‘The service that the customer receives in-store is a massive part of the value proposition for our brands.’
It’s the height of the summer tourist season in Paris, and the giant Champs- Elysées branch of Sephora is packed. Shoppers swarm around the shelves, where hundreds of beauty and skincare brands are ranged in efficient A-to-Z order. Dozens of fragrances meet and mingle in the artificially cooled air, their top notes competing with the piped pop music. Attractive black-clad sales assistants are on hand to aid the indecisive, offering words of advice on scents and skin sensibility.
An acquaintance once suggested to me that Sephora was a cosmetics cathedral, with the giant S emblazoned at the back of the vast space playing the role of a crucifix. ‘It’s a place where people go to pray at the altar of youth,’ he added. Today, there are plenty of worshippers.
Owned by French luxury conglomerate LVMH, Sephora can seem hard to avoid: every upscale district in Paris now appears to have its own branch. The chain’s aggressive marketing – including a glossy cinema advertising campaign – heightens the impression of omnipresence. According to the brand’s website, it has 265 stores across France and more than 250 in the United States, as well as a presence in 13 other countries, including China. The brand is named after the wife of Moses (the site does not mention that there’s also a sinister ship called the Sephora in the Joseph Conrad short story The Secret Sharer).
Although it competes in France with Marionnaud and Nocibé, which are similar operations, it broke new ground by pioneering the concept of ‘limited assistance self-service’ in the fragrance retail sector. In other words, it dispensed with counters to give shoppers a wide choice in an environment that looked more like a record store – or an outrageously hip bookshop – than a perfumer. Suddenly, the barrier between customer and product had vanished. More recently, Sephora has launched a successful range of ownbranded products, notably its Stri-Vectin SD anti-age cream in 2004, as well as diverting retail experiences like hair styling counters and nail bars. The result can cause something resembling culture shock among British consumers used to the staid interior design of Boots the Chemist, which resembles a cross between a laboratory and a supermarket.
In keeping with its black and white decor, Sephora has a chequered history. In fact, it was once owned by Boots.
The British chain came to France in 1970, opening its first store on rue de Passy. In 1976 it launched the Sephora brand as a joint venture with the department store group Nouvelles Galeries, which it later acquired. However, the Sephora of that period was more like the traditional Boots, with a mid-market positioning and without any of the retail innovations mentioned above.
Meanwhile, an altogether more visionary retailer named Dominique Mandonnaud had founded a chain called Shop 8, starting in 1969 with a modest space in Limoges. Mandonnaud brought the self-service concept that had revolutionized grocery retail – in the form of supermarkets – to the perfume sector, which was still dominated by the kind of genteel boutiques that greeted customers with a bell tinkling over the door, or mask-faced vendors selling a single brand from behind a counter in a department store.
In 1988, Mandonnaud acquired eight perfume stores in Paris and converted them to his ground-breaking format.
The next chapter came in 1993, when Boots sold its 38 Sephora stores to Shop 8’s holding company, Altamir (‘Boots on march into Europe,’ Independent, 19 November 1995). Innovating once again, Mandonnaud opened his Champs-Elysées flagship, which at 1,300 square metres launched the cosmetics cathedral concept and provided a template for future stores. More than a shop, it was a destination: tourists popped in to witness the exotic sight of luxury cosmetics being sold in a discotheque, only to walk out laden with potions and fragrances, their purses lighter than air and a bemused look of pleasure on their faces, as if they’d been freebasing Aldous Huxley’s soma.
In 1997, LVMH acquired Sephora, moving the retailer into its third phase of development. The company opened its first store in New York in 1998; after that it expanded in Europe and entered Japan. The next target was Eastern Europe, but Sephora’s energy began to dwindle in 2001, accompanied by a downturn in sales. In 2003, incoming CEO Jacques Levy and European managing director Natalie Bader-Michel began to rehabilitate the chain, bringing in a selection of new brands from the United States, launching Sephora-branded products and encouraging more interaction with customers, including beauty makeovers by consultants. By now Sephora had shrugged off its image as a fragrance retailer and emerged as a luxury perfume and cosmetics superstore.
