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<\/a>Business and Operating Model Alignment<\/strong><\/p>\n Sephora is a prestige beauty retailer that captures value by selling prestige products at a price above cost to consumers both online and in-store. The company has developed a competitive advantage amongst its peer group (department stores and other specialty beauty retailers) by employing a business model that is wholly focused on a superior holistic customer experience(1)<\/sup>. Sephora creates value with business strategies that address existing and anticipated consumer needs more effectively than competitors. The company\u2019s operational model facilitates the successful implementation of those business strategies that support the broader mission- in this way, the operational model serves as a sort of subgroup of the business model. While specific financial data is not available for Sephora as an LVMH subsidiary, the firm\u2019s double digit revenue growth and operational model investments point to a strategy designed to\u00a0achieve business model objectives versus a cost savings(2)<\/sup>.<\/p>\n <\/p>\n Business\/Operating Model Details<\/u><\/em><\/strong><\/p>\n Business Strategy–Consistent Shopping Experience<\/em><\/strong><\/p>\n Sephora offers a uniquely consistent shopping experience across its brick-and-mortar, web, and mobile platforms with access to over 200 prestige beauty brands across product categories (skincare, makeup, fragrance, hair, and beauty devices). Graphics, promotions, and featured products are aligned on all customer interfaces, allowing for seamless browsing and purchasing regardless of format.<\/p>\n Supporting Operational Strategy–Combined Marketing Efforts<\/em><\/strong><\/p>\n Unlike its competitors, the digital and traditional marketing efforts at Sephora are organized under the same department, fueling collaborative decision making(3)<\/sup>. In contrast, most peers historically operated online businesses in a silo, resulting in a disaggregated consumer experience with inconsistent discounts and product placement (e.g. a serum featured in-store may not be highlighted on the website; integrating the business units has proven challenging for most. The joint reporting structure of the Sephora marketing teams has granted the company a competitive advantage as consumers purchase across physical and digital platforms.<\/p>\n Business Strategy\u2014Leveraging Size to Enhance Product Offerings<\/em><\/strong><\/p>\n Sephora leverages its strong reputation to attract new brand partners, control its competitive environment and gain product exclusivity rights to offer best-in-class product curation for consumers. A partnership with Sephora is highly sought after by emerging prestige brands. Given demand for shelf space, Sephora is discerning regarding brand expansion and ruthless in discontinuing underperforming products. Protective of its image, Sephora dictates to whom its brand partners can sell to avoid association with lower-end stores. The company negotiates for exclusive \u201cmade for Sephora\u201d products and exclusive \u201cearly rollout rights\u201d for new brand product launches.<\/p>\n Supporting Operational Strategy\u2014Physical Store Design<\/em><\/strong><\/p>\n Sephora stores are constructed to facilitate the brand showcasing, product trial, and cross-brand purchasing that contribute to Sephora\u2019s reputation and negotiating power within the industry. Stores are designed for a consumer-led retail experiences with large aisles for group shopping and self-explanatory shelves organized by brand, product, and color. Endcaps feature either testable products or digital interfaces where consumers can obtain personalized information on recommended products. In traditional retail outlets, customers travel from counter to counter to learn about products, but the Sephora store design encourages simultaneous product experimentation.<\/p>\n Business Strategy \u2014Customer Service Across Platforms<\/em><\/strong><\/p>\n Sephora offers a superior customer service experience both in-store and online. In-store, Sephora employees are reputed for their deep product knowledge across brands, providing immediate customer assistance. Sephora released two programs on its website to address customer needs around product retrieval in 2015(4)<\/sup>. In the US, Sephora announced 48-hour shipping for domestic orders. In France, the company launched \u201cClick and Pick Up\u201d service where customers can pick up their on-line orders at a local store within two hours.<\/p>\n Supporting Operational Strategy\u2014Employee Training<\/em><\/strong><\/p>\n To support its in-store customer service, Sephora requires employees to attend Sephora University, a comprehensive induction program where employees are schooled in beauty science, Sephora products, the Sephora Attitude (customer focused sales approach) and the Sephora Management Style(5)<\/sup>. While the data is not publicly available, I imagine the recent 48-hour US shipping initiative\u2019s and \u201cClick and Pick Up\u201d program have been facilitated by enhancements to Sephora\u2019s inventory management strategy- I assume local stores and warehouses must hold greater inventory volume to meet expedited delivery or pick up.<\/p>\n Business Strategy \u2014Interactive Beauty Technology<\/em><\/strong><\/p>\n Sephora invested in technological solutions to address customer demands for targeted product recommendations to drive sales. Partnering with Pantone, Sephora developed Color IQ, an in-store interface that scans skin pigmentation to identify precise color matches across makeup brands(6)<\/sup>. Sephora acquired the software company Scentsa to create an in-store touchscreen interface to assist consumers with fragrance purchases.<\/p>\n Supporting Operational Strategy\u2014Sephora Innovation Lab<\/em><\/strong><\/p>\n The Innovation Lab develops and tests new shopping technologies and foster a culture of innovation development throughout the organization. The Lab is responsible for ideating, experimenting, learning, and launching new technologies to support Sephora\u2019s business strategy of delivering interactive beauty technology to address consumer needs(7)<\/sup>. Select current projects include:<\/p>\n <\/p>\n Sources<\/strong><\/p>\n Sephora’s competitive advantage in the prestige beauty space stems from integrated business and operating models that support the company’s broader objective to enhance the customer experience at every touchpoint. <\/p>\n","protected":false},"author":1285,"featured_media":733,"comment_status":"open","ping_status":"closed","template":"","categories":[186,70,63,19,187],"class_list":["post-732","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-beauty","category-consumer-focus","category-consumer-goods","category-consumer-tech","category-specialty-retailer"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/the-tom-challenge-tom-winners-and-losers-assignment\/","yoast_head":"\n<\/a>
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