Sephora Direct: Investing in Social Media, Video, and Mobile

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CASE ANALYSIS

Sephora Direct: Investing In Social Media, Video, and Mobile

Case Summary

Sephora, the now largest prestige beauty specialty retailer in the world, had its humble beginnings in France, 1969. The retail concept of an “assisted self-service” environment successfully broke away from the traditional cosmetics retail model under its previous name, by allowing customers to sample their products without the pressure of a commission based sales representatives pressuring a sale. After opening 54 perfume stores in France, investors helped the founder, Dominique Mandonnaud, export his idea, under new ownership and name to the U.S.

In the U.S., Sephora included cosmetic products into its assortment of products. Since most well-known prestige brands already had their stronghold within their retail channels (mostly in department stores), the brand built relationships with hundreds of small cosmetic manufacturers. Sephora employees, at first considered to be less knowledgeable than the cosmetic sales representative counterpart quickly expanded and shared their knowledge with their “clients” creating a unique shopping experience with numerous products, side-by-side. The store attracts a younger crowd than the department stores, which soon pulled in larger prestige cosmetic companies such as Estee Lauder and Clinique. With about 200 U.S. stores, offering 288 brands, representing over 20,000 products in 2010, Sephora successfully established itself as market leader, followed by ULTA. The company’s target market is 25-35 year old women which are attracted by high end brands, with a sales strategy focused on the beauty experience, offering free samples, rather than discounts.

Sephora successfully identified and harnessed new technology and trends to expand their brand and sales by establishing an immersive shopping website, utilizing social media such as Facebook and Youtube, while also creating their own tools such as “Beauty Talk” and an easy to navigate mobile platform. Sephora is looking to formulate their short term strategy that will allow for more sales, by selectively adding tools to their existing marketing mix.

Key Questions to Address

What are the challenges of each media spending category? Sephora is working with the following proposed budget categories (in case Exhibit 13): Video production, YouTube advertising, video contests, Facebook development, holiday promotions, social partnerships, mobile and store kiosks. Prior to 2010, Sephora mainly focused on providing a well-rounded website and mobile (smartphone) store that extends the in-store experience to the client on the go. This allowed for convenient purchasing. It also experimented with professional and user created video advertisement, as well as sweepstakes and other incentives to attract fans and digital “likes”.