Sephora is an American beauty brand and cosmetics retailer and also an innovative global business which has been known to “do things a little differently”. The launch of Sephora’s website occurred already in 1998, allowing them to operate as an early player within electronic commerce (Bornstein, 2014) and later also social commerce.
Social commerce is the combination of e-commerce and social media. It is a term often used to describe new online retail models or marketing strategies that incorporate social networks and/or peer-to-peer communication to drive sales (Indvik, 2013). The global social commerce market has an estimated size of $30 billion (Euromonitor, 2015). Moreover, it shows impressive growth potential of almost 200%
(Smith, 2015). It was forecasted to represent 5% of online retail revenue in 2015 (Morison, 2014) and expected to grow further. Social commerce offers a unique approach by disrupting traditional marketing taxonomies of bought and owned media. With this new, “earned” concept, customers are no longer customers but rather become “fans” of the brand. Although, these new social media outlets (SMOs) have a somewhat narrow reach and a somewhat homogenous audience, they offer an immense business opportunity. This development constitutes a completely new customer relationship for businesses, which they need to learn to develop in order to leverage the great potential offered by the Internet and social commerce especially. In fact, this potential goes beyond basic user acquisition. It creates a soil for more cost effective R&D, customer service and data management. Data generated and measured through social platforms can, in turn, be leveraged for future marketing efforts and product launches.
In 2012, Sephora released an application, optimising mobile sales leading to a 167% increase in orders, which now accounts for approximately a third of mobile traffic. The most important and best developed parts of the website were incorporated in this application, allowing for an improved and unique customer experience ultimately leading to increased sales and customer loyalty (Cameron, 2013). Sephora’s revenues were €1.94 billion in 2012 (Sephora, 2016). In 2013 these revenues, according to Forbes, increased up to over $4 billion. This is said to be due to the launch of Sephora’s online store, currently serving approximately 1700 store in 30 countries in the whole world (Loeb, 2013).
In 2010 the Sephora team developed a platform called “Beauty Talk” where customers could engage with each other, whilst remaining anonymous and safe (Ofek & Berkley Wagonfeld, 2012). The interest in the platform was high from the beginning. Yet, the Sephora team wanted to encourage users to share their knowledge and experiences more and, thus, they created a “leaderboard” with 35 levels ranging from newcomer to beauty master, depending on the amount of a user’s posts. Upon registration for the “Beauty Board” users register an account and build a highly personalised profile based on their demographics and preferences. This generated data is one very important outcome of implementing social commerce models (Mau, 2013). With the help of the personal data, Sephora gains access to entirely new opportunities of customer interaction. Firstly, this personal data allowed the company for more specific personalisation of their products, the shopping experience for their customers, and their marketing efforts. Hence, social commerce empowered the delivery of personal brand experience (Tode, 2016). Furthermore, the collected personal information transforms anonymous customers into recognised entities. Once individuals are entities, marketing strategies can be personally targeted to each individual customer. In fact, data collection assists Sephora in enriching the user’s experience with the brand. Additionally, big data grants the entity complete control over the online customer experience. Next to the ease and comfort within product search and selection due to personalisation, the company can establish a close trust relationship to their customer base.
The platform was developed in collaboration with a company called Lithium. According to Lithium’s chief Michael Wu, the platform has over 400 metrics, which are being used to track users’ engagement. This reaches from content engaged with, up to the general behaviour on the platform of the user. Sephora, thus, gains knowledge about customers’ social relationships and preferences concerning their purchasing (Ungerleider, 2014). Hence, Sephora also understands how to utilise their customers in a way that they and also Sephora, itself, retrieves maximum utility as explained by Bridget Dolan, Head of Digital at Sephora: Consumers are “the best sales people we have in our stores because these women really know about beauty – they really love it” (Fiorletta, 2014).
