A Deep Dive into Sephora and How it

Became the Leading Cosmetics Brand Using

Advanced Technology
Principles of Marketing – BUMN085H7
Student Number: 13921985
Principles of Marketing – BUMN085H7
Student Number: 13921985

Table of Contents
Introduction…………………………………………………………………………........3
Executive Summary……………………………………………………………………...4
Company Overview……………………………………………………………………...5
Enhancing Brand Image………………………………………………………………...6
Marketing Strategy……………………………………………………………………...7
i. Sephora’s 4 P’s……………………………………………………………………….7
Profitable Relationships…………………………………………………………………7
i. The Beauty Board: Sephora’s Social Platform……………………………………….8
ii. Beauty Insider: Loyalty Program……………………………………………………..8
Technological Advancement………………………………………………………….....9
i. Evolution of their E-Commerce Site…………………………………………………..9
ii. Their Innovation Lab………………………………………………………….............9
iii. Sephora’s Mobile App………………………………………………………………...9
Artificial Intelligence and Augmented Reality………………………………………..10
i. Augmented Reality: Front Window Display…………………………………………10
ii. Virtual Artist Try-On App……………………………………………………………10
Machine Learning and Big Data………………………………………………………11
i. Chatbots……………………………………………………………………………..11
ii. Customer Segmentation and Target Marketing……………………………………..12
Recommendations………………………………………………………………………13
Conclusion………………………………………………………………………………14
Bibliography…………………………………………………………………………….15

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Introduction
This report will go into details about Sephora and its advancement in technology. It will
critically assess the company’s overview and marketing strategy, showing how it has expanded
worldwide, especially with the help of machine learning, AI/AR, and big data.

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Executive Summary
Sephora stands out as a well-rounded beauty store, physically and electronically, that has
gained the attention of many celebrities and generating multiple brand deals. Because of this,
numerous consumers have been magnetized to buy products from Sephora, very well knowing
that their favorite celebrities have come out with makeup brands that can be bought straight from
the store. This popularity has led Sephora to up its game and progress even more within their
technology allowing them to keep track of what their customers like, using IoT such as AI and
AR to assemble apps for customers to have an easier and simpler experience and designing one
of the biggest e-commerce sites in the world.
It is prominent that Sephora has competing beauty brands, one of the biggest ones being
Ulta Beauty, only encouraging Sephora to continuously raise the bar when it comes to staying as
the leading cosmetics brand using digital innovation. They continue to look at ways in how to
improve their brand image, very well knowing how important it is to include everyone and not
just stick to one community or generation.

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Company Overview
Sephora was established in France by Dominique Mandonnaud in 1970 and throughout
the years it has formed into a worldwide French retail beauty business. It is well-known to have
altered the way women shop, to the point where this beauty business has been defined by “its
unique open-sell environment with an ever-increasing assortment of products from carefully
curated brands featuring emerging favorites, trusted classics and Sephora’s own line, Sephora
Collection” (Sephora, no date). They manage over 2,700 stores in around 35 countries, with
mainly 500 stores across America and a high-quality e-commerce site. Their vision involves
employees addressing everyday challenges to enrich people’s lives and fulfilling the brand’s
inspiration of empowering consumers to express their creativity through diversity, inclusivity
and equity. Sephora does not disappoint in giving their customers what they want and equipping
them with the best makeup, having more than 300 brands and over 17,000 products. Sephora also
has a great way of upkeeping their inventory management using technology to enhance their
supply chain and management capabilities, especially since it is critical in the beauty industry as
products for makeup trends tend to alter in a fast pace. “While utilizing information analytics,
such as predictive models, Sephora can anticipate demand and reduce instances of out-of-stock
and ensure that the most popular items are readily available for customers” (Arora, 2023).
It is no secret that Sephora has a few competitors within the cosmetics industry, but that
does not stop them from competing for the top and becoming one of the most well-rounded
beauty companies in the world. Duczeminski (2021), stated “It’s no surprise, then, that Sephora
routinely finds itself at or near the top of the beauty industry year after year – in fact, Sephora
dominated the competition in 2019, pulling in over $10 billion in revenue with $1 billion plus
coming directly from online sales”. Figure 1 shows Sephora becoming the top online store based
on net sales in 2022, making a net revenue of $2,592 million, Ulta following right behind them.
Sephora partnered up with SixtyFour (a music brand) and FaceTheory (a skincare brand) in 2023
in order to advance their innovation and power up their e-commerce growth.

