SEPHORA CASE

Sephora, a seamless omni-channel customer experience!

This case was written by Nathalie Dupuy, Daunat Customer Marketing Director - Cross Channel Expert
(Consultant Beaumanoir Group, Yves Rocher, International Masters Publishers, Guerlain)

Sephora in a few words, a unique concept.

Created in 1969, the brand's concept has differentiated itself from its competitors by its unique way
of transforming a moment of shopping into a moment of pleasure. Sephora has created the
"entertaining shopping experience". Sephora is a specialized retailer that has also created its own
brand of cosmetics; a brand that is accessible, full of energy and boldness, and that anchors the brand
in its customers' daily lives. The development of Sephora cosmetics has strengthened the brand's
attachment to its customers and also made it possible to offer an accessible brand within a world of
luxury products.

Sephora has become the world's leading selective retailer of beauty products with more than 2000
stores in 33 countries. The brand has universal and recognizable characteristics, from the corners in El
Corte Inglès department stores in Spain and V&D in the Netherlands, to the flagships on the Champs
Elysees, 5th Avenue and the Dubai Mall. Sephora excels in the art of finding creative brands and
offering a daring range of exclusive products. The brand provokes emotion through its surprising
thematic animations and innovates by inviting customers to discover its beauty bars and its ever more
original services. Entering Sephora also means surfing the e-store and shopping for trendy beauty
products from the comfort of your armchair. The various Sephora websites (France, USA, China) offer
many advantages (discounts on delivery, choice in gift sets, attentive customer service, etc.).

Sephora employs 35,000 people worldwide, including more than 4,000 in France, to serve its
customers and has developed a 360° cross-channel customer relationship through its various sales
channels: stores, Internet, mobile, social networks, press .... The customer relationship, supported by
its database enriched every day by cardholders (nearly 10 million in Europe and 30 million in the United
States), is one of the company's strengths, enabling it to achieve 90% of sales via loyal customers who
are already cardholders.

The customer at the heart of SOLOMO's marketing campaigns: the Sephora loyalty card.

As a support for the one-to-one relationship, whether physical or virtual (notably accessible on the My
Sephora app), the customer card is the identification medium for the relationship between Sephora
and the customer. After visiting a store or making a purchase on the Internet, the customer can open
a "white" Sephora card. From a customer number and a well-filled customer file (address, cell phone,
email), the whole cross-channel relationship between Sephora and its new customer can begin. The
Sephora loyalty system triggers benefits based on recency, frequency of purchases and the amount of
purchases (For example, in France: 1€ = 1 loyalty point). This loyalty system is enriched with benefits
according to the customer's activity and establishes a recognition system through 3 levels of cards:
Sephora White Card, Sephora Black Card or Sephora Gold Card for very loyal customers (from 1500€
of purchases per year). Loyal customers can take advantage of numerous benefits such as 20% off
during "private sales" operations, as well as offers on their favorite brands and a surprise for their
birthday. The Sephora Gold card also offers free delivery to www.Sephora.fr, free access to the
Sephora Beauty Bars once a month by appointment in store, an e-newsletter with beauty news and
exclusive reports, a dedicated telephone line, and the choice of a Sephora Gold Limited Edition Gift as
soon as 1,000 points are accumulated.
The customer approach is very complete and representative of a marketing approach concept
SOLOMO for "Social" "Local" "Mobile" ... Principle essential for a brand wishing to establish a cross
channel relationship with customers increasingly aware and connected with new technologies. This
SOLOMO marketing approach allows to take advantage of the "smartphone" culture and to offer
personalized and geo-localized marketing content while promoting virality and social sharing. This
approach allows to offer a consistent and engaging experience regardless of where a consumer
interacts with a brand. These interactions should serve to reinforce the consistency of the customer
experience and the relevance of messages in both the real and digital worlds.

Cross-channel customer communication Mailing / Internet / email / SMS / POS advertising with a
high degree of consistency to generate purchases in the stores, on the Séphora.fr website or the
Séphora mobile application.

The objectives of cross-channel communication are to

1) Multiply the points of contact with the customer.
Repeating the same message, the same story or "story-telling" to the customer allows to reinforce the
brand image and increase its retention rate on a communication campaign.
2) Encourage purchases via several media to increase brand attachment, loyalty and food rate
(purchase numbers). Each sales channel offers a different and complementary brand experience.

