If necessity is the mother of invention, Sephora U.S. is the godparent of the modern-day beauty industry.

From incubating a few of today’s strongest brands to pioneering an open-sell environment in prestige, Sephora modified endlessly how beauty is sold — and transformed the U.S. retail landscape in the method.

“Sephora has been a tremendous force for change in the wonder industry,” said Jean-André Rougeot, president and chief executive officer of Sephora Americas, who was president and CEO of Coty when the retailer opened its first Latest York City store in 1998.  “It is a completely different beauty world. Sephora got here in with a self-serve brand-agnostic concept that was truly revolutionary.

“I remember many pundits saying it will never work,” Rougeot continued. “But what I believe everybody missed is that on the time, the younger generation was really frustrated with the department store experience and there was not a way of inclusion. Sephora dramatically democratized what beauty was about.”

“They’ve all the time been an audacious changemaker, disrupting retail from the beginning,” said Charlotte Holman Ros, president North America, Parfums Christian Dior. “Dior was founded by a visionary changemaker and our brand and story are driven by the spirit of audacity and finding latest ways to spread joy and happiness. Likewise, Sephora was the primary of its kind to create an open-sell beauty environment and that spirit of constant disruption to search out latest ways to have interaction and create joyous moments of happiness is all the time at the guts of their strategy.”

Just consider:  25 years ago, when the French-born retailer was readying its first U.S. outpost, department shops were by far the dominant seller of prestige beauty products, with a market share hovering at 80 percent. For the 12 months ending April 2023, that figure is nineteen percent, in accordance with Circana’s checkout data.

A handful of brands — a.k.a. the large three — ruled the roost, and as for newcomers hoping to interrupt through? Good luck attempting to afford the astronomical costs affiliated with doing business in a full-service environment.

Enter Sephora, on the time France’s largest perfumery when it comes to volume, began by Dominique Mandonnaud in 1969 and bought by LVMH Moët Hennessy Louis Vuitton in 1997 for $262 million. 

Back then, Sephora had about 54 doors in France and had just opened its largest, a 14,000 square-foot flagship on Paris’s Champs-Élysées, with one in every of the widest ranges of fragrance and sweetness products anywhere on this planet.

The one problem was — most of those brands were blissful with their distribution within the U.S. and had no desire to upset the present balance of power by selling to Sephora’s American arm.

That meant executives needed to forge a very latest strategy, one built around small emerging brands that few had ever heard of.

“What they’re most known for is curating prestige brands, incubating indie brands, elevating trends,” said Mark Loomis, president, North America, of the Estée Lauder Cos. “Sephora has successfully tapped into Millennial and Gen Z customers and created a destination where they’ll come and experience multiple prestige brands at one time.”

That skill of identifying and constructing emerging brands and trends has fundamentally modified beauty — and created a sales juggernaut. Industry sources estimate that Sephora North America has the potential to drive $10 billion in sales.

For its part, Macy’s Inc., parent company to Macy’s, Bloomingdale’s and Bluemercury, doesn’t break out beauty sales but includes cosmetics and fragrances with women’ shoes and accessories. Together, they generated $9.6 billion in sales in 2022. Meanwhile, Ulta Beauty surpassed $10 billion in sales in 2022 for the primary time in its history, but that features sales of mass, masstige and skilled products, in addition to prestige beauty and services.

“We’re the incubator for the industry,” said Rougeot, who declined to comment on the sales figure. “From Day One — a few of it by accident, some by strategy — Sephora launched into a method to construct brands. No person else has done it — even today.”

He ticks off quite a lot of bestselling brands — Fenty, Supergoop, Tatcha, Drunk Elephant — and notes “with great humility” that 90 to 95 percent of the brands successful in Ulta began at Sephora. “The prestige beauty industry could be so much more boring and so much smaller without Sephora,” said Rougeot. “We’re really impacting the industry and the brands. Our growth has been staggering — we’re growing at an incredible pace and our brand partners are benefiting from this,” he continued. “It’s an incredible flywheel.”

While the brand lineup has been a key component of Sephora’s success, so has its connection and understanding of the deeper sociocultural shifts which have impacted beauty over the past twenty years.

“Sephora has been a force for changing what beauty represents,” said Zena Srivatsa Arnold, who was named chief marketing officer of Sephora U.S. in May. Most recently a senior vp at PepsiCo., she brings an out of doors of the industry perspective and a private love of the category. “Beauty is rather more about self-expression and reference to people, which is de facto powerful.”

“Every client brings themselves to beauty, so we’d like to satisfy them where they’re,” added Abigail Jacobs, senior vp, brand and integrated marketing. “Right away, beauty is seen as incredibly empowering, since it is a tool for individuality and expression.”

Sephora executes about eight major campaigns a 12 months across all of its platforms, including holiday, in addition to quite a few others tied into current events, like Black History month, Hispanic Heritage month and Pride month.

“The overarching story we’re all the time attempting to tell is what is exclusive and special and differentiated about Sephora, whether it’s our product or our experience or the encompassing services and features we provide,” said Jacobs.

For instance, this 12 months’s Pride campaign included content created by Sephora Squad members inspired by the 24 different Pride flags, through which each creator did a makeup look based on their favorite flag, accompanied by stories that told of their very own personal journey. “The longer term of beauty content is multicultural and intersectional,” said Jacobs. “The longer term beauty consumer is those things, and our content needs to satisfy them where they’re. Gen Z is a generation that doesn’t define themselves by a single identity. We’d like each our brands and our content to flex with them.”

In her role, Jacobs also oversees the social media and influencer teams, and the challenges of executing each large-scale and small-scale content are significant. To satisfy them, Jacobs has created “tiger teams” who work in an agile and versatile approach to solve problems quickly. The approach is characteristic of Sephora’s culture and the leadership style that Rougeot brings to the business. He believes in focusing the enterprise on key goals and initiatives, after which letting them run.

“There isn’t a risk-taking without great focus,” he said. “We wish you to be laser-focused on what’s going to drive the business.

“I all the time say in business there are alternative ways to win. There’s never only one solution to an issue,” he continued. “However the query is — how focused are you? Once you decide an answer, you will have to drive relentlessly, bring solutions to it, measure it, have milestones and be sure that that the corporate is on board and understands their roles and commitments.”

A brand veteran who was most recently CEO of Profit Cosmetics before joining Sephora in 2019, Rougeot considers the final management piece of his role to be crucial.

“I’m not an authority in anything, but I could be dangerous on most topics. I can ask questions, I can challenge people,” he said. “I would like the individuals who report back to me to be a lot better than I’m — the marketing people 10 times higher at marketing, the merchandisers, etc. That’s the way you construct a winning team.”

Rougeot relishes his interactions with people in any respect levels of the organization, and is an ebullient, energetic executive who likes to throw in a zinger now and again. When Sephora at Kohl’s opened around the identical time as Ulta Beauty at Goal, he loved to quip that customers don’t need to buy prestige beauty “in between the bananas and the bathroom paper.”

While the heavy lifting on the merchandising side is handled by Artemis Patrick, executive vp, global chief merchandising officer, and Carolyn Bojanowski, executive vp of merchandising within the U.S., Rougeot loves meeting with founders — they usually love him.

Alicia Valencia, global president of Makeup by Mario, recalled a visit she and makeup artist Mario Dedivanovic had with Rougeot, Patrick and senior vp of makeup Alison Hahn within the very earliest days of ideating the brand. Dedivanovic, who rose to fame as Kim Kardashian’s makeup artist, began his profession as a Sephora beauty adviser 20 years ago and was set on launching his brand there.

Valencia and Dedivanovic went to the meeting with a proposal for a launch tower in 75 doors.

“Jean-André checked out us and said, ‘I think that is going to be a legacy brand. Mario, you shall be the following François Nars. I don’t often say that, but I’m very rarely mistaken,” Valencia said.

“Mario and I checked out one another and went, ‘holy cow!,’ she continued. “I said, ‘Jean-André, thanks, but we haven’t even raised seed money.’”

Rougeot was emphatic in his support, believing strongly in Dedivanovic’s vision of a brand that combined education and artistry.

It’s a passion, said Valencia, that’s shared in any respect levels of the organization, especially in-store with the wonder advisers. That backing has enabled Makeup by Mario to turn into a Top 10 brand in two years. “I’m in awe of the wonder advisers. Their love and support for him as a makeup artist has enabled us to be at this stage,” she said. “That is the most important link. It starts with senior management and goes during the organization; the wonder advisers know when something is the actual deal, authentic.”

Internally, Rougeot urges his teams to be intellectually curious, looking beyond the confines of beauty retail, to businesses like Best Buy and Dick’s Sporting Goods, for inspiration and best practices.

For instance, he cites the successful implementation of omni-convenience features, like buy online, pick up in store, curbside  pickup and same-day delivery. “After we began on this path, which has turn into an enormous a part of our business, we were quite bad,” Rougeot said. “So I said, let’s take a look at the individuals who do that well. Before we reinvent the wheel, let’s get smart. We learned so much and we got here up with a Sephora solution that’s working well.”

Every two years, Sephora’s senior management team identifies what it thinks shall be the six or seven key drivers for the following two years. Omni-convenience, for instance, was a key tenet of the 2021-2022 plan called “Tree of Growth.”

The present plan is named “Pot of Gold,” and one vital component is personalization. “Everyone talks about it — only a few do it right,” said Rougeot. Which means a cross-functional all-hands-on-deck approach that takes into consideration the post-pandemic consumer mindset shift. “Previously we were in a single-channel mindset — you’ll see a purely digital customer who began their journey online or they’d come into stores, purchase and go home,” said Nadine Graham, senior vp of e-commerce. “Prior to now few years there’s been an enormous shift. Now any sort of client can come to any channel — they’ve shifted to a multichannel mindset and it requires us to think in regards to the customer first and put the shopper at the middle of every little thing we do.”

The rollout of Color IQ Foundation Matching technology, which began in 2012, is one such example. The tool, which has been upgraded significantly, uses artificial intelligence to scan a user’s skin after which recommends the foundations which might be one of the best match. To this point, Sephora is executing about 75,000 sessions per week, or 4 million a 12 months, across its fleet of 534 stores.

ColorIQ has also plays a key role in Sephora’s diversity, equality and inclusion initiatives, one other key component of “Pot of Gold.” “It is a component of every little thing we do today,” said Rougeot, acknowledging that much work stays to be done. “We made a transparent internal and external statement that we could be the retailer that may be inclusive to all. It’s hard. I’m not saying we do it on a regular basis,” he said, noting that Sephora was the primary major retailer in America to take the 15 Percent Pledge, where retailers pledge to allocate a minimum of 15 percent of their shelf space to Black-owned businesses.

“It’s a marathon, not a sprint,” Rougeot continued, “and it’s a core a part of our worth.”

“Sephora has been very open in regards to the opportunity they need to expand their lenses, when it comes to how they’re viewing people who find themselves shopping, how they’re viewing their forged, their leadership team and in addition the gathering of products in store,” said Danessa Myricks, founder and CEO of Danessa Myricks Beauty. “After George Floyd’s death, everyone knew there needed to be changes. There was numerous performative motion, but Sephora’s actions got here well before George Floyd and the 15 Percent Pledge.”

Myricks first met with Sephora’s team in 2019 once they reached out to her. “We have now very thoughtful conversations about us not only as a Black-founded brand, but as a brand that they had watched grow over time and desired to support and help elevate and create more awareness for,” she said. “They’re focused on constructing brands — not only selling products.”

“Sephora isn’t nearly distribution, it’s about brand-building and visibility. That’s what makes them so unique,” agreed Nancy Twine, the founding father of Briogeo who’s credited with introducing textured hair care into the prestige channel. Twine launched in Sephora in 2014, scaled quickly and in 2022 sold to Wella.

While the founder applauded Sephora’s adoption of the 15 Percent Pledge, it’s Sephora’s ongoing and meaningful support for Black-founded brands that has really resonated. “They’ve invested money and time through the Speed up program to be sure that Black-led businesses are arrange for retail readiness,” said Twine, who oversees this system’s finance and operations curriculum. “One in all the things that they acknowledged was, you possibly can’t just put a brand on a shelf and expect it to succeed. You may have to be sure that they’ve the resources to achieve this.”

Twine said that such efforts also translate in-store and beyond. “Sephora realized they needed to be more intentional with how they were going to get clients in-store, they usually began becoming engaged in the chance,” she noted. “For instance, they did a curl animation, began localizing certain doors that had more textured-hair clients to be sure that they might find product. They invested in digital campaigns with larger content platforms. They really got into it.”

Executives consider that ColorIQ is one other step in the proper direction, and can help remove a key pain point for shoppers of color — the issue of finding the proper shade of foundation or concealer. “In case you come right into a store and the wonder adviser doesn’t appear like you, chances are you’ll not be totally confident that she will find the proper match,” said Jacobs. “This tool brings the science to the art of it.

“We call it the ‘trust campaign,’” she continued, “because if you happen to can trust us to search out the proper complexion product for you, you possibly can trust us for anything.”

To make it much more foolproof for consumers, Sephora has also launched into an aggressive sampling campaign with its top-selling foundation brands, offering prepackaged individual-use samples. “Sixty or 70 percent of shoppers say they won’t buy a foundation without sampling it,” said Jacobs. “We all know individuals are churning through different foundations, all the time in search of the proper one. Sampling is an enormous a part of that.”

Leveraging the info gleaned from the 31 million (and counting) members of Sephora’s Beauty Insider loyalty program can also be a key component of personalization. “We’re using data as a approach to understand what’s most engaging to our clients, what they’re responding to most, to be sure that that we have now opportunities for personalizing marketing touch points,” said Emeline Berlind, senior vp, general manager, loyalty.

Personalization extends far beyond data analytics. Beauty Insiders are capable of customize their perks, whether samples, savings and even experiences like a facial and wine tasting session on the Caudalie boutique in Latest York City.  “There’s an emotional component along with the worth we provide,” said Berlind. “We’re all the time in search of latest and exciting ways to have interaction. What are the thing they didn’t even know that they wanted that we’re going to try to present them. Our goal is to remain true to the progressive spirit of Sephora and use it to drive the business.”

Innovation is baked into Sephora, across every platform. Sephora North America was a first-mover in digital, for instance, launching its e-commerce site in 1999. Today, it’s the number two beauty e-commerce site on this planet, behind Tmall.

“Sephora was on the forefront of being a real omnichannel retailer,” said David Greenberg, CEO of L’Oréal USA and president, North America Zone. “You see that locally they’ve built and the dynamism and consistency of experience between online and in-store shopping. They really took to heart the notion of letting customers shop the best way they need to. They really are probably the most customer-centric retailers today.”

While digital stays an incredibly vital aspect of the business, Rougeot and his team are extremely focused on forging the longer term of the brick-and-mortar experience.

“The experience starts in our stores — 70 to 80 percent of our latest customers come from stores,” he said. “Making our stores exciting and fascinating is a critical a part of what we’d like to do.”

Currently, Sephora is betting big on services, particularly around makeup, introducing special-occasion makeup applications like for weddings and proms, drop-in services for individuals who are in search of a fast zhuzh before a date, say, and in-store makeup lessons. There’s lash applications, Hydrafacials for the face, lips and hands, and brow waxing.

“We’ve seen an uptick in demand, not just for on a regular basis luxury, but in addition for large moments,” said Joan Willat, executive vp and chief retail officer. “We’re honing in on the expertise of the wonder adviser in-stores, in order that they may give a really personalized experience to each customer. That’s what leads clients to try latest things with us.”

At a time when shoppers can — and do — access information on demand from their phones, Sephora’s 15,000 beauty advisers play a key role in differentiating the retailer from its competition. “We all know our loyal customer base is in search of latest and different experiences in our stores,” said Willat, “so we prepare our beauty advisers to satisfy them where they’re and reflect that back to them.”

Rougeot, who propelled Profit Cosmetics to a number one position in brows during his time there,  likes to say there isn’t any such thing as bad retail — just boring retail. For him, services help Sephora transcend the purely transactional aspect of retailing. “Services bring a level of emotional commitment between Sephora and the shopper that’s critical,” he said. “If I offer you my face for 60 minutes — that’s an emotional commitment that’s through the roof, provided you do a very good job.”

One other key to growth shall be to proceed to broaden Sephora’s consumer base, primarily through external partnerships. In 2021, Sephora inked a take care of Kohl’s to open store-in-stores there, with 200 opening in the primary 12 months and one other 400 in 2022. There shall be greater than 900 by the top of this 12 months.

In a press release released in May with Kohl’s first-quarter numbers, CEO Tom Kingsbury said that comp-store growth was within the mid-teens for the primary tranche of stores, and that the 2022 openings were exceeding expectations. The partners also introduced a smaller-format store, measuring about 750 square feet, with 50 planned for the top of this 12 months and a chain-wide rollout to be accomplished by 2025.

Based on Rougeot, makeup sales at Sephora at Kohl’s are already larger than those of Nordstrom, and expectations are that they are going to exceed Macy’s makeup business by 2025. “There are about 50 million women consumers at Kohl’s, 80 percent of whom had never shopped at Sephora,” he said. “About 8 million of those have began to buy from Sephora at Kohl’s, and I believe someday 25 million–30 million shall be buying there.”

More recently, Sephora inked a take care of Zappos, a partnership that can launch this July. Executives aren’t releasing much information across the take care of the Amazon-owned Zappos, but Rougeot said it’s a continuation of the vision to be in every single place a possible beauty shopper is.

“Over the previous few years we’ve been putting numerous momentum behind omnichannel convenience to make it easier than ever for clients to buy with Sephora. Zappos allows us to do this,” said Graham, noting commonalities the 2 retailers share. “We have now a shared commitment to superior customer support; we’re each really good at curating premium brands, and our deal with inclusivity is a commitment that Zappos shares as well.”

All of it adds as much as a dynamic landscape that helps to fuel Sephora and sweetness overall, one in every of the few categories within the U.S. that’s growing because of unit sales increases fairly than price increases. As as to whether or not the present rate of growth is sustainable, time will tell. But Rougeot, for one, is bullish.

“Our growth in beauty today is slightly bit extreme — whenever you see the difference between prestige beauty and electronics or apparel, the gap is kind of dramatic,” he said. “I don’t know if that’s sustainable, but beauty growing faster than other categories is sustainable.

“So long as we proceed to supply great latest brands and trends, drive excitement, show the community that you simply care about them, then I believe prestige beauty will grow significantly faster than mass beauty and apparel and electronics.”

For his part, Rougeot shows no signs of slowing down or letting up. Recently, the top of the day found him at a cocktail reception in San Francisco for the graduates of Sephora’s 2023 Speed up cohort, wearing his uniform of striped shirt, Levi’s jeans and Burberry vest, chatting animatedly first with this founder, then one other.

An early riser, Rougeot said he wakes up excited to see what the day ahead will hold. “Within the shower every morning I’m smiling, because I’m interested by the three or 4 things I’m working on today. I’m going to have a gathering about personalization and omni where I’ll learn a lot and it’s going to be super cool. That’s rare,” he said. “There’s a level of passion, excitement and creativity in beauty that you simply literally don’t see anywhere else.”