Figure 1 Sephora’s E-Commerce Net Sales in 2022 (Statista, 2022)

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Enhancing Brand Image

Brand image is “the key driver of brand equity, which refers to consumer’s general
perception and feeling about a brand and has an influence on consumer behavior” (Zhang, 2015).
The marketer’s sole purpose is to shape the consumer’s
perspective and feelings towards that brand, affecting
the consumer’s behavior when it comes to purchasing
items leading to an increase of sales and market share
while also evolving the brand’s integrity. According to
Keller (1993), “a positive brand image could be
established by connecting the unique and strong brand
association with consumers’ memories about the brand
through marketing campaigns”. For Sephora’s brand
image, they make it very clear that they want to enhance
beauty, not replace it. They mold their brand to make it
inclusive, where diversity is well-represented, having
their products cater to different ranges of skin tones and
styles. Through their marketing strategy, Sephora has
found ways to include several communities and raise
social awareness. Figure 2 displays methods in which Figure 2 Sephora’s Insights (CoSchedule, 2023)
Sephora has expanded its diversity within their brand.
Throughout the years, Sephora has come out with a number of marketing campaigns
directed towards certain communities in the hopes of welcoming everyone. In 2019, Sephora
came out with a campaign called “Identify As We” for pride month with a message saying “We
Belong to Something Beautiful” targeted to the LGBTQ+ community. The video campaign
circulated around transgenders and gender-fluid personas, even starring some activists and
influencers such as Fatima Jamal and Hunter Schafer. “From our hiring practices to in-store
programming, we are always striving to cultivate a welcoming environment that lets everyone
know that they can participate in beauty and they belong” said Deborah Yeh (2019), Sephora’s
CMO. Along with this campaign, Sephora mentioned that they would donate $1 to all of the
supporting organizations every time someone buys
an item from the Sephora Heart Pride Collection.
Deborah Yeh (2019) also expressed, “diversity,
inclusivity and empowerment have always been and
will continue to be the driving force of everything
we do at Sephora”, the brand educating its
employees and customers with these values. The
campaign is shown in Figure 3, directly linked to
the video.
Figure 3 Sephora’s “Identify As We” Campaign (Allure, 2019)

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Marketing Strategy
Marketing is known for engaging its customers and maintaining beneficial customer
relationships. “The two-fold goal of marketing is to attract new customers by promising superior
value and to keep and grow current customers by delivering value and satisfaction” (Kotler et al.,
2019; pg. 5).
Marketing strategies “focus on manipulations of the marketing mix variables – product,
price, place and promotion; setting a strategy consists of selecting a price for a product,
designing an advertising campaign, then designing on a plan for distribution” (Schnaars, 1998;
pg. 18). The core of marketing strategies is to draw in customers while keeping competitors
away. Sephora has grown expansively within their marketing strategy and making sure that their
customer engagement and experience are top tier. Having a set marketing strategy can help a
company go a long way within their industry, attracting more consumers to purchase their
products and growing within the market.
i. Sephora’s 4 P’s

1) Product – Sephora has over 15,000 beauty products ranging from all areas within the
cosmetics industry such as fragrances, hair products, skincare, nails and more. They are
known to promote countless brands and even have a line of their own. The divergent span
of products and brands lure customers to Sephora for a tailored shopping experience
(Tate, 2023).
2) Price – Sephora is known for using “a demand-oriented pricing strategy based on
consumers’ wants” (Tate, 2023) and the favored and finest products tend to be sold at a
high price because of the high demand. Customers are usually attracted to competitive
prices and brands throughout the year, making the average Sephora shopper spend around
$33.17 each month.
3) Place – As mentioned before, Sephora has around 2,700 stores in 35 countries with many
of their locations being in large stores in malls such as JCPenney and Nordstrom along
with a number of stand-alone locations.
4) Promotion – Sephora’s promotional strategy comes from the “’try before you buy’
slogan in which these promotional tactics attract customers and allow customers to
experience the product firsthand” (Tate, 2023). Sephora has gotten many influencers to
promote their products, becoming a major key when it comes to customers wanting to try
those products. Since they see the people they follow and trust using those specific
products, they suddenly become interested in them.

