The Spark Behind Sephora
HEADQUARTERS San Francisco
TYPE OF BUSINESS Beauty and fragrance retailer
NUMBER OF STORES 1,600 global locations, including 325 stores in North America and 386 in-store shops in J.C. Penney
Beauty and cosmetics retailer Sephora is ignited not only by its highly trained cast of associates and smart, forward-thinking approach to in-store digital, but also by the man behind the black, white and red store design.
Paul Loux didn’t create the signature palette and Sephora flame — he arrived at the company, which is owned by Louis Vuitton Moet Hennessy (LVMH), in 2008 by way of design/store planning positions with Guess? Inc., Levi and Nike. But he has sparked a continual reinvention of a design formula that today includes social and digital elements designed to engage, inform and bridge the gap between online and off.
Senior editor Katherine Boccaccio talked with Loux about the Sephora brand, its future plans and how the chain uses digital to bring the store to life.
Does Sephora have a store prototype?
One of the foremost pillars of Sephora’s strategy is creating a store experience that is different from any other — one that is unique, special, fun and ever changing. When I joined the brand at its 10-year anniversary in 2008, we embarked on a holistic reinvention of our store prototype. Every store we have opened in the past few years reflects this new formula, although we continue to make changes to tailor our stores to specific locations and to inject ongoing innovation.
In short, a prototype design that reflects the optimal brand experience is essential for brand recognition. But it is also important to be flexible. For instance, when we went into the Meatpacking District with our 16th store in New York City, we needed to make a unique statement in that very dynamic neighborhood — so our store there is different in many ways than our others. Similarly, when we opened our first location in Mexico in an underground center, a special approach was required for both the site and for making our first brand statement in a new market.
No matter the location, what are the most important elements of Sephora’s design?
There is an absolute signature to our stores with our brand codes of black, white and hints of red, chosen to carefully offset the range of colors inherent in the products we carry. This theme is part of our "calpinage," or striped icons, along with the Sephora flame, which are recognized around the world.
But beyond store aesthetics, we are an open-source beauty treasure trove. Everything about the store design serves to encourage a high level of trial, experimentation and engagement with all the brands we carry, unified by the service and expertise that Sephora’s highly trained cast members (the company’s term for salespeople) offer.
We hear a lot about "seamless" retailing, and we’ve seen plenty of news about Sephora’s in-store digital makeovers. What are some of the ways that Sephora incorporates the digital experience in its physical stores?
Providing expert advice to our clients is a critical part of our brand, and we’re very proud of the way we’re using digital experiences to bring this to life for our clients wherever they are. Rather than creating "visual noise" with no specific purpose, we have created interfaces that help our clients navigate through a complicated set of beauty choices. For example, we can filter the store down to the best skincare products for her concern, match her skin tone to the best foundation recommendations, or give her access to our deep library of product ratings and reviews from other clients … and the list goes on.
What role does interactivity play in the Sephora store experience?
The entire Sephora store experience is about play, exploration and interactivity. We will always pursue ways to augment that dynamic when we feel we are helping our clients discover new products, tips and trends. Just last year alone we brought in a number of unique interactive innovations, such as Sensorium, Skincare IQ, Color IQ among others, with even more to come.
What has Sephora’s experience been with mobile checkout?
Across our store portfolio, we have determined that the right balance is a combination of both traditional cash wrap and mobile checkout. There are unique client engagements that happen in each type of interaction, and our aim is to have both modes at her disposal, so that we can offer the shopping experience that she wants.
Tell us about Sephora’s expansion plans.
Our goal is a balance between making large investments in existing stores to elevate the client experience — making it continually interesting, engaging and fun — and putting new stores in exciting locations where we know there will be considerable demand. We opened 26 stores in 2012, and also remodeled three stores and relocated another three. But we don’t comment on our future plans.
How would you describe your leadership style?
With my team, I try to play the role of steward and editor to progressively hone in on the optimal design solution. Innovation comes the most swiftly — and has the best staying power — when it’s the result of carefully identifying a need, brainstorming with a team across a variety of functions, viewing every comment as valuable, and then crafting that into something that goes a leap beyond what might have been the preconceived solution. When that unexpected spark happens, it’s the fun and magic of design, and you know you’ve hit it.
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Retail companies should expect this year and 2014 to be a wild roller coaster ride of health insurance changes for retailers. That assessment came from Neil Trautwein, VP, employee benefits, National Retail Federation, who said that retailers need to take prudent actions to comply with the requirements of the Affordable Care Act (ACA).