There are many communication media that can be used in synergy. The classic direct marketing media
have their role to play in establishing an individualized relationship. For example, personalized mailings
sent directly to the customer's home allow, in the digital era, to initiate a physical relationship, to take
over a newsletter sent to the customer's mailbox or to relay information transmitted by press or social
networks.

Store windows are the most visible and the most emblematic supports of the Brand. They are and
remain the best way to recruit new customers and also to remind existing customers of the brand by
telling new stories every month (news, new products, promotions ...). They can be relayed in street-
marketing by leaflets distributed by hostesses in the streets to encourage passers-by to come to the
store and discover the advantages of the moment. Street marketing is a good media, very local and
close to the stores to create buzz and recruit new customers.

Any communication device is thought out according to the customer's needs at a given moment and
the coherence of the message that the brand wishes to deliver in relation to the target. The choice of
media is also determined according to the preferences of the targeted customers. The customer
database centralizes customer preferences under a DMP (Data Management Platform). The role of this
DMP is crucial in customer relationship management, since it records all customer contact points (on-
line and off-line) and all transactions. Based on these contact points, Sephora can trigger campaigns
on the media most popular with its customers (this can be automated campaigns that are triggered
based on customer actions, as is the case when the company uses bots for its social networks).

The stores, the Sephora products: showcases of the Brand and "entertaining shopping experience".

In the age of new technologies and the Internet, stores have their true legitimacy and raison d'être to
anchor the customer relationship in reality and provide a unique experience for customers. Trying on,
smelling, touching, listening... the Sephora store is the place where customers can physically
experience their relationship with the brand. Everything is done to enrich the Sephora "entertaining
shopping experience": from the music played at the points of sale to the colors used to present the
products and communications. With each new communication campaign, the store relays the themes
developed in mailings, newsletters or other information on social networks.
During their visit to the store, customers can search for information on their own. Customers can scan
the products with the mobile application and find directly on their mobile the product sheet with the
opinions of Internet users. In the store, products can be "touched" and "smelled" and are
systematically demonstrated by testers. Beauty consultants are specifically trained to welcome
customers and advise them according to their preferences. In some stores, they have tablets at their
disposal to consult customers' histories and preferences thanks to the customer's loyalty card. There
is a real synergy between the content of the information available on the web and what the consultants
say.

At the cash register, the visit and purchases are recorded via the loyalty card that the customer
presents physically or virtually (My Séphora application); the beauty consultant can also search for the
customer online on her cash terminal thanks to an interactive connected system. Thus, at each visit to
the store, the customer's benefits and history can be consulted at any time.

In-store customer relations are based on a style unique to Sephora; a unique training program to
develop the "Sephora attitude”

It is impossible today to talk about cross-channel customer relations without underlining the
importance of training the teams in the field. The richness of a customer's relationship with a brand
that has a large network of stores and a website is based on a relationship of advice and sales specific
to the brand.

The "Sephora Attitude" is an open mind, a team spirit, a direct approach and an expert vision. To teach
this "Sephora attitude", the brand has created La Séphora University. With an international presence
(Paris, Shanghai and San Francisco), Sephora University is a unique place dedicated to training teams
around the world. Sephora University is also a label - recognized worldwide for the quality of the
courses it offers. The ambition of this university is to make each employee a true Brand Ambassador
and to guide them throughout their career by teaching them customer relations and the Sephora style.

Sephora's technical and management training courses give each employee an experience that they can
pass on to their customers and make them feel it when they visit the store. An employee who has been
"fed" the Sephora culture can easily talk about the different channels on which the brand is present,
he or she can refer to the web content and encourage customers to go online for information or even
to order a product reference that is temporarily unavailable in stores or not listed locally. In this case,
the Internet is an excellent sales complement for stores that do not have enough space to reference
all the brand's products.

Digitalization of the point of sale: sales support tools for personalization

E-commerce and "offline" commerce are constantly converging, and initiatives reconciling these two
complementary spheres continue to multiply. At the heart of this dynamic is the quest for a constantly
optimized shopping experience, which has led Sephora to go digital. A forerunner in this area, Sephora
is one of the brands at the forefront of digitalization of the point of sale. This strategy is a natural part
of the brand's digital ecosystem, an ecosystem whose exemplary nature has earned it the top spot in
the L2 digital IQ Index* published in June 2013. It is also reflected in the recent acquisition of ScentSA,
a start-up that had been working with the company since 2008 to develop on-screen sales support
services.

At Sephora, digital technology is considered above all as a tool for customer relations. The "My
Sephora" mobile application was developed with a view to building customer loyalty and
personalization. In addition to creating a quality interaction with customers, this device, available to
sales advisors and accessible via iPod Touch, is designed to offer tailored advice to the 10 million loyalty
card holders in France. By cross-referencing customer information, from purchase history to
consumption habits to the profile of similar customers, the teams can make suggestions and
recommend products - from among the company's 17,000 references - that are closest to the needs
of consumers.

By offering personalized information on the available product range and its specific features right in
the store, Sephora is revolutionizing the in-store customer experience in a way that is both fun and
highly pragmatic. All products tested by customers are recorded in-store and can then be proposed as
part of personalized offers.

The My Séphora mobile application.

Practical and mobile, the cell phone is always within reach of the customer. Numerous services allow
the customer to move around freely and find the benefits of the brand wherever they are. The mobile
app generally includes the services offered on the website with specific features that enable a localized
relationship with the customer. Since November 2013, the app has become a merchant app and thus
allows customers to order a Sephora package from their mobile or tablet. Several services are
accessible:

1) Geolocation: essential for a network of stores, the app offers, thanks to a "store-locator", the
addresses of nearby stores, telephone, opening hours and specific and local news (beauty bars for
example). The app also provides maps to get there, as well as the time and distance the customer has
to travel to get there.

2) All the catalog and products are online. Note that the contents are varied and take different formats:
texts and images for the products and also video contents. The customer can know on each reference
if the product is available in the stores nearby or if not, he can order it remotely (shopping cart) and
have it delivered at home.

3) An interesting function: the scan is integrated into the application. A real means of interaction
between the real store and the website, this function allows the customer to search for information
on a product, make his choice and do his shopping in self-service.

4) Practical and always accessible, the customer has access to the history of his or her loyalty card, his
or her latest purchases and the current offers reserved for him or her. The mobile app serves directly
as a virtual loyalty card and Séphora consultants can scan the loyalty card barcode directly on the
customer's cell phone.

5) Since November 2013, remote purchasing from the cell phone has been offered with the same
advantages as the Sephora.fr website. The evolution was indeed essential at a time when tablet and
mobile sales are surpassing "classic" computer sales; the customer becoming more and more nomadic.

6) The Beauty Board social network is now accessible from the application, allowing customers to
access a wide range of content and advice and interact with the community of Sephora customers.
Click&Collect, mobile payment, e-gift card: services now well developed at Séphora.

The brand is a digital enthusiast and is constantly developing services to make customers' lives easier
and meet their expectations; less time waiting at the checkout, services available 24/7. Sephora has a
portal of 17 websites accessible in 10 different languages. With the French and American merchant
sites, customers can access a choice of thousands of products available 24 hours a day, 7 days a week.
At home, customers can benefit from a wealth of information: video advice, answers and beauty
solutions to frequently asked questions, help in choosing a perfume according to their profile or
personalized diagnoses. On the site, customers can discover new products, get information before
going to the store, play the current animations and share the results with their friends on social
networks.

Customers can order online and pick up their order within 2 hours free of charge. Delivery fees for
Click&Collect orders (in-store pickup) are free. There is no minimum purchase to use this delivery
method; a very appreciated and practical service when we know that the main cause of dissatisfaction
in stores are the queues at the checkout.

For all distance purchases, customers benefit from advantages to encourage them to order: 5 free
samples in the packages, free shipping for a certain amount of purchase, free gift wrapping and an
easy returns service. Sephora is an associate member of FEVAD (Fédération E-Commerce et Vente A
Distance), which is a guarantee of seriousness for all distance selling companies.

For in-store payments, Sephora developed the first mobile payments thanks to Apple Pay in the US as
early as the end of 2014. This is now possible in France since July 2016. To do so, the brand had to
equip its cashier systems with NFC terminals and carry out a major update of its software infrastructure
to accommodate this type of mobile payment.

For customers looking for more interaction, they can request Beauty Advisors by e-mail via a specially
dedicated section. There is also a Customer Service by phone available from Monday to Saturday, from
9am to 8pm. The content of the Sephora website can be shared on social networks and now on The
Beauty Board, a social network dedicated 100% to Sephora beauty.

Social networks.

For its B to C (Business to Consumer) relations, Séphora has a strong presence among its communities
on Facebook (17 million fans in France), Instagram (1.1 million subscribers in France), Youtube (76,250
subscribers) and other networks such as Snapchat. Communication is orchestrated with other media
on news, novelties and events of the Brand. On social networks, the objective is to interact with fans
or customers. Every day, new messages to communicate between the brand and its fans. It is a daily
opportunity to enrich the relationship with the customer and maintain contact. Social networks are
nowadays essential, especially with young people, to complete a cross-channel marketing campaign.
Even if the role of these social networks is not directly to sell, they contribute to support sales by
multiplying the points of contact with customers and maintain brand loyalty. From social networks,
many promotional operations are possible and links to the website or to the stores can be created.

Sephora has understood where its target audience is, especially the Millenials. They are mainly on
Instagram and Snapchat. And the trend seems to be growing as these two social networks are
increasingly used by younger people. The brand has understood the stake of its presence and activity
on them. Regarding the first one, beauty content represents 33% of Instagram content. This makes it
the most present topic on the social network. The brand therefore engages its community on its
Instagram account with attractive visuals, contests and tutorials that correspond to the practices and
expectations of Millenials on the social network. On Snapchat, Sephora is one of the most present
brands. Its strategy is based primarily on lenses. The brand was the second in France to launch its own
lenses. But also on snap ads. Moreover, we are told that users spend about 35 € on these ads which is
a pretty impressive figure on Snapchat. Finally, the brand is investing in chain geofilters, filters adapted
to each Sephora store.

Sephora and influencers

We can remember from Sephora's intervention its very special relationship with influencers.
Influencers love Sephora and the brand gives them back. He even adds that some brands present in
the shelves of the chain could never have existed without influencers, such as Huda Beauty. Sephora's
motto is to be able to impose nothing on them and not be afraid to let go. You also have to accept that
people say things about you that don't always completely correspond to the message you want to
convey.

Sephora and the conversational

Sephora launched in 2016 in France, The Beauty Board, a 100% beauty social network. This network
had existed since 2014 in the US. It is a kind of database of looks in which it is easy to pick to get
inspired and make new discoveries. This network allows you to like and comment on a post, and
especially to tag the products used on a photo. One click is all it takes to be redirected to Sephora.fr
and buy the products directly online. It also allows you to enter the color of your eyes or hair for
personalized advice.

The launch of a first chatbot in 2016 to combine beauty and... artificial intelligence

With the chatbot "Beauty Bot", Sephora conversed for Christmas 2016 with its customers in need of
inspiration, in order to recommend a personalized selection of gifts. The retailer is constantly
reaffirming its image as a "digital pioneer" brand. Deployed in November 2016, its beauty chatbot, the
"Beauty Bot" was accessible via Facebook Messenger. The principle: converse (or more precisely
"chat") with a user to find out the identity of the gift recipient (age, gender, first name), as well as his
or her style; then, propose a personalized selection that the customer can accept or refuse - the bot
will then propose other recommendations. The choice of Facebook Messenger was natural given its
audience of one billion users. The Beauty Bot has been deployed by the company in five countries:
France, Italy, Poland, Spain and the Czech Republic. Based on artificial intelligence, a chatbot learns
from users' choices in order to select products from the Sephora catalog that are increasingly
relevant... and improve its conversation. Once the selection is made, the order can be placed directly
on the cell phone or picked up in store, thanks to geolocation. The Beauty Bot takes into account the
location of customers and thus gives the possibility to pick up the order in the nearest Sephora. Of
course, conversational chat does not replace interaction with an experienced consultant, but it can
attract an ultra-connected target and bring content and visibility for the brand.
2017, Sephora launches its conversational bot with VISEO