Profitable Relationships
With Sephora being a leading global beauty retailer, they have found ways to build profitable
relationships through brand deals, customer centered strategies and innovative techniques. In
doing so, Sephora has been able to grow their business and exceed within the cosmetics industry
also giving the space for their customers to build a community and express their thoughts on the

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products, company, and more. The two main ways in which they build profitable relationships
are through their social platform and loyalty program.
i. The Beauty Board: Sephora’s Social Platform
For Sephora’s B2C marketing strategy, technology
plays a key element, guiding them to creating their own
social media platform known as The Beauty Board, which
came out in 2014. Their goal was to constantly give
customers the greatest purchasing and user experience.
Inspired by Facebook, this new platform allows their
customers to upload their own photos and tag the products
they have used right beneath their photos. As Kotler, M.,
Cao, T., Wang, S., et al. (2020, pg. 30) mention in the
article, “These tags are directly linked to the official
website of Sephora which sets up a bridge between the
social and business platforms”. Figure 4 shows what The
Beauty Board looks like, giving a perspective on how the
customers used this board when it came to interacting
Figure 4 Sephora’s Beauty Board (AdAge, 2014)
with each other on Sephora’s products and brands.

ii. Beauty Insider: Loyalty Program

Figure 5 Sephora’s Beauty Insider Program (Sephora, 2023)
Fook and Dastane (2021) described loyalty programs
as a “part of marketing strategy which concerned to
maintain long-term relationships with customers to
increase profitability” and it is known to be used by many
small and big organizations as a way to forecast future
enhancements within those organizations. The purpose of
these loyalty programs is to make the customers feel
important by customizing their preferences within the
products and services in order to meet their wants and
needs. Sephora has their own loyalty program named the
Beauty Insider Program where it persuades customers in
signing up to receive benefits and privileges. Their
loyalty program ranges from birthday gifts to exclusive
access to events. Figure 5 has been included to show an
inside peak of what Sephora’s Beauty Insider Program
entails. Sephora (no date) explains on their website that
their Beauty Insider Program is “our free rewards
program in the United States and Canada that lets you
earn points on all your merchandise purchases and
redeem those points for rewards”.

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Technological Advancement
Sephora’s technological advancement has played a significant role in its success in the
cosmetics industry. With their evolution in technology, it has modified the way customers
recognize, experiment and purchase products. By constantly investing in new technologies and
applying them into their stores and websites, Sephora has been able to supply customers with
coherent and augmented beauty shopping experiences.
i. Evolution of Their E-Commerce Site
Sephora has been able to implement their advanced technology to refine their website,
constructing an empire through digital renovation – “Its commitment towards digital has not only
made it successful in the beauty space but it has also set an example for all brands looking to
transform through technology” (Trishim, 2020). From the start of their e-commerce launch,
Sephora has been exploring ways to improve their website where it can be more manageable for
their customers. As shown in Figure 6, there is great evidence of their e-commerce development
from 1997 to 2018 with the help of new technology.

Figure 6 The Evolution of Sephora’s Website (Duczeminski, 2021)

ii. Their Innovation Lab

As Mary Beth Laughton (2018), Sephora’s Executive Vice President of Omni Retail, stated,
“Digital and innovation have always been a part of our DNA at Sephora – We are very focused
on our customers and we know that their lives are increasingly reliant on digital; so we know to
be successful as a retailer, we’ve got to be where our clients are and give them the tools and
experiences that meet their needs”. Sephora’s Innovation Lab opened in 2015 and the goal of
creating this new lab was to test new technologies that would then allow the retailer to administer
them into the stores, online and within the app. Bridget Dolan (2016), the Vice President and
Head of the lab, mentioned that “Sephora’s Innovation Lab team is always scouring the market
for new technologies as well as technologies that have been around that could be leveraged in a
unique way; we focus on teaching clients about products and techniques – our clients are savvy
and want to understand a product and how to use it”.
iii. The Mobile App
Sephora’s mobile app plays an essential role when it comes to strengthening the universal
customer experience. The app is known to contain and offer extensive features intended to make
the shopping experience more suitable and engaging for its users. Customers are able to read

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product reviews which presents them with valuable insights and tips from other users as well as
undergo virtual consultations allowing customers to meet with Sephora’s experts for
personalized recommendations and advice. They are even allowed to scan product barcodes in
the stores which gives them elaborate information such as the ingredients and reviews. As
described on the Sephora (no date) website, “Through these innovative features, Sephora’s
mobile app ensures that customers can access an extensive array of beauty knowledge and
assistance right at their fingertips, further elevating their shopping experience”.

Artificial Intelligence and Augmented Reality

Artificial intelligence in the service industry can be defined as “the development of
artificial agents that, given the information they have about consumers, competitors and the focal
company, suggest and/or take marketing actions to achieve the best marketing outcome”
(Thaichon and Quach, 2023). On the other hand, augmented reality “provides consumers with an
interactive product-based experience placed in a real-world environment with additional virtual
data or images such as three-dimensional holograms, interactive models, graphics, sound and
text” (Berman and Pollock, 2021). Sephora uses the power of artificial intelligence (AI) and
augmented reality (AR) to amplify their customer’s experience through their creativity in
developing updated technology which lets their customers do about anything online and in-
person, two of their most popular tools mentioned below.
i. Augmented Reality: Front Window Display
Sephora established an in-store feature using augmented reality where their customers can
“interact” with some of their favorite celebrity female beauty founders through a simulation.
When a customer hovers their phone over a founder’s face, a short film will start playing on their
phones where the founders are talking about their lives and how they started their makeup brand.
Along with this, a link will pop up taking the customer to tutorial videos that the founders had
put together on the Sephora app. The customers can easily stop these videos by simply moving
their phones away from the face.
ii. Virtual Artist Try-On App
Sephora’s Virtual Artist App launched in 2016, becoming one of their most popular products,
which uses augmented reality and artificial intelligence for customers to virtually try-on makeup.
“Sephora identified a crucial customer pain-point in messy makeup trials in-store and the
apprehension of buying products online without the customer trying them on” (Trishim, 2020).
Sephora went ahead and partnered with ModiFace, a tech provider of augmented reality for the
beauty industry, to design versions online and in-store. Sephora has also innovated other AR and
AI products, following the success of their Virtual Artist App, by “launching other products such
as ColorIQ (to find foundations and concealers to match user skin tone) and Skincare IQ (quiz to
provide recommendations for user’s specific skincare needs)” (Trishim 2020). On the other hand,
Sephora took into consideration the opportunity to make customers still feel safe post-pandemic
times, allowing this tool to become very useful since it cut down on the need to physically try on

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products while also keeping the user experience excited. Figure 7 below shows what the Virtual
Artist tool looks like in-store and on the mobile app.

Figure 7 Virtual Artist Try-On App: In-Story (Holson, 2017) & Online (Carman, 2017)

Machine Learning and Big Data

Sephora is ranked at the top because of their ability to use machine learning and big data
to examine their consumers’ behaviors across the board. Machine learning is “a process through
which we use data to train models – these models are then used to make predictions on a new set
of data that the model hasn’t seen before” (Jeyaraman, Olsen, & Wambugu, 2019). With the use
of machine learning algorithms, Sephora is able to supply customers with personalized
recommendations, doing so through the creation of their chatbots. Big data “refers to the large,
diverse sets of information that grow at ever-increasing rates, encompassing the volume of
information, the velocity or speed at which it is created and collected” (Segal, 2022). Using big
data helps Sephora analyze their customers’ behaviors and purchase patterns, permitting them to
make data-informed decisions on inventory management, product development and marketing
campaigns.
i. Chatbots
Sephora began their journey with chatbots in 2016 when they introduced their very first
chatbot on Kik, the messenger app directed to young teens, and Sephora chose this app because
their goal was to reach out to a younger crowd in an app where they felt comfortable enough to
use. Customers can go ahead and ask about makeup tips, tutorials, etc. and the chatbots provide
them with instant responses. These chatbots can even go one step further and help customers find
certain products and also recommend to them the most popular products in each category.
Customers are also allowed to book in-store makeup sessions via Facebook Messenger,
Sephora’s goal being to make their customers’ lives easier when it comes to booking
appointments with only a few quick steps. Sephora has had a huge success with its chatbots, “the
number of orders increased by 11% in the US after using chatbots and clients who booked
service using the Facebook Messenger bot ended up spending over $50 in-store on average”
(Wang, 2022). Chatbots have brought a lot of sales to Sephora and have even offered more
opportunities. “23% of shoppers compare prices on mobile while standing in-store and before
going to a brick-and-mortar location and 24% engage with a retail app each week” (Wang, 2022)
allowing Sephora to form close relationships with loyal customers online and having chatbots

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create a better customer service experience. The images shown in Figure 8 give an idea as to
what the chatbots look like in Facebook Messenger and Kik.

Figure 8 Chatbots: Facebook Messenger (Facebook, 2016) & Kik (Forbes, 2016)

ii. Customer Segmentation and Target Marketing

Sephora has its way of implementing customer segmentation and target marketing when it
comes to satisfying each customer’s needs. Demographic and behavioral segmentation play a
role in helping Sephora divide its customers, with the help of big data, based on their
demographics such as age, gender, income, etc. and behavior when it comes to shopping. When
customers go onto the website or local store to buy products, Sephora can collect the data that
contains the customer’s purchase history, frequent visits, and more to then put together specific
marketing campaigns or promotions for that target audience. Sephora also develops brand deals
with influencers and celebrities that they know will bring in a fixed audience based on the data
that they receive when it comes to popularity and trends. This leads to them manufacturing target
marketing to get the attention of the crowd that they are trying to get hooked, increasing their
sales and demand. Sephora also launches targeted marketing campaigns connected to special
events, holidays and seasons in the hopes of resonating with their customers during those times.

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Recommendations
While Sephora is already ahead of the game with everything that they offer, there can be
some new product offerings that they can introduce in order to welcome more customers:
• Limited Edition Collaborations: Having the history of creating many collaborations with
well-known celebrities and influencers, Sephora can go one step further by creating
limited edition collaborations. By coming out with collaborations that have limited
edition products, especially from loved celebrities and influencers, Sephora can bring in a
whole new level of excitement from their customers and even attract new customers. In
doing so, Sephora is allowing room to bring in a fresh perspective and unique products
within their market.

• Option to Personalize Products: With giving their customers the ability to customize
certain products, Sephora can get ahead in the market. There will always be customers
who are looking for something specific that they cannot find in other beauty stores, so
when hearing that Sephora allows them the option to personalize colors, scents, or
formulas, this can captivate a bigger crowd. Sephora can always start off small with the
help of AI or AR, expanding their knowledge in tailoring products for their customer’s
personal satisfaction.

• Eco-Friendly Offers: Introducing eco-friendly products can target a specific group,

attracting them to try out the products that Sephora has to offer that actually help the
environment. The demand for clean beauty products is ever-growing, giving Sephora the
chance to grow within this area, beginning with items such as recyclable packaging and
cruelty-free approaches. This can also help Sephora in enhancing their brand image even
more with the consciousness of improving the environment.

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Conclusion
With everything that has been said in this report, it is clear that Sephora has gone above
and beyond in improving their brand, from technological advancements to connecting their brand
image with all of the communities. Their advancement in technology has evolved in ways to
which their customers can comfortably buy products from anywhere. Starting from when they
first became a business to where they are today, they have distinctly made an impact in the
beauty industry and have set the standards for various cosmetic stores.
There is clear evidence of Sephora’s growth within the cosmetic industry, leading them to
become number one in the market. When it comes to their brand image, Sephora has always been
open to producing ways to welcome new customers and to continue fulfilling their long-term
customers. From expanding their image to either mesh with the current season to also
manufacturing new campaigns for certain communities, Sephora’s sales only keep expanding
because of their understanding when it comes to their customers.
With the use of AI and AR, consumers can virtually try-on makeup from the comfort of
their own homes without having to go into a store. This played a crucial role during the
pandemic, with Sephora not only taking into account how to keep their business flourishing
during those times but also skyrocketing in e-commerce sales, putting them in the top lead. Even
coming out with chatbots using machine learning and customizing customer segmentation and
target marketing using big data, Sephora is continuously one step ahead.
It is clear that Sephora sticks to their vision and does their best in staying diverse and
inclusive, making their brand very welcoming to those surrounding them. As they have
implemented all of these things, there is always room for improvement and expansion when it
comes to advancing their offerings. Sephora has looked into ways on how to expand their
company while sticking to their vision, knowing how difficult that can be considering the many
types of consumers out there. However, Sephora has been able to expand perfectly fine, allowing
space to grow but also not backing down or shifting from what their image and goals are.

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