The Economics of Sephora

Introduction

• Sephora's impact on the makeup industry is significant.
• Transition from traditional sales to a self-service model.
• Overview of Sephora's growth and practices that made it an industry leader.

Sephora's Growth

• Employs over 36,000 people
• Operates in more than 2,700 stores across 35 countries
• Offers over 250 beauty brands
• Originated from a small perfume shop in Limoges, France (1969)

Business Model

Assisted Self-Service Model

• Customers can freely test products before purchasing.
• Beauty advisors available for assistance.
• Trust in advisors due to brand-agnostic recommendations.

Product Display Strategy

• Products displayed by category (makeup, skincare, fragrance) rather than brand.

Acquisition by LVMH

• Sephora sold to LVMH in 1997.
• Benefits from LVMH's ability to quickly adapt to trends.
• Popular brands like Fenty Beauty (owned by LVMH) prominently featured.

Exclusive Products and Relationships

• Exclusive Sephora collection increases leverage over brands.
• High-end beauty brands depend on Sephora for sales growth amidst competition.

Customer Engagement

Beauty Insider Program

• Three tiers: Beauty Insider, VIB, Rouge.
• Over 25 million members benefit from personalized marketing and rewards.

Inclusivity Efforts

• Emphasis on diversity by including Black-owned brands.
• Relaunched Color IQ technology for skin tone matching.

Expansion Plans

• Partnership with Kohl's for 850 shop installations by 2023.
• Added 200,000 new Beauty Insiders from Kohl's locations.

Conclusion

• Sephora aims to be a global leader in prestige beauty.
• Focuses on customers, brands, and teams to transform the beauty industry.