Sephora, a multi-national chain of personal care and beauty products has built an empower through digital innovation and come out as the winner in the cosmetics retail space. It’s commitment towards digital has not only made it successful in the beauty space but has set an example for all brands looking to transform through technology. Here, we explore some of the digital initiatives that the company has successfully executed and how they’ve helped them create and capture value.
Sephora’s Innovation Lab
Sephora converted one of its warehouses into a lab space in 2015 which was previously used to design and test its store layouts. Today this lab is used to build and test digital solutions to enhance the shopping experience both in-store and online. The lab holds a complete model of a physical store which is used to try different ideas. Store associates provide feedback on technological experiments. While many companies have set up such i-labs, Sephora is unique in that it has maintained the physical store within the lab space to thoroughly test in-store experiences before roll-out. This helps Sephora manage it costs optimally and hence, capture value for itself through increased margins.
Sephora has created value for its customers through its products and store experiences that solve customer pain points and increase the willingness to pay. Along with the launch of the Innovation Lab came multiple digital offerings from Sephora – 1. Pocket Contour, a mobile-app feature that provided contouring tutorials based on the user’s face shape 2. Using beacons (IoT location-broadcasting device) in stores to provide personalized notifications to users as they walked past certain events, sales, services, etc. 3. Sephora Flash, an Amazon prime equivalent for free and fast shipping.
One of their most successful products is the Virtual Artist app released in 2016. Sephora identified a crucial customer pain-point in messy make-up trials in store and the apprehension of buying products online without the customer trying them on. Virtual Artist uses augmented reality for users to virtually try on makeup. Sephora partnered with ModiFace (augment reality tech provider for beauty) to create mobile and in-store versions. The company doubled-down on its AR investments by launching other products such as ColorIQ (to find foundation and concealers that match user skin-tone) and Skincare IQ (quiz to provide recommendations for user’s specific skincare needs). Sephora was quick to identify skincare as a major growth category and through the launch of Skincare IQ, has generated sales that have surpassed makeup sales.
Omni-Channel Strategy and other initiatives
The leadership at the company is completely bought-in and driven by digital. Sephora took a big leap in digital retail by combining the in-store and online teams into omni-retail department. The company truly believes that it falls upon the retailer to make sure the transition between channels is as smooth as possible, reducing the effort for the customer. One example of how Sephora achieves it: Makeup artists add products used during in-store makeovers to the particular customer’s profile for them to browse through and buy online. Also, makeup tried on the Virtual Artist app can be purchased online and located instore. With this omni-channel strategy, Sephora has been able to combine online and offline customer profiles, gain data around behavior and hence, provide personalized recommendations that increase its value proposition.
Other digital initiatives that have helped drive the exponential growth at Sephora:
- Sephora Assistant: Messenger chatbot using AI that allows users to book makeover appointments, which saves administrative costs.
- Beauty Board: A social-media platform created for collaborative browsing and connecting & creating with the community
- Google Assistant app: A voice-enabled application for users to book services, take quizzes and listen to beauty podcasts
Sephora’s unique selling point has been the use of technology in its physical stores. To continue its lead, Sephora has opportunities and risks for the future that it needs to be prepared for. Currently, with the amount of data that Sephora is accumulating, it has the potential to push into building personalized cosmetics. As tech giants like Amazon and other beauty players like Ulta and Glossier catch up on the technology front, Sephora needs to find ways to maintain its position. Using its community to further lock-in customers, applying the knowledge gained in-store through associates to understand customer journey, customized products might be ways to overcome the looming competitive threat.
Sephora has been successful in reimagining beauty industry and gaining from its digital investments. Its continued experimentation with new technologies and customer insights will define if it can remain ahead of the curve.