Insights into Sephora’s growth plans

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French multinational beauty retailer Sephora sets plans for continued growth in a crowded and competitive market with numerous challenges. First off, the LVMH-owned company, which has more than 2,600 stores in 35 countries, is relaunching in the UK this month.

A key focus is a dual expansion of Sephora’s physical stores combined with the development of digital distribution. In addition to Great Britain, accelerated global development is underway in regions such as Latin America and Asia. Sephora is positioning itself as a “beauty playground,” capitalizing on consumers’ penchant for small luxuries at a time of global economic uncertainty, and betting now is the right time to bring that to new markets.

Sylvie Moreau, President of Sephora Europe and Middle East, who joined the company from Coty in summer 2021, outlined future plans in London on the eve of Sephora’s UK relaunch. Since the pandemic restrictions were lifted, “the brick-and-mortar stores have been the biggest winners,” she says. This effect is particularly pronounced with Premium Beauty. Data from retail watchdog Placer.ai shows that U.S. footfall in beauty and spas increased 33.3 percent this August compared to the same period in 2019. Some Sephora stores have seen an equally large increase in footfall, up 45.5 percent compared to the same month in 2020, data estimates suggest.

Walk-in traffic at competing retailers such as Ulta Beauty and Space NK is also increasing. Space NK’s store revenue is up 15 percent from before the pandemic. Financial services firm Cowen estimates that Ulta has a larger market share than Sephora in the US — 9 percent, compared to Sephora’s 6 percent.

A key focus is a dual expansion of Sephora’s physical stores combined with the development of digital distribution.

Photo: Sephora

Crowded marketplace

In physical retail, there’s more overlap than ever between brand choices at premium retailers and drugstores – in the UK, for example, beauty lines from Chanel, Dior and Givenchy can be found in both high-end department stores and pharmacy chain Boots. In the US, Ulta has added more niche and premium brands like Bread Beauty Supply and Drunk Elephant, while major retailers like Target and Walmart continue to attract indie newcomers like Starface and Lime Crime. In the UK, Boots remains a strong player with a 48% share of the nationwide premium beauty market.

Sephora once stood alone with its attractive offering of indie and premium names and brand-agnostic employees. Now it’s a crowded field with more players vying for market share. According to Moreau, the exuberance of Sephora’s in-store experience, including brand discovery opportunities, can keep the company at the forefront.

“We see beauty as a celebration, and that’s what we’re loudest about,” she says. “You can always hear music in the store and we deliver our services in the middle of the sales floor, not in a little cocoon. We have a very extroverted voice.”

Role as brand incubator

In addition to the lively in-store atmosphere, Moreau says Sephora wants to raise its profile as a major brand incubator for indie hopefuls. She highlights the example of Huda Beauty, which launched with a simple selection of false eyelashes at Sephora’s Dubai store and has since grown into a billion-dollar business. Recently appointed Executive Vice President, Global Chief Merchandising Officer Artemis Patrick is leading much of this effort. Moreau says the company wants to find another “10 or so” very small brands and give them a launch platform with Sephora. “We make big bets on these brands,” she says.

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