SHO for Sephora

SHO for sephora

TABLE OF CONTENTS

EXECUTIVE SUMMARY

COMPANY SUMMARY HISTORY

SWOT ANALYSIS POSITIONING COMPETITION DISTRIBUTION PROMOTIONS

7

NEW STRATEGIC INITIATIVE

KEY OBJECTIVES

HOW SHO WORKS

5 FORCES RATIONALE PLANNING

LONG TERM BENEFITS

44

MARKET ANALYSIS

M-COMMERCE INDUSTRY

PESTEL ANALYSIS

KEY PLAYERS

MARKET COMPETITION

60

TARGET CONSUMER PROFILE ANALYSIS

76

COMMUNICATION & PROMO PLAN

OMNI-CHANNEL PLAN

PROMOTIONAL CALENDAR

84

FINANCIAL PLAN

90

CONCLUSION

96

APPENDIX

98

BIBLIOGRAPHY

104

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EXECUTIVE SUMMARY 6

The rise of the m-commerce industry has given retailers a new platform to showcase their brand and for consumers to interact with it. In some cases, retailers have taken to this new channel to offer a brand new and innovative way to actually sell their products, completely different from either their e-commerce site or their brick-and-mortar spaces. Sephora, a leader in not only beauty retailing but digital innovation as well, has proven to be the front-runner and therefore the perfect retailer for a new enhancement for m-commerce.

Our new initiative, SHO for Sephora, takes the idea of “Oh, show me that!” to the next level. Using the latest and most advanced image augmentation technology, users can now scan beauty products in their Sephora app and instantly have the ability to buy them with one touch on their smartphone. Whether you’re admiring a friend’s lipstick and want to buy it immediately on the spot or you ran out of your favorite bronzer and don’t have the time to run to the Sephora store, SHO is always there to give customers exact what the want with the ease of a single touch.

With this new implementation, we hope to improve upon Sephora’s mobile strategy even more than what is already currently in place. We hope that with SHO, Sephora’s current app downloads will increase to a total of three million within the course of one year. We also hope to increase their already successful membership rewards program, Beauty Insider, by one million new members in six months. Finally, our success will be lastly measured by an increased conversion rate which will ultimately result in more time spent on the app and hopefully increased mobile sales. SHO will hopefully bring Sephora one step closer to perfect optimization for an m-commerce presence and therefore solidify their place as a pioneer in digital innovation in retailing.

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COMPANY SUMMARY 10

SEPHORA “Sephora, the name is a contraction of the Greek word “SEPHOS” which stands for BEAUTY, and the name ZIPPORAH, THE EXCEPTIONALLY BEAUTIFUL WIFE OF MOSES in the book of Exodus.”

(LOEB)

HISTORY

Sephora was founded in 1970 in France

by Dominiques Mandonnaud, who had a vision to open a store where women would be encouraged to come in and try on perfume. In 1979, he opened a space to do so called Shop 8, and women across France fell in love with the concept. This encouraged Moundonnaud to then open dozen more Shop 8 perfumeries. Yet, Moundonnaud still had a vision for a beauty brand like no other and wanted to expand his store beyond a perfume experience. In 1993, he bought Sephora and combined with his Shop 8 would provide the ultimate beauty experience to his consumers. In 1995, the Sephora Brand was launched with an introduction of bath and body line that has been marked as a major milestone for the brand and its path to be the market leader.

By 1996, the brand was doing so well that they opened a flagship store on the Champs Elysées in Paris. When it first opened, this store received more visitors than the Eiffel Tower; it was the ultimate destination point for women.

Another indicator that Sephora was going in the right direction was the fact that Louis Vuitton Moet Hennessy (LVMH) , the world’s leading luxury goods group, acquired the beauty brand on 1997.

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From 1997 till today, with the help of LVMH, Sephora has expanded and developed in ways that probably would not have been possible without the parent company. The brand refers to the last 15 years as “15 years of Transforming Beauty”. (1) After being acquired by LVMH, Sephora really took off on its journey to become a global beauty behemoth. On July 17th, 1998, Sephora opened its first store in the U.S. in the SoHo neighborhood of New York. A year later in 1999, they lunched Sephora.com in the U.S. It is important to mention that some of the leading fashion brands only entered the online retailing space some five or so years ago. Another important milestone occurred in 2004 when Sephora entered the Canadian market and opened their store in the Toronto Eaton Center. In 2007, the Beauty Insider program was lunched that has no amassed more than 10.6 million members to date.

Sephora has always had a vision for the innovation and the bigger picture of the future through evolved use of technology. Not only was the retailer the first to have an online presence, they were also one of the first retailers to pick up on the iPhone and iPad retailing trends. In 2010, they went after iOS and lunched BeautyTalk, only one year after they lunched the Sephora iPad app that was still relatively new to the market. Their latest breakthrough has been the Sephora + Pantone ColorIQ introduction to the stores. With this new initiative, customers can come into a store and have their skin scanned to find the exact Pantone number of their skin tone. The customer can then use this number to find the perfect foundation within any brand that Sephora carries.

Today Sephora is not only the leading multi-brand beauty product chain in France, but also a strong competitor on a global scale to other companies. “Sephora is available in 30 countries with more than 1,750 points of sale generating revenues in excess of $4 Billion.” (Loeb) It is still owned by LVMH and is grouped under their Selective Retailing category along with brands like DFS, Starboard Cruise Services and Le Bon Marche. The current CEO of Sephora is Calvin McDonald.

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Looking at the revenue and growth projections we can conclude that LVMH as group had a 4% rise in revenues from $36.13 billion in 2012 to $38.71 billion in 2013. Overall, it resulted in a 0.4% rise in net profit in 2013. Bernard Arnault, LVMH chairman and chief executive officer, highlighted the “remarkable” performance by Sephora, noting the retailer steadily gaining market share in all key geographies and becoming the “leading distributor” of perfumes and cosmetics in America.” (Socha) Forbes.com stated that Sephora has already captured more than 20% of the cosmetic and fragrance market share in the U.S. They also project that their sales are estimated to exceed $2 billion. (Loeb, 2013) Although we do not have access to a detailed breakdown of Sephora’s financial reports, projections, as well as the fact that LVMH recently posted positive numbers, lead us to conclude that Sephora is doing extremely well and will continue to gain even more market share. Further growth can be both predicted and expected for Sephora’s future.

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SWOT ANALYSIS STRENGTHS • • • • • • • • • • • • •

Preeminent international & multichannel retailing beauty chain Offers wide variety of top brands at different price points Immersive in-store experience - customer is encouraged merchandise Advanced CRM - (personalized newsletters, Beauty Insider Program) Strong presence in social media sites like Facebook, Twitter, Google+, Instagram, Pinterest, and Tumblr, as well as their own blog, “Glossy” M-commerce platform, Sephora To Go app Sephora + Pantone ColorIQ Encourage showrooming / welcome shoppers in-store to shop online Ranked as Genius by L2 Digital IQ Industry leader when it comes to digital initiatives and the consumer reach, 1300 stores worldwide Is part of LVMH groups selective retailing Major financial support from LVMH - Collaborations with Marc Jacobs, Olsen twins and other major influencers in the fashion industry.

Sephoras presence in Fashion Week

WEAKNESSES • Location of the stores - most stores are located around metropolitan areas that limit their customer reach • Little editorial and no TV advertisements • Limited amount of the brands carried • Some stores are crammed with merchandise, making consumers feel overwhelmed and stressed • Not all countries have Sephora’s online site or brick and mortar locations

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OPPORTUNITIES • Capture more market share • Grow and carry more brands • Provide online shopping experiences in more countries • Expand upon current m-commerce platform • Increase brand awareness • Digital shopping 2.0 • Environmentally friendly cosmetics market • Expand on the m-commerce rise • Potential collaborations across different channels like other fashion designers, production companies • Partnerships with beauty/fashion bloggers • The emerging markets: Russia, China, Brazil and India • The rise of buying power of Asian, Hispanic and African-American woman, production of specific lines targeting these groups.

THREATS • Possibility of economic recession • Intense rivalry in the beauty industry • Competitor adoption of technology and their entrance into m-commerce • The accessibility of brick and mortar sores, consumers select other retailers if a store is not near by them • Not all the consumers are tech-savvy • The increasing prices on raw materials • Government regulations in different markets • Aggressive marketing initiatives by competitors

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L 2

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Measured in terms of retail sales, [Sephora] now commands a staggering 12 percent of the beauty market in the United States, 15 percent of the market in China and 27 percent of the market in its native France, according to Sanford C. Bernstein, a sell-side equity research firm. Bernstein says Sephora will push LVMH’s Selective Retailing division — which also includes the DFS Group — to sales of 14.7 billion euros (about $19.8 billion) by 2017, surpassing the conglomerate’s Fashion and Leather Goods division by 2018.

(Sherman)

D I G I T A L

I Q

Sephora has managed to position itself as the leader for multichannel beauty product retailing. Forbes.com released an article, “Sephora: Department Store Cannot stop Its Global Growth”, discussing how, in the past, department stores were the ultimate stop for consumers of not only fashion but beauty products as well. Yet, “Then came Sephora. This new stand-alone beauty and fragrance store was a real shock for store operators throughout the world. The department stores believed they had the only retail format capable of effectively selling premium beauty and fragrance products. They were wrong.”

(Loeb) Amongst Sephora’s competitors in U.S. are the following retailers: Ulta, Macy’s, Nordstrom, Barneys New York, Bergdorf Goodman, Bloomingdales, Neiman Marcus, Net-a-Porter, Beauty. com and Saks Fifth Avenue.

R A N K

POSITIONING

THE MARKET

L2 DEPARTMENT STORE REPORT 2013 Although U.S. Department Stores’ share of retail has been halved in the last 10 years, in 2008 there were 138 department stores. By this time, there were 57, and the death rattle from icons like JCP and Sears are clearly audible.

The best firms have noticed the opportunities in multichannel retailing and have made attempts to grow even furthur in those platforms. Macy’s, Nordstrom, Saks Fifth Avenues have all set the pace for this retailing strategy. Macy’s now registers $3.1 billion in online sales – 11% of their overall revenue.

Nordstrom, now considered a pioneer of in-store pickup, saw same-store sales increase 8% after incorporating real-time inventory integration and in-store pickup of online orders. Saks Fifth Avenue’s sites feature large-scale photography, product-page videos, and a robust navigation tool paired with substantial investments in fulfillment.

E-COMMERCE SITES Search engines are responsible for almost half of the upstream traffic to department store sites. Email is also a key factor, driving a 6.3% share. Social media accounts for just 2% of traffic and is steered primarily by Facebook. Net-A-Porter captures 2.7% of site traffic from a more than 42,00-strong Pintrest community.

MOBILE SITES 85% of department store sites are mobile-optimized. While mobile influence on in-store sales is projected to grow from $158 billion in 2012 to $689 billion by 2016, only half of department stores provide basic store location links through their mobile experience. The Saks Fifth Avenue mobile site includes easy click-to-call and click-to-email features, as well as a prominent link to download the Saks app. Macy’s site is entirely mobile-optimized expect for the “Contact Us” customer service link.

APPS Time spent shopping on retail apps has increased 525% year-on-year since December 2011. Department Stores favor iOS over Android and focus primarily on e-commerce functionality. 67% of brands offer an app that has a wish list or registry feauture to allow customers to save particular products they wish to purchase.

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Graphs Source: L2

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COMPETITION $$$

HIGH ACCESSIBILITY

LOW ACCESSIBILITY

$ ULTA BLOOMINGDALES BEAUTY.COM NORDSTROM NET-A-PORTER

BARNEY’S BERGDORF GOODMAN MACY’S NEIMAN MARCUS SAKS FIFTH AVENUE See Appendix: Figure 4

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ULTA Ulta is the only other multi-brand and multi-channel beauty retailer. They offers products from the following categories: makeup,

nails,

skincare,

hair

care,

fragrance, bath & body, mens, and teh signature Ulta collection. Their products range in price from $2.49 for a nail polish to $229 for Perricone MD face/ eye treatment serum. Ulta is an American beauty retailer that currently operates 550 stores with an ultimate goal of 1200 stores. They also sell online at www.ulta. com and through a mobile app. (Ulta.com)

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MACY’S Macy’s beauty department sells products in categories like, bath & body, cologne & grooming, hair care, makeup, nails, perfume, skin care, tools, & beauty accessories. They currently offers over 100 beauty and fragrance brands. Nationwide, there are rougly 800 Macy’s stores. The store has online presence as well as an app that gives them their market share in the m-commerce platform. Their price point varies between $3 for a Bare Escentuals eyeliner pencil sharpener to $750 for Estee Lauder face cream. (Macysinc.com)

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NORDSTROM Nordstrom’s beauty department currently has makeup and skin care products, tools, brushes, fragrances, and hair, bath & body, and nail items. They sell 233 different brand lines on their online store as well as offering four apps that serve different purposes, like shopping on the iPhone or iPad, browsing and shopping Nordstrom catalogs, or the Nordstrom Rack app that sends you notifications about specific item alerts. They operate in 35 states with 117 full line stores and 141 Nordstrom Rack stores. Their online store is available in 44 countries across the world; in addition they also operate 2 Jefferey boutiques. Their price point for Beauty & Fragrance goes from little under $5 for things like nail polish or shampoo up over $1000 face creams. They provide products for both men and woman.

(Nordstrom.com)

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BARNEYS NEW YORK Barneys New York under their beauty

offers

the

following

categories: bath & body, beauty accessories,

cosmetics,

eco-

friendly beauty, fragrances, hair, home fragrances, men’s fragrances & grooming, sets & palettes, and travel & treatment. They primarily specialize in the more designer and luxury beauty lines. Their price point varies from $7 for a shampoo up to $1,900 for a La Mer moisturizing cream. Barneys New York does have an online store but dose not have m-commerce presence. They have 21 Outlets that is located on the east and west cost along with 11 flagship stores, 7 Co-Op locations and 5 restaurants. (Barneys.com)

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BERGDORF GOODMAN Bergdorf Goodman currently sells products in skin care, color (face, eyes, lips, nail lacquer) with 26 brands offered, fragrances with 56 brand offered, bath, body & hair with 13 brand offered, men’s grooming with 41 brand offered, home fragrances with 9 brands offered, and beauty accessories with 16 brands offered.

They have an online store, New York stores, as well as an app called “Today’s Shoe”, where you can pick out the perfect shoe for any occasion.

Their price point for their beauty merchandise

also

ranges

from

under $10 to items in the thousands.

(Bergdorfgoodman.com)

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NEIMAN MARCUS Neiman Marcus under their beauty offers

categories

like

skin

care,

color (face, eyes, lips, nail lacquer), fragrances, bath, body & hair and men’s grooming. Their price point varies from $5 Supersmile whitening gum to $1900 for a La Mer face cream. Both Neiman Marcus and Bergdorf Goodman offer on their online store Beauty Replenishment Service where you can set products and time frames when you want a certain product to be replenished. There are 41 Neiman Marcus stores and 36 Clearance Centers. Neiman Marcus has m-commerce presence through their NM app. Neiman Marcus and Bergdorf Goodman are owned by Neiman Marcus Group. (Neimanmarcus.com)

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BLOOMINGDALES Bloomingdales under their beauty offers

categories:

skincare,

makeup, fragrance, bath & body, hair care, men’s shop, sun care, tools & accessories. They carry 168 different brand lines for all these categories. They operate 36

Bloomingdales

stores,

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Bloomingdales outlet store as well as you can shop at bloomingdales. com or on their mobile apps the Big Brown app and 59th & Lex app. They also offer iCatalog app that is made for iPad users where their customers can look through and shop offers from the Bloomingdales catalog. Their price point varies between from $6 for hair care products to $1900 for La Mer face cream. (Macysinc.com)

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BEAUTY.COM Beauty.com

is

an

online

beauty retailer with no brick and mortar stores. They offer beauty categories like skin care, makeup,

fragrance,

bath

&

body, hair care and accessories.

They carry products from over 200 different brands and offer everyday free shipping, 5% cash back, as well as free samples.

Their price varies from $4 Lip Balm to a $795 wrinkle reduction device. Beauty.com does not currently have an m-commerce presence. (Beauty.com)

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NET-A-PORTER Primarily a fashion retailer, Net-APorter does currently offer products in the bath and body, beauty sets, cosmetics cases, fragrance, hair care, makeup, nails and skincare categories.

Net-A-Porter

was

founded and still is an online store, they do not have brick and mortar presence, they do offer Net-APorter app for iPhone, Andriod and iPad as well as app for their magazine, that anyone can access through iPad. Net-A-Porter is on the front line of the market when it comes to innovation and use of technology. Their price point for beauty products varies between $9 Klorane dry shampoo to $775 Sisley-Paris Anti-Aging skin care cream. (net-a-porter.com)

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SAKS FIFTH AVENUE Saks Fifth Avenue under their beauty offers categories: makeup, skin

care,

fragrance/cologne

& after-shave, hair care, bath & body, shaving, sun care both for women and men. They carry top brands for women and men.

Their price for beauty products varies between $7 nourishing conditioner to $1995 for ReViva anti-aging product In USA they operate 41 Saks Fifth Avenue store and 53 Saks Fifth Avenue Off 5th stores. They also have 5 international stores that are located in Mexico, Kazakhstan, Bahrain

and

United

Arab

Emirates. (Saksfiftavenue.com)

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DISTRIBUTION PHYSICAL RETAIL SPACES Approximately 1,300 stores spanning 27 countries around the world 300 stores in the US First U.S. store opened in New York in 1998 First Canadian store in Toronto in 2004 North American headquarters located in San Francisco Corporate offices in New York and Montreal Encourage customers to sample products FEATURES More than 100 beauty brands in most locations Typical store carries about 7,000 stock keeping units In-store iPads for customers to browse products, Beauty Studio services, and tips on makeup and hair styling Color IQ DATA More than 1,750 points of sale Revenues in excess of $4 Billion by estimate (Forbes.com) JCPENNY JCPenney began opening Sephora shops inside stores in October 2006 Total of 386 boutiques Each boutique is about 2,000 square feet Have much higher sales productivity per foot than the rest of the J.C.Penney store Located in the center of the store Still features the signature Sephora look and beauty offering

“FORMATTED LIKE AN APOTHECARY BUT FURNISHED LIKE A NIGHTCLUB, THE CHAIN HAS BECOME KNOWN AS A LOW-PRESSURE, CONSUMER-EMPOWERING ALTERNATIVE TO TRADITIONAL DEPARTMENT STORE COUNTERS” (SHERMAN)

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E-COMMERCE Sephora launched their website in the U.S. in 1999 and Canada in 2003. The site is considerably the retailer’s largest North American store in terms of sales and selection of products and brands.

Particularly impressive is their highly-optimized search function, that has every product tagged from among 102 different dimensions like age, ingredients,price, and color. This kind of precise detailing helps customers narrow down their search much quicker to find exactly what they’re looking for.

FEATURES Highly-detailed search function Sephora TV “Glossy” blog “Beauty Talk” - Customer $ expert run forum for beauty advice and recommendations DATA 9 million unique visitors per month E-commerce business has doubled in the past five years Sephora is No. 136 in the Internet Retailer Top 500 Guide Online sales in 2011 estimated at $130.2 million, up 21.7% from $107.0 million in 2010

“DIGITAL IS IN OUR DNA” - Julie Bornstein, Sephora Direct Senior VP

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M-COMMERCE Sephora began implementing their mobile strategy in 2010, focusing on just the US market. In releasing their smartphone and tablet apps in 2012, the retailer created one-of-a-kind platforms to experience the brand and completely new and different ways. Focused on simple, personalized shopping online, as well as enhancing the in-store experience, the mobile app actually encourages the practice of showrooming, with a bar code scanner that can be used on products in-store to pull up ratings and reviews. The tablet edition lets consumers shop products in a magazine-like format while they can also watch how-to videos and practice at the same time using the virtual mirror feature.

MOBILE APP FEATURES 2D bar & QR code scanning Personal purchase history Passbook Integration E-Gift Cards Integration with in-store POS system Active promotions TABLET APP FEATURES Articles on beauty trends Virtual mirror Video tutorials “Beauty Talk” forum DATA (as of 2013) More than 70% of mobile traffic comes from iOS devices Mobile orders increased by 167% with introduction of apps Traffic to mobile up 75% (Now accounts for a third of all Sephora.com traffic) Downloaded more than 2.5 million times Over 50% of Sephora’s emails are opened on mobile or tablet devices 400,000 new Beauty Insider sign ups within 3 months of app launch Passbook users spend twice as much annually and purchase twice as frequently as average Sephora customers 600,000 Apple Passbook registrations

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PROMOTIONS CURRENT COMMUNICATION ACTIVITIES TRADITIONAL

Sephora occasionally employs some traditional practices when it comes to advertising. From print ads to billboards, the retailer positions itself accurately in front of the appropriate audience during times of high consumer spending, such as the winter holidays. During those times, it is likely that the retailer will utilize the previously mentioned strategies like billboards in New York City or print ads in fashion magazines to drive holiday sales and promote current sales.

However, as a digitally integrated company, majority of Sephora’s advertising activities are executed digital in platforms. They primarily advertise on other fashion mobile apps like Refinery 29 to promote not only their products but the Sephora-to-Go app as well. By doing so, Sephora is both targeting and meeting their core customer in other aspects of their mobile lives, thus making the brand synonymous with digital retailing and innovation.

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SOCIAL MEDIA

As a digitally integrated brand, Sephora utilizes social media outlets for a wide range of activities.

While nurturing customer relationships is still a key facet of their initiative, the brand also uses these channels for a number of other practices like advertising, promotions, and tutorials. In embracing social media in such a way, the retailer has created yet another platform to interact with consumers and establish an entirely new branded environment that differs from any other channel.

Pinterest in particular has proved to be Sephora’s biggest secret weapon. Being the early adopters that they are, the social media-savvy team jumped on the opportunity to not only inspire consumers, but to promote deals and sales. With 63 boards of topics like “Gifts for Him”, “Tress Code, “Daily Obsessions”, and “Pro Tips”, the retailer gives viewers everything they could need to find inspiration or the right products for their needs. It was noted by the Sephora marketing team that “Pinterest users were saving their favorite beauty products and inspiration onto boards, organically driving new referrals to their site. To improve discovery and reach, Sephora implemented initiatives such as direct pinning from product pages, direct pinning from targeted emails, and competition campaigns. Their first direct-pin email campaign attracted over 14,000 repins and a 60% growth in Pinterest traffic referrals” (Cameron). In fact, according to the brand’s Executive Vice President and Chief Marketing and Digital Officer, Julie Bornstein, “Pinterest users spend 15 times more on Sephora products than Facebook followers”.

WHAT’S NEXT

“The concept is that pictures are everywhere, and we know that beauty lovers love to see ideas for looks and products to buy,” says Julie Bornstein, chief marketing and digital officer of Sephora. The retailer made news this January when they announced their planning of an entirely new social network called “Beauty Board”. Linked with Sephora’s other social media platforms, this network will allow Sephora costumers to upload and share their own photos or looks at other people’s photos to learn more about a product. It will also serve as commerce platform, with tagged products in the pictures instantly available for purchase if Sephora carries that particular merchandise. This new platform will have web, iOs and mobile web functionality along with all the Sephora’s Brick and Mortar location profiles available for anyone who will interact with the site. Beauty talk is going to start off as initiative only offered in the U.S. market due to the fact that U.S. is their biggest market that they operate in. If it will turn out to be successful in the U.S. they will expand to other markets as well with Canada as their primary choice. (Naughton)

