Walmart is still the biggest seller of beauty products in the U.S., and they’ve been upping their game in recent years by introducing chain-exclusive beauty brands such as Hard Candy. Nonetheless, two beauty-specialty retailers have thrived through the recent recession years: Sephora, which focuses strictly on prestige products, and Ulta, which delivers unique value by bridging the prestige and mass markets. In addition to being great examples of retailer differentiation, these chains have disrupted both the traditional department store selling model for prestige brands and the drug/mass selling model for mass market brands. They are also great examples of retailers who have clearly defined their target market, have customized their in-store experience accordingly, and work hard to make their shoppers feel special and valued. So – how do they do it, and what can we learn from them?
Sephora: Trusted Advisor for Fashionistas
Traditionally, Americans have shopped for high-end, or prestige, cosmetics and fragrances at department stores like Macy’s, but when Sephora entered the U.S. market in 1998, they completely reinvented the prestige cosmetics shopping experience. They now have over 500 locations in the U.S. and significant market share.
In the traditional department store, each brand is isolated at a separate service counter, staffed by a salesperson who only sells that brand, and all products are stocked in closed cases. This creates a rather high-pressure selling environment, can lead to long waits for service, and makes it very difficult to explore and experiment across brands.
In contrast, Sephora has a low-pressure environment which encourages exploration and experimentation. Open shelving allows Sephora shoppers to touch, smell, and apply any product. Sales staff are trained to probe for the shopper’s needs and then recommend appropriate items from any of the 250 brands they carry (including some “exclusively at Sephora” lines). Their newest New York store even features a mobile payment system so that staff can process customer payments on the store floor (skipping the checkout counter, the least enjoyable part of the store experience for most shoppers), as well as in-store iPads that allow shoppers to scan QR codes to access product information, ratings, and reviews (see also: Using QR codes To Speed Customers Through the Purchase Decision Process).
Once consumers experience the freedom of Sephora’s open selling environment, they are reluctant to return to the restrictive department store environment.
In combination with their open selling environment, Sephora aims to be a trusted advisor to prestige beauty consumers, who like to keep up with the latest fashion trends, and that is evident in every aspect of their stores, website, and marketing.
In-Store. Just like department stores, Sephora staff will demonstrate the use of specific products, but they go above and beyond this basic sales tactic. For example, Sephora stores also offer free 10-minute Express Services – a makeup application and mini-lesson on how to achieve the season’s most coveted looks, such as a pouty lip or smoky eye – as well as 60-minute makeup sessions with a minimum purchase. Larger stores regularly offer special events featuring consultations with visiting industry and brand experts.
On the Web. The Sephora website builds on the advisory approach of the stores in several ways. For example, when you look at the Sephora website, the home page features the Latest Looks and Editor’s Picks. If you choose to shop by brand name, you won’t just see a list of items, but two types of recommendations: “Are you new to the brand? Make these products your introduction.” and “Must-Haves – Your Perennial Favorites.” Sephora is also ranked a leader among prestige brands in the fast-growing area of mobile marketing and shopping.
Marketing. Sephora encourages shoppers to join their Beauty Insider rewards program. Shoppers collect points with every purchase (which can be redeemed for designated items) and also receive a special gift on their birthday. Twice-weekly emails and social media posts feature the latest beauty trends with links to instructions and products; recent emails featured Spring 2012 Trends, Hot Now products, enticing luxuries and helpful solution-sets. Specials are designed to both entice and inform. They are typically presented as “$8 (a $30 value)” or as a gift with purchase, with product benefits and quality clearly prioritized over price. Again, all of these elements combine to reinforce Sephora’s image as a trusted advisor and provider of exclusive, top-tier products and the latest cosmetic innovations.
Ulta: A Candy Store for Women
Ulta aims to bring a unique value to their shoppers by providing one-stop shopping for a wide range of prestige and mass market beauty products, along with lots of money-saving deals to help shoppers feel they are being smart spenders. Their success at delivering “affordable indulgence” is evident in their numbers: nearly 400 U.S. stores, annual sales of nearly $1.5 billion, and 20% annual growth from 2006-2010.
Products. Ulta is the only U.S. retailer which offers a full range of beauty products that includes both mass and prestige brands. They carry many of the same prestige brands as Sephora, but also a complete selection of mass-market brands. This enables consumers to trade up and down between price-points without the hassle of shopping multiple stores to find their favorite beauty products at prices that feel smart. In addition, shoppers can immerse themselves in Ulta’s enormous product assortment, which is seeded with “testers” to encourage interaction, offering shoppers both an escape and entertainment.
Stores. While Ulta store staff are not as numerous and highly trained as Sephora staff, they are a big step above the drug/mass stores which offer no shopping assistance. Ulta stores uniquely have in-store beauty salons offering hair styling, skin treatments and, most recently, gel manicures as well as Benefit Brow Bars where you can get your eyebrows waxed and shaped. Unlike the typical salon which only offers one brand of products, Ulta offers a full range of products to help you replicate your salon style at home.
On the Web. When you visit Ulta’s website, you’ll be hit with lots of money-saving specials first, with product benefits and fashion trends second. It’s a “something for everyone” candy store, versus Sephora’s more selective advisory approach. Ulta partners with mainstream magazines like Glamour and Lucky for fashion trend reporting, reinforcing their image as inspirational yet approachable.
Marketing. Ulta’s shopper rewards program has over 8 million active members who collect points (redeemable for selected products) and receive special offers via twice-weekly emails. Loyalty member transactions represent more than 50% of their annual sales. Weekly specials focus on cost-savings for the consumer while driving traffic and volume for the retailer. Typical deals are coupons good for $3.50 off any $10 purchase and buy two, get one free specials on hair care products.
Take-Aways for Marketers: