Monday, January 30, 2006

Cosmetic Contrarian.

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JANUARY 25, 2006


Sephora: Liberating Beauty Products

The French perfumes and cosmetics company is breaking every marketing rule in the industry -- and the response has been wildly enthusiastic

For products as individual and personal as the look of your face, it is remarkable that cosmetics merchandising in the U.S. has remained stuck in its longstanding "look but don't touch" tradition. On one hand, drug stores sell cosmetics in sealed-plastic packaging that require shoppers to buy things like lipstick without a chance to try it on. Alternatively, department stores allow more hands-on access, but only with the hovering attention of a sales person whose commission is driven by pushing a specific brand. Both approaches leave something to be desired.

Spotting a void in the marketplace, Sephora has staked out the middle ground. Three years ago Europe's leading retail beauty chain moved into the U.S. with a simple, if radical, concept. It created a retail environment that invited customers to roam the store and try on different lipsticks, eyeliners and blushes made by many different manufacturers. Instead of department store-type cosmetics counters that force shoppers to interact with a salesperson to sample a product, Sephora is organized around freestanding racks that feature such chic brands as Bulgari, Christian Dior, Gucci, Lancome and Calvin Klein.

Sephora's open, minimalist displays entice shoppers with sumptuous product colors, packaging and bottle design. Strategically placed mirrors, tissues, cotton swabs, astringent and makeup remover encourage sampling. Prices usually out of sight in department stores are prominently marked. Without the pressure of a salesperson eager to close a sale and move on to the next customer, shoppers feel free to spend an hour or more trying out different colors and different brands until they arrive at the exact ones they like.

As for sales assistance, Sephora offers help only on request. "We think clients like to have someone help them, so we're an assisted self-service store," says Betsy Olum, Sephora's senior vice president of marketing. "Our customers can shop on their own and they don't have to fight off `spritzers.' Sephora offers options. We think our customers are much more educated. They're reading a lot of fashion magazines. They don't always shop by brand. They like to shop across brands."

The company is aware that its approach is revolutionizing cosmetics merchandising. "We've opened this big wide door in the business; it's going to be hard to put everything back in the showcase," argues Barbara Emerson, who as Sephora's vice president of store planning and design heads up a staff of six in-house designers. "At Sephora everything can be touched and tried. There's a very democratic aspect to all of this. We think people should have fun experimenting. For years beauty retailers have kept product locked away as if it were some precious part of retail. I don't see how anyone can now go back to the old way of selling."

Given the profit margins in the more than $6.3 billion prestige beauty category, those products have, in fact, long been "a precious part" of department stores' bottom line and Sephora's aggressive move into the United States has already caused competitors to begin opening up their beauty counters. Women gladly pay premiums for cosmetics' illusory promise of self-invention, and Sephora capitalizes upon this in its emphasis on personal discovery. Its success in America recognizes the increasingly independent will of shoppers. Sephora's U.S. network has grown to 70 stores since opening its first outpost in SoHo, New York City, in 1998.

Early growth was fueled not by advertising but by word-of-mouth buzz and inviting storefronts in areas with heavy foot traffic. "Our locations became our advertising," says Olum.

"Design is one of the most important elements in our U.S. rollout," Emerson emphasizes. "It's integral to the function and appeal of our stores.".

It's easy to see why first-time customers wander into the company's shops. Most of them reflect the influence of Sephora's Champs Elysees flagship created by French architect Gerard Barrau. They are designed to give passersby a birds-eye view of the entire store and feature all products on one level. Open, glass facades greet visitors with a red-carpet welcome; that red, cut pile is used throughout as an integral element in the stores' bold black, white and red color scheme. Black-and-white floor tiles and architecturally striped columns punctuate the interiors, as do the giant blow-ups of the company's serpentine wisp of a logo..

Sephora was started in 1993 as a French perfume chain. French luxury conglomerate Louis Vuitton Moet Hennessy (LVMH) acquired Sephora in 1997. LVMH also owns Givenchy, Kenzo, Dom Perignon, Moet & Chandon, Guerlain, Hard Candy, Urban Decay, and Celine, among other exclusive brands. LVMH has expanded Sephora from less than 60 stores, based only in France, to include over 393 stores in Europe. In addition to its burgeoning U.S. business, Sephora operates in Asia with seven stores in Japan.

While all the company's stores are stamped in the same color palette, they allow for individual distinction suited to their surrounding architecture. In Las Vegas, for example, at the Venetian Hotel complex, the site offers thirteen 16-foot arched windows, giving Sephora a 160-foot wall of natural light along the front and side elevations of its store. The company's first Japanese shop, opened in Tokyo's shopping district of Ginza, is organized on three levels and stands out with a black-and-white striped facade. The Paris and Barcelona stores include large, flashing videoscreens, a digital ticker of world perfume prices and a museum display of antique perfume bottles. Sephora's Rockefeller Center store in Manhattan incorporates similar architectural details that are cast over 21,000 square feet on three levels with a glass elevator and people-mover conveyor beltway.

Regardless of those extra flourishes, all of Sephora's stores conform to the company's signature easy-to-shop concept. Belying product inventory of more than 11,000 items covering over 250 brands Sephora's retail layout is precise and orderly. Just past the store entry are women and men's fragrances, arranged in alphabetical order. Top 10 fragrance best-sellers are highlighted in their own areas. Products are grouped by brand and according to categories of need, like those for dry or oily skin. Sephora lipstick bars pop with more than 365 colors that include lavender, green, blue, gold, white, yellow and black. Do-it-yourself gift boxes allow customers to select their own colors, products and potpourri. Shoppers can choose among soaps, bath gels and crystals, body lotions and delicately arranged details like dried rosebuds, cinnamon logs and pastel starfish. Even as Sephora's relaxed, retail environment invites browsers to linger and sample products, its stores' clearly defined organization offers a quick read for busy customers making a short visit..

Stores contain "staging" areas for free makeovers, by appointment. In fact, Sephora calls its sales staff "cast members" and refers to the selling floor as "on stage." The cast members' presence further reinforces the role of cosmetics in fashion theatricality. Dressed in black designer tunics and slacks, they wear no jewelry or makeup other than red lipstick and red or clear nail polish (matching the black and red signature colors of the store interiors). Mime-like, they move quietly around the store wearing a single black glove. Without the benefit of display counters, the glove serves to show off the product much in the same way a jeweler uses black velvet to offset jewels.

"Black is a strong background for design and beauty products," acknowledges Emerson. "A black glove is a good background for showing off things like a fragrance bottle. It sets us apart." When presenting products, cast members keep their ungloved hand discreetly behind them to eliminate any distractions from seeing the product cupped in the black gloved hand..

Another distinction setting Sephora apart is its growing reputation as a retail lab for small beauty companies like Shu Uemura, Vincent Longo, Peter Thomas Roth, Benefit and Stila, who have a tough time getting space at big stores. By extending the dimensions of its product offerings, Sephora has broadened its demographics beyond that of traditional department stores.

"We attract women as young as 15 and as old as 70," says Olum. "We offer cutting-edge product lines as well as more established cosmetics like Chanel and Clinique. Men as well as women shop the store. Men find our retailing approach a lot less intimidating."

Sephora is, however, becoming a more intimidating force to department stores. LVMH, after all, has the marketing muscle and money to turn Sephora into a global player. More critically, Sephora's underlying operating philosophy is an affront to an industry traditionally driven more by retailer sales ploys than buyers' choice. For example, Sephora does not go in for popular department-store gimmicks like free gifts with purchase. It's that belief, communicated through open, accessible retail design, that has made Sephora one of the most potent forces in beauty products today.

"Every aspect of the stores from their architectural layout and interior design to the background music chosen to the customer experience is designed to reinforce a shopping experience emphasizing freedom, exploration, discovery and a personal definition of beauty," underscored Daniel Richard, president and CEO of Sephora Holdings, when he accepted the "Innovator of the Year" award from the National Retail Federation in 2000.

Copyright 2000- 2006 by The McGraw-Hill Companies Inc.


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