The resulting social network enabled Sephora a whole new way of customer service: peer-to-peer reviews. They gained more accurate problem descriptions and frequently asked questions. Moreover, they were able to recognise and react proactively to developing trends. These inter-customer reviews do not only save manpower for Sephora, they can also give access to new ideas and methods. As a result, they can offer higher quality customer service to other channels (Tode, 2016). It is important to mention that Sephora did not stop their online efforts after implementation of their own social media sites. They continue their role as an early adopter and are, thus, able to tap into new opportunities as soon as they come up. What do you think?
Bornstein, J. (2014). How Sephora Reorganized to Become a More Digital Brand. Harvard
Business Review. [online] Available at: https://hbr.org/2014/06/how-sephora-reorganized-to-become-a-more-digital-brand/
Cameron, M. (2013). Sephora’s World Leading Digital Platform. The Social Media Monthly. [online] Available at: http://thesocialmediamonthly.com/sephoras-world-leading-digital-platform/
Euromonitor, (2015). Internet Retailing in Germany. [online] Euromonitor. Available at: http://www.euromonitor.com/internet-retailing-in-germany/report
Fiorletta, A. (2014). Sephora Drives Advocacy With BeautyTalk Program. [online] Retailtouchpoints.com. Available at: http://www.retailtouchpoints.com/features/retail-success-stories/sephora-drives-advocacy-with-beautytalk-program
Indvik, L. (2013). The 7 Species of Social Commerce. [online] Mashable. Available at: http://mashable.com/2013/05/10/social-commerce-definition/#AeP5T.YaSOq7
Lithium, (2015). The Sephora story.
Available at: http://www.lithium.com/why-lithium/customer-success/sephora
Loeb, W. (2013). Sephora: Department Stores Cannot Stop Its Global Growth. Forbes. [online] Available at: http://www.forbes.com/sites/walterloeb/2013/04/18/sephora-department-stores-cannot-stop-its-global-growth/#33a34332286f
Mau, D. (2013). [online] Fashionista.com. Available at: http://fashionista.com/2014/03/sephoras-social-shopping-platform-is-here
Ofek, E. and Berkley Wagonfeld, A. (2012). Sephora Direct: Investing in social Media, Video, and Mobile. 1st ed. Cambridge: Harvard Business School, pp.2-24.
Sephora, (2016). About Us | Sephora. [online] Available at: http://www.sephora.com/contentStore/mediaContentTemplate.jsp?mediaId=10800104
Tode, C. (2016). Why brands could own social commerce, not the big platforms – Mobile Marketer – Social networks. [online] Mobilemarketer.com. Available at: http://www.mobilemarketer.com/cms/news/social-networks/17474.html
Ungerleider, N. (2014). How Sephora Discovered That Lurkers Are Also Its “Superfans”. [online] Fast Company. Available at: http://www.fastcompany.com/3035236/how-sephora-discovered-that-lurkers-are-also-its-superfans
Hey Anna, thanks for the interesting post, a very detailed and thorough analysis! It is particularly interesting to see how Sephora’s social commerce campaign influence their marketing and customer relationship efforts as well as the entire company as a whole.
Two years ago I wrote a blog post about , one of them being Lithium. While at the time I wrote the post I couldn’t get my hands on the product itself, it is exciting to see how a company like Sephora is making use of such a customer engagement tool. In my post I’m also referring to the book Wikinomics: How Mass Collaboration Changes Everything by Don Tapscott and Anthony D. Williams (2006). The two authors write about new emerging business models that might become viable by the use of mass collaboration tools. More in detail, they talk about the concept of the ‘Prosumer’- a blend of consumer and producer. I think the last paragraph where you are referring to the peer-to-peer reviews as a completely new way of customer service for Sephora is a perfect example for the ‘Prosumer’ concept. As you mentioned yourself, by giving their customers a platform to engage with each other, Sephora can learn from their customers first-hand, spot new trends and react proactively. So their customers are more or less actively involved in the development of the products of tomorrow. Steve Jobs once famously said: “People don’t know what they want until you show it to them”. Considering the case of Sephora and the potential value of social commerce tools, I have to disagree with this statement (at least partially). Sometimes it might be smarter to listen to what your customers than try to guess it. What do you think?
