Happy returns

Sephora, the renowned French beauty and skincare retailer, made a triumphant return to the UK market in late 2023.

This return significantly boosted the financial performance of its parent company, LVMH, in 2023. The selective retailing division saw a 25% organic revenue growth to €17.8 billion and a 76% increase in operating profits. With this remarkable performance, it has rapidly re-established itself as a major player back in the UK beauty landscape.

We examine the factors behind Sephora's resurgence:

Why return?
Sephora left the UK market 18 years ago due to market challenges and intense competition from Boots and Superdrug, and the beauty halls within John Lewis, Debenhams and House of Fraser. However, the beauty landscape has since evolved significantly, with the rise of online shopping, the growing impact of social media influencers, and a growing interest in premium and niche beauty products. Furthermore, we have seen the demise of Debenhams and a lack of change from both John Lewis and House of Fraser. This, combined with Sephora’s sophisticated digital strategy and its key acquisition of the e-beauty retailer FeelUnique in 2022, have paved the way for a promising re-entry into the British market.

Key to success
Sephora's resurgence in the UK is driven by a powerful combination of innovative technology, strategic audience targeting, and a strong commitment to inclusivity and sustainability.

It has successfully integrated the physical and digital shopping experiences, creating an "experiential shopping journey" through AI-powered tools and "Beauty Zones" in store. By offering personalised recommendations, virtual try-ons, and a curated selection of over 100 brands, including popular influencer choices like Huda Beauty, Rare Beauty, Tatcha, and Drunk Elephant, Sephora has catered to the demands of tech-savvy consumers, particularly Gen Z and Gen Alpha.

This focus on the younger generation has been crucial in Sephora's success. Leveraging social media and influencer partnerships, the brand has effectively engaged a market segment of approximately 12.9 million consumers in the UK. The latest term of "Sephora kids" – children and tweens mirroring beauty influencers with their own product hauls and skincare routines – explains the brand's ability to capture the imagination and spend of a young demographic.

Sephora's dedication to inclusivity and sustainability aligns perfectly with the values of its target audience. A diverse product range, inclusive marketing campaigns, and a focus on "clean beauty" have contributed to the brand's strong reputation. Sephora insist on dedicating 15% of its shelf space to products from black-owned brands which further enhances its appeal to socially conscious shoppers.

Location strategy
Sephora currently operates two stores in London and one at the Trafford Centre, Manchester, with stores in Eldon Square and MetroCentre Newcastle due to open in Autumn 2024. The brand is planning further expansion across the UK, aiming to establish a stronger presence outside the capital. The location strategy targets high footfall areas in prominent shopping centres to ensure visibility and accessibility. Its flagship store at Westfield London White City spans over 6,000 sq. ft and features more than 135 brands, with a similar sized store proposed for Eldon Square.

While Sephora's exact expansion plans are undisclosed, the retailer aims to increase its physical store presence in major cities and potentially introduce smaller formats in affluent areas. Going forward, a key focus on twin expansion of Sephora’s physical stores combined with development to digital sales will be key. Globally, Sephora is aggressively expanding into Latin America and Asia, positioning itself as "beauty’s playground", tapping into consumers' predilection for small luxuries during a period of global economic uncertainty.

Competition
Sephora's return to the UK market has intensified competition among beauty retailers. Established players like SpaceNK, H Beauty, Boots, and Superdrug face a formidable challenger in Sephora.

Space NK attracts a beauty-savvy customer base that prefers niche and indie brands. These customers are willing to invest in high-quality products and seek unique offerings. Space NK's strategy includes a mix of city centre and suburban locations, targeting both urban and suburban beauty enthusiasts. While H Beauty, supported by Harvey Nichols, appeals to a more affluent and discerning customer base with a higher disposable income. These customers value luxury products and premium experiences. H Beauty focuses on upscale locations aligned with Harvey Nichols' customer base, often found in affluent neighbourhoods and high-end shopping districts.

In contrast, Boots and Superdrug cater to a broader mass market, emphasising accessibility, affordability, and convenience. While not direct competitors in terms of product range and target audience, their widespread presence and strong brand recognition make them formidable rivals.

Sephora's success in this competitive environment will depend on its ability to maintain its brand image, offer a compelling product assortment, and effectively target its core demographic. Additionally, a successful omnichannel strategy and a focus on customer experience will be crucial to driving long-term growth.

Sephora's return to the UK market signifies a significant shift in the beauty industry. The brand's innovative online-offline strategy, appeal to younger generations, and commitment to inclusivity and sustainability have driven its success. As Sephora continues to expand its presence in the UK, it poses a great challenge to established competitors and sets new standards for the beauty retail sector.

Sephora's comeback is not just about reclaiming market share; it's about redefining the shopping experience for UK consumers. By leveraging technology and embracing evolving consumer preferences, Sephora is well-positioned to thrive in the competitive beauty market.

Emily Lin