Sephora SWOT Analysis 2024: Explore Its Competitive Edge

Since the early 2000’s Sephora has changed the makeup market through its innovation and customer management. It even caused a 23% increase in its parent company LVMH’s revenue in 2022. And in this article, we’ll be investigating the reasons behind the company’s triumphant rise with the Sephora SWOT analysis.

Sephora: Company Overview

Dominique Mandonnaud founded Sephora in Paris in August 1970. The company went through years of losses before turning in a $270,000 profit in 1972. By the end of 1997, it had crossed $322,937,653 in revenue and had 18% of France’s perfume market share.

Now, Sephora is a French multinational personal care and beauty products retailer. It’s headquartered at 41 Rue Ybry, 92200 Neuilly-sur-Seine. In 2022, its parent company LVMH had a market cap of $430.99 billion and generated $72.72 billion as revenue.

Product & Services of Sephora
Cosmetics | Skincare | Fragrance | Nail Color | Beauty Tools | Body Lotions | Haircare

Sephora Competitors
Ulta Beauty | Nordstrom | Macy’s | Sally Beauty | Birchbox | The Body Shop | Purplle | Oriflame

Did You Know?

Sephora comes from the Greek word sephos or beauty, combined with Moses’ wife’s name Zipporah.

Strengths – Sephora SWOT Analysis

Superior In-store Service: Sephora’s biggest selling point is the company’s in-store customer service experience. The employees at Sephora can provide expert opinions on what products customers should try. They are well-behaved, allow customers to try on as many products as needed, and offer free help with makeovers. Sephora employees will also offer up to 3 free samples from any aisle, but mascara and eyeliner and gladly add complimentary products with purchases over $75.

Compelling Loyalty Program: Sephora stays ahead of the competition by offering an unmatched loyalty program that provides benefits and provides access to a community focused on skincare and makeup. By becoming a Beauty Insider at Sephora, customers can claim and redeem points for deluxe-sized samples, and they will receive a birthday gift. Spending $350 will elevate a customer’s status to VIB and grant perks such as a free makeover per year. While spending $1000 will elevate them to VIB Rouge, and they can get exclusive discounts, free shipping, and unlimited makeovers.

Wide Selection Of Products: Sephora offers a wider selection of products than any typical department store can, with approximately 300 brands in its collection. It offers makeup, skincare, hair care, brushes, tools, body care, and bathing products to its customers. Along with reputed brands such as Chanel, Estee Lauder, Dior, L’Oreal, and Lancome, Sephora also features new and trending brands such as Adwoa Beauty, Shani Darden Skin Care, and Bread Beauty Supply.

Omnidirectional Sales Channels: Sephora has managed to make its virtual and physical retail spaces a seamless experience, making its customers completely satisfied with either retail channel. Its physical stores attract customers by offering Beauty Workshop stations, where they can sit and watch tutorials and try on new products virtually. The website also offers the Virtual Artist service, which offers suggestions to its users based on their preferences and skin condition. Sephora was also the first company to perfect its mobile experience and provide all services that its website does, which resulted in half of Sephora’s digital traffic coming from phones till 2016.

Innovation: Sephora has been leading the charge in enhancing the customer experience by integrating technology into the browsing and purchasing experience. Its Virtual Artist feature allows a customer to try on makeup and get suggestions regardless of the nature of the retail platform. Sephora launched one of the largest beauty-based social media platforms in 2017, and it connected activity on its site and forums to the physical store. Sephora even introduced a Skincare Advisor on Google Home who can take in voice commands and shoot back skincare tips daily.

Weaknesses – Sephora SWOT Analysis

Employer Image: Sephora’s treatment of its employees leaves a lot to be desired, and it has lowered the company’s employer image over time. Sephora’s training is a harsh experience, and employees have to rigorously follow every rule set in place without fail. Employees must be dressed to the nines, give makeovers on demand, cannot backtalk even when customers are rude, and are required to provide recommendations for upselling. However, they don’t get any commission for sales and have claimed to face discrimination based on physical appearance.

Racism In Stores: Sephora faced allegations of racial profiling its customers and employees from as early as 2014 and hasn’t yet managed to get a hold of the situation. The issue came to light when SZA, a famous US singer, stated that she had been racially profiled by Sephora employees. In that very year, 29% of black shoppers complained of facing unfair treatment, which was 8% higher than problematic interaction reports against police. In 2021, Sephora’s survey found that the company had failed to make any headway, as 4 of 5 shoppers thought there was no brand owned or made by people of color, and 3 of 5 shoppers had been discriminated against due to skin color.

Failing Product Safety: Although Sephora is loved by its customers for providing a seemingly infinite supply of free samples, there have been incidents where it has jeopardized a customer’s health. In 2017, Elena Davoyan filed a lawsuit claiming that she had contracted herpes from trying on a shade of lipstick from the Los Angeles retail center. The lawsuit was settled out of court by Sephora and Davoyan in 2019, but no amount of reassurance and claims can take back the reputation damage Sephora has suffered from it. Especially because employees admitted to not switching out testers and letting customers use display tools without any regard for their safety.

Posting Fake Reviews: Sephora’s forum and site reviews are used by many customers as a trustworthy way of ascertaining a product’s value and performance. Unfortunately, in 2018 the brand Sunday Riley instructed its employees to leave glowing reviews of its product lines on Sephora’s site along with reviewing other products to make it look superior. Although the brand claimed it was a one-off incident, Sephora’s trustworthiness has been reduced since, as customers are always on the lookout for fake reviews.

Opportunities – Sephora SWOT Analysis

Doubling Down On Asian Countries: In 2022, North Asia had the largest cosmetics market worldwide, with China having the highest cosmetics consumption in value. The Asia-Pacific region contained 43% of the global cosmetics market share. Sephora currently has only 200 stores in Australia, China, India, Indonesia, Malaysia, Singapore, and Thailand. The company should consider opening more stores in this region and increasing its market presence in China, India, and South Korea.

Product Placement On YouTube: 51.4% of US YouTube users in 2023 were women. Sephora can form contracts with YouTubers with large female audiences and use them for marketing Sephora’s brand image to these users through subtle product placements. This way, the company can implicitly market itself through influencers without having direct ties with them.

Including Asian Brands: Sephora can include rising popular Asian cosmetics and skin care brands such as Roman, Hemish, TOCOBO, Purito, and Peach C. These brands are now being featured by competitors such as Stylevana, and these have gained massive traction as these brands are cruelty-free.

Threats – Sephora SWOT Analysis

Falling Purchasing Power: With a war raging and growing global political unrest, most countries are facing falling economies. The purchasing power of US consumers has gone down drastically over the years, hitting an average annual rate of -3.08%. Consumers have lost -6.18% purchasing power in 2023 compared to 2022. If purchasing power continues to decline at this rate, eventually consumers may turn away from expensive goods such as makeup.

Ignoring Background Checks: Sephora fails to thoroughly review and run background checks on celebrities it forms contracts with. For example, it failed to vet YouTuber Olivia Jade, who the company contracted to promote a bronzer. Unfortunately for the company, she was found to have faked her achievements for her admission to USC, and her parents were accused of paying $500,000 for her and her sister’s studentships at the university. Scandals such as these could eventually sour the public image of Sephora and cause it massive financial losses.

Breaching Privacy For Data: In 2018, an Illinois customer filed a complaint for stealing and disseminating her data. She alleged that her phone number and more were collected and spread to Sephora Employees for marketing purposes when she tried the Virtual Makeup Artist feature. In a time when customers are becoming more concerned with data privacy, such actions can cause customers to turn away from fear.

[Bonus Infographic] SWOT Analysis of Sephora

Recommendations for Sephora

For Sephora to sustain its dominance in the industry, it should consider these options.

• Sephora should randomly send inspectors to check its employees’ adherence to its hygiene protocols.
• The company can expand to Asian countries with rising markets, such as Thailand and Bangladesh.
• It should disclose what information it collects to its users.
• It can include cheaper brands in its collection to retain customers during the economic crisis.

Frequently Asked Questions (FAQs)

Final Words on Sephora SWOT Analysis

Sephora managed to change the landscape of the makeup industry by focusing on customer service and management. However, the company’s issues with racism, safety failures, and more have brought down its image. To sustain itself, the company should carefully review its policies and employee training.

References

• Wikipedia contributors. (n.d.). Sephora. Wikipedia.
• Aaker, D. (2016, April 26). Six Reasons to Admire the Sephora Brand. LinkedIn.
• Carrara, A. (2023, January 27). LVMH’s record-breaking results driven by Sephora. Cosmetics Business.
• Hopp, D. (2022, August 29). 15 Weird (But True) Facts About Sephora. Byrdie.
• Dries, K. (2014, November 7). Big Sephora Sale Marred by Tech Issues, Accusations of Racism. Jezebel.
• T. (2018, November 15). 20 Reasons Why Sephora Lost Our Trust (Forever). TheTalko.
• Pomarico, N. (2016, July 15). Things About Sephora You Didn’t Know. The List.
• Stewart, K. (2018, July 23). 5 ways Sephora creates a seamless customer experience. NRF.