And yes, I enjoyed reading your post even though I’m not into the beauty topic at all.
Hey Anna, thanks for the interesting post, a very detailed and thorough analysis! It is particularly interesting to see how Sephora’s social commerce campaign influence their marketing and customer relationship efforts as well as the entire company as a whole.
Two years ago I wrote a blog post about two Web 2.0 that boost organisational productivity (http://janmariniak.blogspot.nl/2014/08/two-web-20-tools-that-will-boost-your.html), one of them being Lithium. While at the time I wrote the post I couldn’t get my hands on the product itself, it is exciting to see how a company like Sephora is making use of such a customer engagement tool. In my post I’m also referring to the book Wikinomics: How Mass Collaboration Changes Everything by Don Tapscott and Anthony D. Williams (2006). The two authors write about new emerging business models that might become viable by the use of mass collaboration tools. More in detail, they talk about the concept of the ‘Prosumer’- a blend of consumer and producer. I think the last paragraph where you are referring to the peer-to-peer reviews as a completely new way of customer service for Sephora is a perfect example for the ‘Prosumer’ concept. As you mentioned yourself, by giving their customers a platform to engage with each other, Sephora can learn from their customers first-hand, spot new trends and react proactively. So their customers are more or less actively involved in the development of the products of tomorrow. Steve Jobs once famously said: “People don’t know what they want until you show it to them”. Considering the case of Sephora and the potential value of social commerce tools, I have to disagree with this statement (at least partially). Sometimes it might be smarter to listen to what your customers than try to guess it. What do you think?
And yes, I enjoyed reading your post even though I’m not into the beauty topic at all.
Hey Jan,
Thank you for your comment and also sharing your previous blog post. I think it’s really interesting how you describe the effect and importance of social tools within organisations, especially Lithium. Within our extremely volatile and changing business world, it has become ever more important for organisations to engage and retain their customers. Moreover, as you mention – companies like Sephora have started recognising and exploiting the value of “Prosumers”. This is not only cost efficient, but also in itself increases customer engagement and brand attachment. Nowadays, several big players in the market have incorporated “Prosumer” engagement strategies, for instance, Nike with their NikeID feature allowing customers to personally customise their very own sneaker. Such techniques have, without a doubt, transformed traditional Customer Relationship Management (CRM) and achieved unique customer experiences, ultimately increasing switching costs to the benefit of the organisations introducing these techniques. Furthermore, the book you reference states that “To succeed, it will not be sufficient to simply intensify existing management strategies. Leaders must think differently about how to compete and be profitable, and enhance a new art and science of collaboration.” I believe this is also in line with the conclusions of Granados et Al (2008), regarding strategic inflexibility being the main problem of incumbent firms losing market share and becoming less competitive. This highlights the increased importance of offering differentiation via designing an exceptional customer experience though e.g. social commerce, as in the case of Sephora.
Lastly, concerning the quote by Steve Jobs I believe you are right in stating the importance of listening to your customers to find out what they want. In the case of Sephora, the launch of their social commerce platform was indeed an internal idea aiming at solving their challenges of responding to individual customers in a timely fashion. However, I also agree with Steve Jobs’ quote, in the sense that the novel service of a platform offered by Sephora’s “Beauty Talk” was something customers did not per se ask for. It was more that they indirectly wished for higher efficiency regarding response times by Sephora, who then came up with an idea that “killed two (or multiple even) birds with one stone”. So I believe you and also Steve Jobs combined summarise this in saying: “By listening to and understanding your customer you can find ways of giving them what they didn’t know they actually needed.”
Granados, Nelson F.; Kauffman, Robert J.; King, Bradley (2008): „How Has Electronic Travel Distribution Been Transformed? A Test of the Theory of Newly Vulnerable Markets“. In: Journal of Management Information Systems. 25 (2), S. 73-96, DOI: 10.2753/mis0742-1222250204.