How Sephora is Using Tech to Revolutionize Shopping

Founded in 1970 in Paris, Sephora has become one of the most popular makeup retailers in the world and a money-making machine for parent company LVMH. From the get-go, a key to Sephora’s success has been its emphasis on innovation. They were the originators of the “try it before you buy it” concept that’s commonplace now.

Sephora is also masterful at bringing its digital and physical presences together. Make no mistake, this is a company that’s prioritized retail from the get-go, but never at the expense of its digital business. It’s been obvious from the beginning that Sephora sees these two parts of its business as equally important, not mutually exclusive.

They were early adopters of the web back in the 1990s. Around the same time Amazon was starting to take off, Sephora actually had a website where you could buy makeup. That sounds mundane now, of course, but it was mind-blowing back then.

Since then, Sephora has continued to use technology to evolve and improve the way their customers shop. Let’s look at some examples of how Sephora is using technology to drive growth and see what lessons we can take away from their efforts.

Using an in-house team to drive innovation

When it comes to innovation, Sephora doesn’t outsource. In 2015, they launched an Innovation Lab because they wanted an in-house team that was responsible for creating groundbreaking new products and processes. It’s a cross-functional team that scouts new technologies and helps apply that tech to different parts of the business.

One innovation that came out of this lab was a better use for beacon technology. Many stores use beacons, which are golf ball-sized nodes that transmit signals over Wi-Fi to customers who are using the company’s app within the store. The problem is they don’t use beacons well. Sephora’s approach to using this technology is brilliant.

When you walk in with the Sephora app open, you get a map of the store and daily promotions. It’s integrated with your wish list and shopping cart. Not only that, the beacons provide store reps with your purchase history so they can better help you find what you’re looking and suggest new products that actually fit your tastes.

Sephora has also been a pioneer when it comes to augmented reality. With its Virtual Artist app, customers can actually “try on” makeup or lipstick before they buy it. It’s the same kind of technology behind Snapchat filters, but Sephora has found a way to use it so that it boosts customer confidence and increases their likelihood of purchasing.

Thanks to their partnership with Pantone, Sephora is able to offer Color iQ, the first and only beauty service that scans a customer’s face, assigns them a Color iQ number, then reveals foundations that are a precise match for their unique skin tone.

L'Oréal, Estee Lauder, and other huge makeup brands don’t push the envelope like Sephora does, which is funny since Sephora really doesn’t sell its own stuff. It offers customers a remarkable experience selling makeup they could get elsewhere.

Getting buy-in from a robust loyalty program

On top of all its technological innovations, Sephora has a killer loyalty program called Beauty Insider. In my opinion, it’s one of the best loyalty programs out there.

I say that for a few reasons. First, it’s personalized. As a new customer, you’re asked a series of questions about your hair, skin, complexion, etc. That way, when it generates recommendations, they’re already tailored to you. As you purchase more and more products, the app uses that history to create even better recommendations.

Second, Beauty Insider is built around reaching certain thresholds like 100 or 10,000 points. But you’re not doing this in isolation. You’re able to see the progress of your fellow Sephora customers and what levels they’ve reached. Even Starbucks, which has an equally great loyalty program, doesn’t move people up the tiers the more they spend. With Starbucks, everyone is created equal, which is totally fine. But what Sephora has done is offer a gamification aspect to retail that taps into our competitiveness.

Sephora wants you to progress up the rungs from light to medium to high usage. To incentivize you, they offer better discounts and access to higher-end tailors the more purchases you make. The elite tier—VIB Rouge—is achievable if you spend $1,000 or more a year in Sephora’s stores or on its website. As silly as it might sound, that’s a coveted distinction that devoted customers don’t want to lose once they attain it.

You hear all the time about brands that want to build a community around their product or service, but few ever get there. Through its unique approach to a loyalty program, Sephora has created the ultimate place for lovers of cosmetics to gather.

Three lessons Sephora teaches retailers

From Sephora’s efforts, I believe we can glean three important lessons.

The first is: never settle. Many organizations, when they find something that’s working, they’ll play it out as much as possible for as long as possible. But in this day and age, things change and shift so quickly. Keep experimenting and trying new things. If you don’t, you leave the door open for a hungrier competitor to pass you by.

The second lesson is embrace digital. By that, I mean doing more than just giving digital a seat at the table. The voice of digital retail in your organization must be just as heard and respected as the voice of physical retail. It’s the CEO’s job to make that happen.

The final lesson is to create a small, nimble technology team that is capable of touching all aspects of your business. From promotions to products to in-store, this tiger team needs to be creating new ideas based on consumer insights and deploying them rapidly. In an industry as fast-moving and cutthroat as retail, you can’t afford to miss this boat.