The Sephora Effect: Lessons on How to Build a Beauty Brand

The constant innovator has shown smaller companies how to use tech to drive new revenue streams.?

This article in a snapshot:

• Sephora's success stems from creating immersive, omnichannel experiences that blend digital convenience with in-store events and special offers.
• The brand's diversification strategy includes offering a wide range of products at multiple price points to ensure customers keep returning.
• Sephora leverages AI and machine learning to customize recommendations and enhance the customer experience.
• Creating a one-stop shop for all people’s beauty needs is a powerful strategy for customer loyalty and retention.

In Manchester, the queue of people waiting for the doors to open reached 3,000 . In London, when SEPHORA relaunched in the U.K. at two new locations after a 17-year absence, customers were willing to wait for hours to be one of the first 500 to receive a product-crammed gift bag and join local celebrities inside. Judging from the earlier website launch, organizers were expecting a stampede.?

This is what the LVMH-owned beauty brand does so well — make an event out of shopping as it blurs the lines between the digital and in-store experience and enrolls social media influence into its physical spaces. As both a CMO and consumer, I am a long-time admirer of their diversification strategy.

In the world of beauty retail, providing people the space to live and play close to home has proven the biggest differentiator. The professional hair color and care retailer Sally Beauty is another big brand that is doing this particularly well. I want to explore Sephora’s success in a little more depth because there is so much we can learn from the French company about how to optimize the consumer experience.

Sephora is a Constant Innovator

Sephora was one of the first movers when it came to understanding that the consumer shift to expecting more and more convenience — accelerated by the pandemic — did not mean downgrading brick-and-mortar stores. Rather, it signaled an opportunity to create a seamless experience across channels and lean into the inherently tactile nature of the beauty industry.?

“The innovations it pioneered early on are now industry standard. By allowing customers to test lipsticks and makeup accessories before buying, the cosmetics innovator laid the groundwork for the fully immersive experience shopping at Sephora has since become.”?

The death of brick-and-mortar was clearly exaggerated and instead, the company made its studio-like stores essential to the Sephora brand. In a similar way, Sally Beauty is now offering salon experiences to appeal to DIY hair colorists through its “Studio By Sally” concept.?

This combination of retail store and teaching salon helps customers both choose the right professional products and learn how to recreate hair colors or styles at home. Inspired by the growing number of consumers “taking their hair into their own hands ,” Sally has effectively created DIY-centric spaces where all their customers’ needs can be met in one place. It is a trend that Sephora helped pioneer.

How Sephora Became an Immersive Experience

Although we in the business tend to think in terms of channels as we create customer journeys, Sephora says customers themselves are only thinking about being entertained. It has integrated all the customer touchpoints (some of them literal) across its digital and physical spaces so well that it has become a seamless one-stop shop.?

People can try out products in-store and purchase them online, or use the Virtual Artist on its app to test products online and buy in-store. All this is complemented by a celebrated loyalty program (“Beauty Insider”), data-led personalized recommendations, and in-store beauty services such as makeovers, skincare treatments, and beauty classes.?

Using AI to help navigate this vast range

Sephora has over 340 curated brands and 45,000 products. To step into a Sephora store now is a sensory experience and the list of Sephora’s services is amazing:

• Makeup Services
• Skincare Services
• Waxing Services
• Personalized Consultations
• Digital Services
• Classes and Workshops

To help customers navigate the sheer scale of this range, Sephora uses machine learning and natural language processing not just to analyze purchase history but narrow down a customer’s skin type, eye color, and aesthetic tastes . Innovations such as Color IQ, Skincare IQ, and Virtual Artist provide an incredible level of personalization .?

Sally Beauty has also invested in augmented reality innovations to allow customers to virtually try on hair color and makeup before purchasing. Its ColorView AI tests products through facial recognition, facial mapping, and biometric tracking — and then sends the results to a customer’s shopping list on the Sally Beauty app.

Highlighting new and emerging brands

While Sephora has an enviable history of innovation, for other beauty brands, the same basic principles apply to keeping ahead of the trends: diversify your offerings, target repeat customers, and create a one-stop shop so people can benefit from both digital convenience and the salon-style experience.?

Sephora also curates the list of brands it chooses for each location to make them locally relevant and ensure there is a mix of classic and emerging lines at multiple price points. The UK general manager described Sephora’s use of its global merchant community to find exciting new brands as its “power alley.”

Using Software to Manage Growth

Sephora and Sally Beauty are classic examples of where people can get their lashes, hair, and makeup done right — leading other brands to follow suit. What all these brands are pointing to, however, is that one offering is not enough — you have to find different revenue streams.?

But how far do beauty businesses with plans to scale take the booking systems and tech required to diversify? The software platform you choose needs to allow brands to focus on their core strength while running the management in the background.?

Ability to pivot in this market is crucial

Remember, consumer behavior helps dictate trends. So when fall comes around and everyone is suddenly into chemical peels and hydrating facials, the software already has the features and functionality for those types of services, while giving businesses the tools to pivot and adapt quickly to other emerging trends. The goal is to create a recurring revenue stream from loyal customers.?

So, to lean into Sephora’s and Sally Beauty’s success, beauty and wellness brands need to:

• Use a smart marketplace and app that tracks consumer search behavior.
• Analyze trends in real-time to anticipate seasonal demand shifts.
• Use customized analytics for targeted marketing and creating infographics that make these insights more accessible and easily actionable.
• Enhance visibility across multiple search platforms such as Google and Yelp.

Retention is a critical part of strategy

It’s estimated that three new customers are needed to compensate for the loss of one existing customer — that’s how important retention is as part of your strategy. Meanwhile, 80 percent of value creation comes from generating new revenue from existing customers.?

Put another way, brands need to focus most of their attention on gaining repeat customers and they can do this by streamlining the consumer journey in-store and online.?

To optimize your own diverse offerings, choose a platform that automates inventory management, scheduling, marketing, payment processing, and loyalty programs. You want to ensure that when you diversify, you are doing so without creating any major additional workload.?

It’s all about finding out what customers want, giving them more of it, and using data tools to anticipate what they will want next. That is Sephora’s winning formula and it can work at any scale.

Sephora Has Set a High Bar

Sephora is the benchmark in the beauty industry for putting customers at the center of their experience. Look no further than its digital strategy for evidence. Sephora has the highest organic search traffic at 16,100,000 among beauty retailers and has appeared in more than 10 million Instagram posts — way ahead of its rivals. I have such admiration for Sephora for positioning their brand to achieve this sort of reach.?

To the executive teams at Sephora, thank you for your inspirational work. As both a CMO and consumer, I will only continue singing your praises. Guillaume Motte , Sandra Rimbot , Alexis Rollier , Priya Venkatesh , Artemis Patrick , Carolyn Bojanowski , Zena Srivatsa Arnold , Joan Willat , Nadine Graham , Vlad Kuznetsov .

About Vagaro

Vagaro is the software designed to help beauty and wellness businesses streamline their operations and enhance customer experiences. The platform includes features for inventory management, appointment scheduling and booking, marketing and promotions, payment processing, and loyalty/membership programs. Vagaro’s scalability and real-time analytics makes it an ideal solution for companies looking to optimize their omnichannel strategy and expand across locations and regions.