‘Sephora is beginning to reap the fruits of its facelift,’ read a headline in the French business magazine Les Echos on 25 January 2006. Nothing better illustrated the chain’s new strategy than its own Stri-Vectin SD antiwrinkle cream ‘made by a laboratory in Salt Lake City, sold exclusively at Sephora and selling like hot cakes despite its high price of 125 euros’. In the same article, Bader-Michel admitted that the Sephora-branded products, sold at a ‘strong margin’, had played a decisive role in the chain’s return to profitability.
Visiting Sephora is an entertaining experience, but it can also be an irritating one. The advice that sales staff hand out is not always objective. When a particular skincare brand has done a promotional deal with the store, chances are that’s the brand they’re going to recommend. Sales are tracked in real time so staff can ensure that they’re reaching their targets.
This can annoy beauty companies too. The chairman of one independent skincare company told me, ‘We need to be in Sephora, but with certain reservations. I get the impression we’re third in line behind Sephora’s own products and brands owned by LVMH.’
For that reason, his preferred environment is the department store, where he can manage his own branded universe and train sales staff to interact with customers.
Along with beauty salons and their larger, more opulent cousins, spas, department stores have played a vital role in the history of the beauty industry. Many of the pioneers we met in the early chapters of this book wore out a great deal of shoe leather trying to convince salons and department stores to stock their products. They went to extraordinary lengths to attract the attention of buyers: early in his career, François Coty famously shattered a bottle of his Rose Jacqueminot fragrance on a countertop at the Grands Magasins du Louvre; the appreciation of customers who crowded around to ask about the delicious scent led to it being taken on by the store. Beauty entrepreneurs from Estée Lauder to Bobbie Brown owed their success to department stores.
Sephora is part of the ‘selective distribution’ market favoured by luxury beauty brands. What that means is an exclusive environment, usually with at least one beauty adviser or make-up artist on hand to ‘educate’ customers and nudge them towards buying. Upmarket surroundings – flattering lighting, numerous mirrors and lacquered surfaces – are part of the brand story: confirmation that beauty companies are selling not products, but lifestyles.
William Lauder said as much at the Global Department Store Summit in New York in 2010:
The service that the customer receives in-store from the consultant is still a massive part of the value proposition for our brands. Crème de la Mer is at the top of our brands pyramid, selling for US$190 in Saks, so of course it is important to match brands like that to the right environment… The level of service the customer receives reinforces for her why she chooses to shop in this environment, why she chooses the brand and why she is prepared to pay a premium (WGSN.com, 15 July 2007).
The legacy of Mr Boot
Historically, Boots the Chemist lies at the other end of the spectrum: a highly democratic destination selling a host of health, beauty and pharmaceutical products in a self-service environment. The business was started in 1849 by John Boot, a former agricultural worker who began selling herbal remedies from a small store in Nottingham, in part to help employees of the area’s new textile factories, many of whom could not afford a doctor. John died in 1860, but his widow Mary continued running the shop along with his son Jesse.
It was Jesse who transformed the business from a single store into a flourishing chain. First he began to buy stock in bulk, which enabled him to keep prices down: his advertising promised ‘Health for a shilling’. Additional branches were opened across Britain. By the outbreak of the First World War, Jesse owned 550 stores. Retiring just shy of his 70th birthday, in 1920 he sold the business to the United Drug Company of America. Under US ownership the chain expanded to 1,000 stores. In an elliptical twist to the tale, a group of investors led by Jesse’s son – John Boot – bought the business in 1933. John launched the Boots No. 7 skincare line in 1935, packaging it in eye-catching blue and yellow and advertising it as ‘the Modern Way to Loveliness’. Today Boots claims No. 7 is ‘the UK’s leading cosmetics and skincare brand’. It has a charismatic creative director in Lisa Eldridge, a make-up artist who has worked with a glittering array of photographers, designers and celebrities, as well as hosting a popular blog (www.lisaeldridge.com).