After a first chatbot experience, Sephora enters the conversational and voice assistance era in 2017
with its app available on Google Assistant: beauty finally has a voice thanks to this conversational bot
that allows its customers to interact with the brand via Google Home as well as on Android and iOS
smartphones from via Google Assistant. Always a pioneer in digital and technological innovations,
Sephora is one of the first applications available on the Google Assistant following the launch of its
"Actions on Google" platform in France. In an increasingly connected world, Sephora has developed a
conversational bot in collaboration with VISEO, using artificial intelligence bricks allowing its customers
to interact with Sephora via Google Home as well as on Android (from version 6) and iOS smartphones
via the Google Assistant. The choice of this assistant allows the brand to be where the audience and
uses are. With more than 49 million voice assistant users and 10 million voice-activated speakers sold
in the United States in 2016 (Statistical source: Google Think Tank, eMarketer), voice assistants appear
to be an essential channel for the brand. Sephora, a pioneer in digital innovations, is also legitimate in
launching features that make customers' lives easier.
The conversational bot makes it possible to :
- Discover how to book a beauty service: Full makeup at the Beauty Bar or services at the
Benefit eyebrow bar, the Google assistant and Google home now allow you to consult all the
availabilities in the Sephora stores. The appointment is to be finalized by email afterwards.
- Play with the brand via quizzes about the world of beauty to indicate the level of knowledge
of the customer
- Listen to exclusive beauty podcasts with influencers for 8 weeks from the launch. One
influencer per week, one theme per day, to be listened to or re-listened to in full at the end
of each week on sephora.fr. Themes include: Let's talk about style and trends; What is your
must-have beauty routine; Focus on a new product.

Conclusion

Loyalty cards, stores, beauty advisors, the Internet, apps, social networks... multiple ways of enriching
the individualized customer relationship on a daily basis. Over the last few years, Sephora has been
able to evolve and provide its customers with numerous products and services. All customer paths are
possible between communication channels: Web to shop, Mobile to Shop, Web to Web, Shop to Web,
etc. All these contacts are consistent and require an efficient information system. The information is
connected and updated to follow the customer as closely as possible and to develop attachment to
the network and to the Sephora brand. In parallel to the elements presented in this case, we must not
forget the "classic" media for the general public such as the press, TV, radio, etc., which do not manage
individualized customer relations, but which contribute to the brand's reputation and attachment.
INTERNET BIBLIOGRAPHY

LVMH website, Sephora selective distribution: http://www.lvmh.fr/le-groupe/les-societes-et-les-

marques/distribution-selective/sephora

Sephora at the forefront of digitalization

http://www.lvmh.fr/lvmh-news/news/sephora-a-l-avant-garde-de-la-digitalisation

Sephora website http://www.sephora.fr/

“We are Séphora" website http://www.wearesephora.fr/

The Sephora loyalty program: http://fidelite.sephora.fr/

Sephora and social networks: http://www.mbadmb.com/2017/12/16/sephora-millenials-chloe-jobert/

Sephora and Artificial Intelligence: http://www.e-marketing.fr/Thematique/social-media-

1096/Breves/Sephora-chatbot-allier-beaute-intelligence-artificielle-311821.htm

Sephora on Google Home: http://www.viseo.com/fr/communique-de-presse/sephora-lance-son-bot-

conversationnel-avec-viseo

Sephora and Apple Pay :

https://www.igen.fr/iphone/2014/11/sephora-est-pret-pour-apple-pay-88651

https://www.google.fr/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahUKEw
iD9ciXtPDYAhUPLFAKHWjFANcQFggyMAE&url=https%3A%2F%2Fwww.lci.fr%2Fhigh-
tech%2Fapple-pay-debarque-en-france-comment-payer-avec-votre-iphone-
2000186.html&usg=AOvVaw1TryATS8dCYOWLAgIPS1Ih
QUESTIONS THAT CAN BE USED FOR PEDAGOGICAL REFLECTION:

Tomorrow, new services remain to be tested to validate the interest that customers will have in them.

1) Imagine the development of new services on the My Sephora App? How can we develop the
"entertaining shopping experience" aspect? Through which new experiences and new services?

2) Could you create a new offer using geo-localized notifications to bring people into the stores via
service offers or promotions?

3) How can you develop interactions between social networks and points of sale?

4) Could you propose a process to share the beauty bar photo experience in the store?

5) How can we develop the use of mobile in store?

6) How do you think we can use the possibilities of augmented reality?

7) How can the use of robots and artificial intelligence contribute to the enrichment of the customer
experience online and in store?

8) How can gamification logics be used for this brand?