Although it may not seem like it, there is more than one model that leads to success in today's retail world.
For some retailers, the answer may be to focus strictly on online sales, since physical stores can reduce profits and slow growth.
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For others, the answer is accessibility to the majority of shoppers in the United States through large retail stores.
Others captivate customers with aspirational luxury, selling them the opportunity to buy a lifestyle or a brand that offers them an atmosphere or a membership to some exclusive club.
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One of the most successful retail models of the last decade has been Sephora, which combines the success of brick-and-mortar stores with online sales, plus a healthy dose of aspirational luxury. And in some cases, total luxury. After all, not everyone can afford a $610 moisturizer.
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Sephora is praised in part for its ambitious growth plans, but also for almost perfectly threading the needle between young shoppers on a budget but with a strong ability to embrace and drive trends, and a more mature audience looking for quietly luxurious products, like fragrances. or luxury beauty devices.
Sephora wins in a competitive market
Sephora's rise was achieved with a somewhat unusual approach. Luxury goods company LVMH owns Sephora, a retailer that is in a highly competitive space. Every luxury and high street brand already has its own beauty line, including Christian Dior and Gucci, as do many low-end retailers such as H&M and Forever 21.
Sephora's success does not come from creating its own brand that is supremely better than the incumbents already in the space, although it does have its own popular brand that is sold in stores and online. Rather, Sephora's success comes from curating all of the biggest brands of the moment. Reports suggest that some makeup brands pay more than $100,000 just for a small space on store shelves.
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It makes sense. The appeal of Sephora is that it presents a highly experiential physical experience. Online sales are also strong, but to get the full experience, many customers prefer to go to physical stores and try products before purchasing. This is an invaluable process in the makeup community; Shoppers can swatch lipsticks and foundations to check color combinations, try on perfumes, try on facial moisturizers, and more.
Sephora plans a major investment
They say major store renovations happen when times are really good or really bad for a business. And it seems that the first is the case of Sephora.
The beauty retailer announced in January that it would be revamping all of its 700 North American locations, with some getting an overhaul and others getting a few tweaks here and there. The project began in fall 2024 and will continue for the next five years.
“We're not a cheap date and we don't want our brands to spend a ton of money building these amazing accessories and then it doesn't work,” Artemis Patrick, president and CEO of Sephora North America. he said at the NRF Big Show Conference.
Some renovations will include changes to Sephora's iconic checkout process, which requires customers to “snake” through a maze of mini sample products, available for purchase before heading to the cashier.
But with about a quarter of shoppers now using mobile assistants to check out, Sephora will place modular displays throughout its stores to tempt customers sporadically, rather than all at once before checking out. And these screens may move, depending on the customer's behavior.
“We can actually split the device and move it to the front if we wanted, creating a much more agile footprint,” Patrick said.
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