On 5 July 1948, health secretary Aneurin ‘Nye’ Bevan launched the National Health Service, providing free government-funded healthcare for all, with the words, ‘We now have the moral leadership of the world.’ Boots – which had long been a dispensing chemist – was now more than ever a vital community hub, continuing the tradition established by its founder during the industrial revolution. But it also evolved as a health and beauty retailer, introducing supermarket-style self-service in the 1950s. It merged with Alliance Unichem in 2006 to form Alliance Boots, which was acquired the following year by Alliance’s former executive deputy chairman Stefano Pessina and a private equity firm.
Boots has stores around the world – in Norway, Russia, Thailand and the Netherlands – but it is an inescapable element of the British high street.
Its customer loyalty card, the Boots Advantage Card, launched in 1993, has 16.7 million ‘active’ members in the UK (it defines active as members who have used their card at least once in the past 12 months), enabling the chain to gather vast amounts of data about its customers’ shopping habits. In their (2001) book Romancing the Customer, Paul Temporal and Martin Trott describe it as ‘the largest smart card retail loyalty scheme in the world’, suggesting that 40 per cent of transactions in the store are linked to the card.
Boots has made the card almost impossible to turn down. Customers collect four points for every £1 spent in store or online, one of the most generous schemes in the country (one point is more typical). Card holders can then spend points on a wide range of items in the store. Boots has also installed Advantage Points Extra Offers kiosks in selected stores: by inserting their cards into an ATM-style terminal, customers can check their points balance, receive money-off coupons and learn about promotions exclusive to card holders. This has the added advantage of driving traffic to stores.
The clinical, no-nonsense interior of Boots stores can recall airport duty-free shops, but neither their customers nor the brands they stock are the same. Since their establishment in 1946 – when the first one opened at Shannon Airport in Ireland – duty-free spaces have become a vital retail channel for upmarket beauty brands. They particularly appeal to frequent-flying male consumers, who tend to shun traditional beauty emporia but feel at home in the bland surroundings of the duty-free shop, where they can kill time between flights.
A key player in the sector is a company that started life in 1960 as Duty Free Shoppers, now known as DFS Galleria. It was launched in Hong Kong by entrepreneurs Charles Feeney and Robert Miller, who spotted an opportunity to target ‘the emerging Japanese traveller’ when they secured the exclusive concession for duty-free sales in Hawaii. Their operation evolved into what their website describes as ‘the world’s largest travel retailer’ (www.dfsgalleria.com). Since 1996 the company has been partly owned by LVMH.
There is another, entirely different distribution channel, which for me has a ring of nostalgia about it.
‘Ding dong, Avon calling!’ My mother would chime the advertising slogan when she brought our breakfast to the table, making us laugh. The ultimate door-to-door beauty sales company, Avon was already a legend when it launched the campaign in 1958. Such was the ubiquity and staying power of the phrase that my mother was still singing it decades later. In the 1970s the company changed the name of Outlook, its magazine for sales representatives, to Avon Calling.
Avon’s reps buy its products at a discount – between 20 and 25 per cent – and then sell them at full price, pocketing the difference. Overseeing them are ‘sales leaders’ who manage teams of representatives and earn commission from their sales. Sales reps tour their territory leaving brochures with potential clients, returning to pick up orders later. The job is not for everyone: reps are required to trudge the streets, and the most successful have a knack for sales. You don’t have to look far online to find disgruntled ex-Avon ladies whose earnings did not live up to their aspirations. But with more than 6 million reps worldwide and US$10 billion in annual revenue, somebody at Avon is making money.
Suitably enough for an industry that knows how to tell a good story, Avon was started by a bookseller. His name was David H McConnell, and in the late 1800s he was hawking books from door to door in New York, providing samples of the fragrances he concocted at home as sweeteners. When McConnell noticed that women were far more interested in his scents than in books, he decided to focus on perfume.
