Sephora was founded by Dominique Mandonnaud in 1969 in Paris, France. The beauty and the cosmetic retailer has over 2,300 stores in 33 countries worldwide; 11 stores in Singapore. In 1997, Sephora was acquired by its parent company, LVMH Moët Hennessy Louis Vuitton, which has helped Sephora gained its reputation as a pioneer and innovator in the industry. It is a multi-label beauty cosmetic retailer which carries a wide array of beauty products namely, makeup, skincare, fragrances, body care, nail polishes and haircare products.
Sephora main shoppers are female ageing from below 24 up to 34-year-old, as shown in Appendix 1. They also position themselves as being affordable in pricing and provide high-quality products. Sephora’s outstanding strengths are having various highly valued brands in their products offering, like Nars Cosmetics, Clinique, and Estée Lauder etc. and its own private label, Sephora, as shown in Appendix 2. On the other hand, the retailer also faced threat from its other departmental store’s competitors like Tangs and Takashimaya which also offer similar beauty products.
1. Successful Strategy Utilised by Sephora
In order to remain competitive with its competitors in the monopolistic competition market of cosmetics and beauty products, Sephora utilises Customer Loyalty, a source of competitive advantage, as a strategy to ensure that customers regularly frequent their stores rather than the competitors. Sephora builds customer loyalty through having a strong brand, explicit positioning strategies and attractive loyalty programs for their customers.
One of the biggest attractions of shopping at Sephora is that customers are able to earn points to redeem attractive rewards. Sephora’s loyalty program, Beauty Pass consists of three different tiers, Sephora White, Sephora Black and Sephora Gold. A customer can register for a Sephora White beauty pass for free and accumulate points as they shop to be upgraded to the next tier, Sephora Black and followed by Sephora Gold. The benefits and perks of each Beauty Pass Membership tiers are as shown in Appendix 3.
Sephora Beauty Pass loyalty program does not just offer the customers with discounts or free samples. Through the loyalty program, customers are showered with various member-exclusive perks like the members-only exclusive events, exclusive invites to events and workshops, access to private sales and exclusive launches and complimentary makeovers. Through these perks and exclusivity provided to their Beauty Pass members, Sephora has gained a large pool of loyal customers.
An example of Sephora Gold Beauty Pass exclusive event that has gained large attention by the media and public which have driven many customers to join their loyalty program was the VVB x Nails Inc Collection Launch Celebration Event, as shown in Appendix 4, which was made exclusive for Sephora’s VIP guests. In addition, Sephora also conducted the 2017 Black Friday Private Sales which provided the Black and Gold cards members, as shown in Appendix 5, with early access to the event to ensure that they can get their hands on to the products before anybody else does.
An interview done with Ms Emily Collins, a senior analyst at Forrester Research shows that customers want special treatment from the brand’s loyalty program and that “They come for perks, but they stay for the experience”. Hence, Sephora Beauty Pass loyalty program is proven to be effective in retaining and creating an emotional attachment to their customers through various private events and workshops on top of the discounts and free samples. On top of that, Sephora is also able to identify purchase behaviour of their loyalty program members, which these data can be used for them to make decisions on both management level and provide them with information consumer behaviour of the specific segment of their customers, like for example, the repurchasing rate of their customers of age 20-25 years old.
In the United States of America, where Sephora runs a different loyalty program called Beauty Insider, the Beauty Insider Community mobile and online platform is also created for loyalty-member of Sephora and serves as a destination for the members to share their love for beauty and cosmetics, as shown in Appendix 6. The platform goals are to provide the members with beauty inspirations and acts a platform for them to share and provide honest reviews of the products that they have tried.
As the platform allows customers to showcase their profiles, interests and even their recent purchases, as shown in Appendix 7, this also acts as another source of data base for Sephora to gain information regarding customer’s perception and demand of their products.
2. Applying the identified strategy to Lite
Upon completing in-depth research and analysis of Sephora, it has been observed that Sephora and Lite operates in similar environment and shares similar target market. Both Sephora and Lite exist in a monopolistic competition market condition where products are only differentiated from one another by brands and are not perfect substitutes of each other. Additionally, both retailers share a common demographic group of consumer of age 24 – 34 years old. Hence, the customer loyalty strategy adopted by Sephora could also be used for Lite and might also create the same effect of success for Lite as well. The efforts that Lite can also embrace in the business model are: