Brand Sephora gets an image makeover
With more exclusive labels and larger stores, the LVMH-owned beauty retailer finally turns the corner in the Indian market
Sephora, the French beauty retailer from the LVMH Moet Hennessy Louis Vuitton family, has struggled to make it work in the Indian market. But after five years in the country and two failed partnerships, the French retail brand is hoping to get third time lucky with its new partner Arvind Lifestyle Brands. The Indian venture broke even in the second quarter of FY2018 and it is all set to further expand its store footprint in the coming year.
A booming beauty market and a new leadership have raised the brand’s hopes and it is planning to bring in 14 new labels while expanding its store footprint in the coming years. But industry insiders warn that the challenge it faces today is quite different from what it encountered five years ago. For one, the retail landscape has changed with the entry of online beauty aggregators such as Nykaa as well as e-commerce giants Amazon and Flipkart who have their own bouquet of private and premium labels. The online cosmetics market is estimated to grow ten times in the next few years from ~1000 crore now according to Red Seer Consulting.
J Suresh, chief executive officer and managing director at Arvind Lifestyle Brands does not think this has any bearing on Sephora’s fortunes. “We are in the retail space and not a mere brand and we target premium customers. Sephora is about experience and experimenting. Customers try out multiple things and select what they like,” he says adding that they are not in the mass business. In the year since teaming up with Sephora, Arvind has focused on providing the customer with a premium experience at the store, with a better selection of labels and a team of trained store executives. Cleaning up the catalogue At the heart of Sephora’s turnaround story is a new stocking strategy. Sephora customers want to access the premium brands that they may have encountered on their travels abroad and the Indian assortment is similar to what is stocked in global markets. “Make-up, skincare, fragrance are our main merchandise. Globally, many brands are exclusive to us, which you do not get anywhere,” says Suresh.
Sephora opened its first store in partnership with Genesis Colors in 2012, but the alliance did not last long and it soon joined hands with DLF Brands. But this venture too came apart soon and finally in 2015, Sephora teamed up with Arvind Lifestyle Brands. “Earlier, the merchandise was neither chosen nor stocked well and; there were not too many labels on offer. Plus the staff were not well trained in beauty matters,” says an executive who has worked with Sephora in the past.
The brand team at Arvind brought in new brands and ensured that the store staff was aware of the brands being retailed and trained in matters of make-up and personal care. This helped provide customers with a more personalised experience. At the same time there was an attempt to take Sephora into new territories and make it easier to access for a wider set of customers. Arvind opened 10 stores taking Sephora’s total tally up to 14 and says Suresh, “We improved store upkeep. We hired good staff and we got many new brands.”
Sephora retails products from Mac and Estee Lauder (also available in their own stores and via online channels in India), its own labels and an exclusive line of about 20 brands that includes Becca, Cover FX, Smashbox and so on. The company plans to introduce 14 additional exclusive brands in the country over the next year. New look stores, new experience The Indian beauty, make-up and personal care market has been growing at over 9 per cent a year between 2011 and 2016 while the colour cosmetics segment has grown at a compounded annual growth rate (CAGR) of 21.3 per cent between 2011 and 2016 in terms of value, according to industry estimates.
Enthused by the buoyancy of the marketplace, Sephora set up new stores and increased its store size. The average size of a Sephora store which was between 2,700 and 2,800 square feet has gone up to about 3,200 square feet. The stores were designed to improve display and discovery of brands while the team was trained to guide and handle customer enquiries better says Suresh.
All of this has resulted in a turnover of around ~100 crore in FY17 and the company says it is looking at a turnover of ~200 crore in FY18 and ~500 crore in the next three years. Store sales have been growing at a steady pace at mid-single digits according to the company.
“The beauty sector still has low penetration so on one side brands are penetrating smaller markets and on the urban side premium brands are spreading their wings and capturing the market. Sephora has a unique position where it is not just playing on this trend of premiumisation, but also offering a unique and wide assortment, which will be a key attraction for consumers,” says Baqar Naqvi, an analyst with Wazir Advisors.
Can Sephora grow despite the growing clout of online beauty marketplaces? Suresh says online is a big opportunity and they are selling via Arvind’s nnnow.com but the Sephora format is unique. Naqvi agrees and adds that the Sephora format fulfills an important need. “Further it is not just the assortment, but the trained sales staff and their consultative sales approach which will help convert consumers,” he adds. J SURESH CEO & MD, Arvind Lifestyle Brands
“Sephora is about experience and experimenting”