But he needed help – and on his bookselling rounds he had come across many impoverished women with time on their hands. What if he could help them and their families while also growing his business? His plan was to take women on as independent contractors, leaving them free to manage their time and their territory.
Mrs PFE Albee of New Hampshire, a 50-year-old wife and mother of two, became the first representative of what was then the California Perfume Company in 1886. Just over a decade later, the company had 5,000 representatives. As the company’s website says, ‘at that time it was practically unheard of for a woman to run her own business. Only about 5 million women in the United States were working outside the home, let alone climbing the ranks of any corporate ladder. That number accounted for just 20% of all women.’ They were domestics or factory workers, and their wages were a fraction of men’s (www.avoncompany.com).
With its door-to-door model – more formally known as ‘direct selling’ – the company literally advertised itself, although it did place a print ad in Good Housekeeping magazine in 1906. It also began expanding internationally, with representatives ringing doorbells in Montreal, Canada from 1916. The brand name did not emerge until 1928: McConnell had visited Shakespeare’s birthplace, Stratford-upon-Avon, and was so enchanted with the town that he named a range of products after it. The California Perfume Company would be renamed Avon Products in 1939.
Over the years, Avon has aligned itself with the cause of empowering women – and in 1986, when the hundredth anniversary of the Statue of Liberty coincided with its own centennial, the company sponsored a project to restore the iconic ‘Lady Liberty’. It has run the Avon Foundation for Women since 1955, the Avon Breast Cancer Crusade since 1992 and Speak Out against Domestic Violence since 2004. The company donates hundreds of millions of dollars a year to causes related to or supported by women. (It’s interesting to note, however, that Avon did not get its first female CEO until 1999: the remarkable Andrea Jung has stayed in the top slot for more than a decade.)
Avon has innovated on the product front too: in 1986 it launched Bioadvance, one of the first skincare products to use stabilized retinol. In 1992 it launched Anew, another skincare cream, this time pioneering the use of alpha-hydroxy acid (AHA).
As its worldwide expansion continued, the company moved into China in 1990, but was forced to switch to a traditional retail model eight years later when the government banned direct selling. It shifted back to its original strategy when the ban was lifted in 2006. Today, Avon is the world’s biggest direct seller, selling fragrances and cosmetics door to door in 120 countries. As we’ve seen, it inspired beauty innovators like Natura in Brazil and Amore in South Korea.
The development of Avon can be compared to the market research techniques pioneered by Procter & Gamble in the 1950s: like Doc Smelser’s door-to-door interviewers in their hats and gloves, Avon’s women sales representatives – self-employed, motivated – created a complicity with their customers that made traditional advertising almost an afterthought. Not only that, but they were self-recruiting.
In an interview with the Financial Times, CEO Andrea Jung said: ‘The macroeconomic global dip created a dynamic that forced us to double down on our founding principles… We saw a big uptick in the numbers of direct salesmen.’
During the recession, Avon focused sales on ‘value’ products and turned its attention to recruitment. In 2009 it ran a commercial during the Super Bowl broadcast in the United States – this was later extended globally. ‘We featured Avon representatives who had lost their jobs [elsewhere] and talked about how they were now running their own business, how they could never be fired. By half-time our phones were jammed. We took the campaign global and gained both market share and number of sellers wherever we ran it. It’s the most cost-effective campaign we’ve done and it was at the heart of the financial crisis.’
Jung is overseeing Avon’s expansion into emerging markets – she sees the Middle East, India and Africa as the most promising, with Turkey and South Africa showing the fastest growth – but she adds, ‘For me, the biggest emerging market isn’t a country, it’s women. We have 600 million people living on a dollar a day, and two-thirds of those beneath the poverty line are women. When a woman takes on an earning role, family health and education improve. The societal impact is huge’ (‘Woman at the top: Andrea Jung’, Financial Times, 16 November 2010).
With markets still to conquer and representatives to recruit, Avon isn’t about to stop calling.