Beauty Retail Giants Are Taking Amazon On...and Winning

In an extremely challenged U.S. retail market, how are stores successfully competing with ecommerce, specifically retail behemoth Amazon and wildly popular celebrity brands like Colourpop? According to Calvin McDonald, the CEO of Sephora, it is due to the experiential services their stores provide.Sephora competes with department stores (whose monobrand counter displays discourage selling across brands) and Ulta, a very comparable beauty superstore. Both Sephora and Ulta are building their broad appeal around millennials who view beauty shopping as a luxurious experience.

"Ulta and Sephora provide a place to play," said Piper Jaffray analyst Stephanie Wissink, adding that there's an "intangible benefit" of being in the store.

Ulta is an all-encompassing mega store for any and all beauty needs. Unlike Sephora, Ulta also supplies what would be considered “low-end”products often found in the drugstore beauty aisle. As comprehensive as Ulta’s assortment can be, so many options at many different price points can be confusing, especially if you are not aided by a sales associate. Ulta differentiates itself from Sephora with more of a reliance on price promotions via coupons and various promotional discounts in addition to a points-based loyalty program that is rivaling Starbucks for active members despite only selling to half the population.

Owned by luxury conglomerate LVMH, Sephora defines itself with meticulous curation of prestige and exclusive labels, supported with emmersive customer programs that are designed to distinguish itself from both brick-an-mortar competitors and Amazon. Beauty brands reward Sephora’s price integrity by keeping product availability fairly limitedSephora_CEO_Calvin_McDonald_Store.png

When first approaching Sephora’s signature black and white striped entryway shoppers are immediately greeted by an associate who will direct them to the section they want to explore.

"There's not a 'floor'—there's a 'stage,'" a five-year Sephora employee said. "We wear 'costumes.' There are also 'worlds,' which describes different sections of the store, including Color and Skincare."

If Sephora’s departments are “worlds,” then their associates are the ambassadors.  Sephora’s team of associates are there to inform and guide visitors to a counter attired with high chairs, mirrors and an assortment of application tools.  The shopper guides the need and associates teach the correct application from the ample supply of testers while (of course) suggesting multiple complementary products.

Like fashion, it’s very important for customers to stay on top of make up trends. Beauty classes focusing on different application techniques are frequently offered. These classes often inspire participants to purchase the products used in the demonstrations. To Sephora and its patrons, make up is an art form and you are the canvas.

Sephora hasn’t left online customers behind. “Sephora Virtual Artist” is an update to its app that allows users to use augmented reality (AR) to test different looks. With the fun of Snapchat filters and the practicality of being in store, Sephora ensures their clientele can continue their experience with the store without physically being in it.

“Play!” by Sephora is the retailer’s latest offering. This beauty subscription box is delivered to your front door on a monthly basis. While each box includes samples, coupons and how-to booklets it’s “Play Dates” that welcome subscribers back to the store as a community of clients to share their experiences and engage with eachother that makes the Sephora subscription program unique.

"Retailers connect clients with product,” Sephora CEO, Calvin McDonald, said recently. “We really focus on building that emotional connection with the client."

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More on this topic:

How Sephora is Thriving Amid a Retail Crisis - New York Times (tiered subscription model)

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