"It will be an extremely interesting time as we move toward open enrollment in the fall of this year, and then into 2014 when the health insurance exchanges are supposed to open," said Trautwein. "There are many different issues coming into play very quickly. There are not a lot of clear-cut answers."
CHANGING PLANS: Retailers are expected to be uniquely impacted by the ACA, given their high reliance on part-time and seasonal workers. That’s because the legislation requires employers to extend coverage to all employees working 30 or more hours per week.
"Some 46% of retail and restaurant companies participating in our recent survey say they will have to change their current health insurance offerings in some way to comply with the law," reported Joan Smyth, partner, Mercer, a New York City-based benefits consulting firm (mercer.com).
The 46% response from retailers is notably higher than the average for other industries, where some 24% of survey respondents anticipate a similar need to change their insurance programs. Such changes might be to whom the coverage is offered, what coverage is offered or how much is charged to employees.
Furthermore, 47% of retailers and hospitality companies participating in the Mercer survey expect health insurance premiums to rise by at least 3% because of the law, according to Smyth. That figure is considerably higher than the comparable 34% for all employers.
MURKY REGS: Retailers face a critical problem in re-engineering their health insurance plans: insufficient regulatory guidance. Despite the steady stream of communications from federal agencies since the last presidential election, many requirements remain murky.
"One of the bigger headaches for retailers is figuring out how to translate the requirements of the ACA in a way that makes sense for their operations," said Trautwein. "To date, they don’t have all the information needed to make plans."
Here are some areas that remain unsettled:
- Guidelines on the constitution of an "essential benefits package," the minimum health insurance coverage employers must offer.
- Parameters for "rate bands," ratios determining how much more a plan can charge older/sicker people versus younger/healthier ones.
- Guidelines for settling conflicts between state and federal law: For example, will provisions on benefits adopted by individual states automatically become essential benefits under federal law? Will the exclusion of certain medical treatments end up conflicting with federal anti-discrimination laws?
Retailers will deal with uncertainty not only in matters of legislation and regulation, but also in marketplace dynamics. For example, what will happen with the new competitive statewide insurance marketplaces?
"Will they succeed or fail?" posed Mercer’s Smyth. "The result will affect the future of employer-sponsored plans."
Another uncertainty is the participation levels of employees, added Smyth. "Who will join the employer plan, and who will say ‘I will just pay my individual penalty because I can always join the exchange later if I get sick.’ "
Many observers believe that younger, healthier people will opt out of the system, resulting in premium increases for everyone else.
"They may do the math, see that the penalty is not high,and decide they don’t need health insurance," Smyth explained. "After all, employers are allowed to charge up to 9.5% of employee income for the plan, and that is a good amount of money."
Taken as a group, these uncertainties pose a considerable challenge. "One of my biggest concerns is that the legislation will put too much change in the hands of employers," Trautwein said. "It will be difficult for them to keep all of the different pieces straight."
KEY CONCERNS: Will the continuing confusion about the ACA lead to a delay in its implementation?
"It would not surprise me if there were an effort to provide time for a greater transition to the requirements of the law," said the NRF’s Trautwein. "But that will likely not develop until late in 2013. So I keep telling retailers, ‘Plan as if the law will go into effect on schedule.’ "
Retailers can take steps to ease the transition to the new world of health insurance. (See related story.) No matter how carefully retailers tread, though, the ACA is likely to have a negative impact on the bottom line.
"The retail industry operates with thin profit margins," Trautwein said. "People are one of the biggest overhead costs. Health benefits, next to wages, are the largest part of those costs, and there is very little room to absorb additional expenses or pass those along to customers. So it’s not a pretty picture."
Phillip M. Perry is a New York City-based business writer.
Retailers are expected to be uniquely impacted by the ACA, given the industry’s high reliance on part-time and seasonal workers.
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Zumiez Q4 profit up 22%; 60 new stores planned for 2013
Lynwood, Wash. — Zumiez Inc. said Thursday its fiscal fourth quarter net income rose 22.1% to $22.9 million on improved sales.
Revenue for the quarter, ended Feb.2, (14 weeks) increased to $224.4 million from $183.9 million in the year-ago period (13 weeks). Same-store sales fell 1%.
Zumiez said it plans to open about 60 new stores in the current fiscal year, including up to 10 stores in Canada and six stores in Europe.
Zumiez said its net income rose 13% in 2012, to $42.2 million. Revenue rose 29%, to $669.4 million from $555.9 million.