eye the other day, because so many of us shop at Sephora and often wonder why they carry certain brands and what happened to others?? Read on if you'd like to know more!! Original article link HERE.
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Inside Sephora's Branded Beauty Strategy
By Lauren Sherman, 24 September 2013
Sephora has changed the way women shop for cosmetics, giving traditional department store counters their first real competition in over 50 years. Now, teaming up with Marc Jacobs to launch an ambitious new colour cosmetics collection called Marc Jacobs Beauty, the retailer is venturing into a new waters and creating new synergies within the LVMH group, which owns both companies.
NEW YORK, United States — In the year leading up to the August 9th launch of Marc Jacobs Beauty, developed in collaboration with beauty retailer Sephora, the lauded American designer was generous with the press. Lengthy profiles appeared in outlets from New York magazine toWomen’s Wear Daily, in which Jacobs praised the line, declaring that he was “surprised by how delighted I am with the results.” The collection of shiny lip vinyls, gel eyeliners and high-gloss nail polishes — comprising 122 skus (stock-keeping units) in total — was an instant hit with beauty magazine editors, offering the just right mix of compelling back story and appealing product to fill the pages of their September issues.
In contrast, Sephora was only briefly mentioned in these write-ups and the beauty retailer has declined to comment on the collaboration. That may be because Sephora Originals — the moniker under which Marc Jacobs Beauty sits — is part of a wider strategy for the company, which now operates stores in more than 30 countries and is seen as one of the LVMH group’s biggest drivers of growth.
Founded in 1969 by Dominique Mandonnaud and acquired by LVMH in 1997, Sephora’s rise is well-documented. Measured in terms of retail sales, it now commands a staggering 12 percent of the beauty market in the United States, 15 percent of the market in China and 27 percent of the market in its native France, according to Sanford C. Bernstein, a sell-side equity research firm. Bernstein says Sephora will push LVMH’s Selective Retailing division — which also includes the DFS Group — to sales of 14.7 billion euros (about $19.8 billion) by 2017, surpassing the conglomerate’s Fashion and Leather Goods division by 2018. (In 2012, Selective Retailing brought in 28 percent of LVMH sales, or 7.9 billion euros, while the Fashion and Leather Goods division brought in 35 percent of sales, or 9.9 billion euros).
Sephora’s ascent has a great deal to do with its unique approach to merchandising. Formatted like an apothecary but furnished like a nightclub, the chain has become known as a low-pressure, consumer-empowering alternative to traditional department store counters. At Sephora, customers can get their hands on high-end products without going through the rigid interactions that characterise beauty counters. The store’s fluid layout allows shoppers to hop from brand to brand, product to product, and test them out at their leisure. Makeup tutorials are available, but it’s on a opt-in basis. And critically, employees are not instructed to push one single brand.
Over the years, Sephora has also developed a reputation for championing niche lines, a segment of the market that has grown exponentially over the past decade, according to Karen Grant, global beauty industry analyst at Port Washington, NY-based market research firm NPD. “They’ve been able to take brands without a name, without a presence, and bring them to life,” Grant says, citing both Bare Essentials and Benefit (also owned by LVMH) as companies that were catapulted forward thanks to Sephora’s support. Vegan-makeup line Obsessive Compulsive Cosmetics and the argan oil-based skincare collection from model Josie Maran are two niche brands that have recently benefited from Sephora’s support.
But winning merchandising strategies and product development are two different things.
Sephora’s first foray into product development was its own private label, which currently includes over 700 skus. In 2010, the company launched Sephora Originals, a project akin to Target’s designer collaborations, except that these lines are devoid of Sephora branding. The first Originals line was created for Hello Kitty. Tarina Tarantino and Charlotte Ronson soon followed. (Tarantino’s line was discontinued at Sephora in 2012, but the accessories designer relaunched her namesake collection of lip glosses and shimmering face powders via her own e-commerce channels earlier this year.)
The Marc Jacobs collection is certainly the most high profile of the Originals projects yet and is projected to generate more than $20 million in North American sales in 2014. Crucially, it also marks the first time Sephora has tapped into parent company LVMH’s own stable of fashion brands to develop an entirely new offering.
“It’s the only way to really come into the [branded beauty] category strong,” says Mario Ortelli, senior luxury goods analyst at Sanford C. Bernstein. “I expect they will launch more lines with LVMH brands.”
For LVMH, at which synergies across brands have traditionally been limited to things like using reputation and collective buying power to negotiate better rates for media buys and retail rents, this would be an interesting move.
Marc Jacobs is already set to take the brand beyond Sephora stores, opening its own standalone beauty outpost on Bleecker Street in Manhattan’s West Village and offering select Marc Jacobs Beauty product at its existing clothing, books and accessories stores. (While the Bleecker Street boutique will be run entirely by Marc Jacobs, the product and marketing materials were produced in collaboration with Sephora — and the sales staff will receive the same training.)
Launching a standalone brand like Marc Jacobs Beauty means that slowly, but surely, Sephora is now competing directly with beauty behemoths like Estée Lauder and L’Oréal, which supply Sephora with some of its bestselling product lines, including Yves Saint Laurent and Lancôme. (“People are more willing to venture into niche brands today, but the big brands are still the big brands,” says Grant.) But as the power of department store beauty counters wanes, the big beauty conglomerates have been more and more willing to play with Sephora.
“Right now, it is not very wise not to work with [Sephora],” says Ortelli. While Estée Lauder-owned MAC Cosmetics has focused its strategy on standalone stores, the company’s Clinique and Bobbi Brown brands are major Sephora staples. And Estée Lauder’s designer lines created with Michael Kors and Tory Burch will almost certainly land on Sephora’s shelves in the near future.
But unlike at department stores, neutral territory for cosmetics brands — the more brands pay, the better space they get — Sephora’s own lines are sure to receive top placement in its stores.
For now, the new Marc Jacobs collection represents just one small part of Sephora’s future prospects: the company’s long-standing mission is to bring relentless innovation to the way consumers shop for beauty, from new product lines to easier in-store checkout systems. “Sephora is never complacent,” says Grant.
“But the business will always be focused on the retail,” concludes Ortelli.
Disclosure: LVMH is part of a consortium of investors which has a minority stake in The Business of Fashion.
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Apologies, but I'm derailing and am using this article to talk about somethings that's really been bugging me...
I can tell that Sephora has really made some strides in recent times, both in product offerings and in trying to step up their Beauty Insider reward programs. I've even placed orders in the past few months to take advantage of different weekly codes or point perks!!
However, and maybe it's just me...but I really feel like the attention has shifted a bit from the customer service. I used to get really great customer service, no matter what store I was in from the East Coast to the West and back down South. They might have been slightly annoying and a bit naggy by always asking if I wanted help, but I still consider this part of a good customer experience because I knew where they were if I needed help. Plus they were usually super nice, and many of them would recognize me and I was able to develop some great relationships.
That is, until the past year or so.
I've had one bad experience after another to the point where I have felt the need to send texts to friends and rant on Twitter to vent and let off some steam. I'm talking, like wanting to drop kick someone because they were so rude and horrible. Not really. But just saying that kinda made me feel better. It's been outrageous how I've been treated lately, and I don't understand why. Being in a customer service industry myself (plus I used to work retail), I really try to be as nice as possible when I'm shopping...so I don't think it's something that I've instigated. Has anyone else had the similar experiences lately? Do Sephora sales associates seem different than they used to??