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SOCIAL MEDIA AS OF FEBRUARY 2014 5.6 MILLION LIKES POST ONCE TO TWICE A DAY ON AVERAGE ALL ABOUT VISUALS- LOOKBOOKS, PRODUCT PROMOS “FAN FRIDAYS” - SPECIAL GWPs FOR FACEBOOK FANS ONLY 1.25 MILLION FOLLOWERS FOLLOWING 285K USERS 7,658 TWEETS MAINLY PRODUCTS, CURRENT PROMOTIONS, & SPECIAL OFFERS 929,449 FOLLOWERS FOLLOW 293 ACCOUNTS 567 POSTS MOSTLY BEHIND THE SCENES IMAGES & PRODUCT PHOTOS 280,862 FOLLOWERS FOLLOW 105 USERS 6,387 PINS 63 BOARDS

179,541 SUBSCRIBERS 26,430,497 TOTAL VIEWS BEAUTY TUTORIALS & SPECIAL COLLECTION VIDEOS

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DIRECT MARKETING CHANNELS To reach their current and potential customers, Sephora currently relies on a variety of direct marketing tools, such as direct mail catalogs, e-mail newsletters, and in-store communications. These channels help put the retailer in front of the consumer even more, while still remaining loyal to their customized CRM strategy. While some practices like direct mail are slowly on their way out with the rise of the digital frontier, Sephora keeps up with the changing trends and puts their focus on the more relevant initiatives, like email newsletters.

EMAIL NEWSLETTER In a sea of “BOGO”s and “15% off this”s within the consumer’s inbox, Sephora once again sets itself apart from the crowd. In sharing a large amount of information in a concise way, the brand manages to keep consumers informed while cutting out the bulk and unnecessary fluff. They highlight features like “Editor’s Picks” or “Top Gifts Under $25” to direct the viewer’s attention to one particular category as opposed to bombarding them with merchandise. Each customer’s Beauty Insider status and current rewards available are also included in the newsletter, thus maintaining the necessary level of tailored CRM to continue nurturing customer relationships.

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CURRENT SALE PROMOTIONAL ACTIVITIES One fundamental element of Sephora’s communication and promotional strategy is their unique membership and rewards program, Beauty Insider. With free sign-up, shoppers can earn one point for every dollar they spend that can then be redeemed for gifts at the 100 and 500 point levels. In addition, members are offered a variety of other perks depending on which tier of membership they reach.

BEAUTY INSIDER Birthday gift Free beauty classes 100 and 500 point product rewards (sample size) Seasonal promotions

VIB Unlocked by spending $350 in a calendar year Limited edition offers Early access to sales First dibs on new products Seasonal VIB only gifts VIB only shopping events

VIB ROUGE Unlocked by spending $1000 in a calendar year Access to private VIB Rouge events Premium annual gifts (ones that aren’t sample-sized) Complimentary beauty studio access in any store (free makeovers) Personal beauty concierge Unlimited free shipping

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NEW STRATEGIC INITIATIVE

KEY OBJECTIVES Reach 3 MILLION app downloads in 12 months • Gain 1 MILLION additonal Beauty Insiders in 6 months • Reduce the number of abandoned shopping carts by offering customers an EASY, FAST, & OPTIMIZED way to purchase their favorite beauty products • Provide more EFFECIENT PRODUCT REPLENISHMENT through features like “My Vanity” and one-click refill • Encourage more interaction with other features within the app to

DRIVE SALES AND AVERAGE TIME SPENT •

INCREASE THE CONVERSION RATE of visitors to the app

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HOW SHO WORKS

SEPHORA APP ENHANCEMENT Sephora currently employs a very strong mobile retailing presence capable of bar and QR code scanning that encourages customers to scan products in the original packaging in the store and unlock reviews, ratings, and other products. With SHO, the new feature being added to the app, augment reality technology will allow users to instantly scan any product that Sephora carries, and buy the product instantly with one touch or add it to their “Vanity”. The new “My Vanity” addition gives users their own customized cabinet of products that they have purchased or saved, and they can simply tap to instantly replenish those products when needed. SHO will also allow consumers to post their scanned products onto their social media accounts or unlock new Beauty Insider rewards unique to using the new enhancement.

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PORTER’S 5 FORCES BARGAINING POWER OF CUSTOMERS

THREAT OF NEW ENTRANTS

HIGH

MEDIUM COMPETITIVE RIVALRY WITHIN AN INDUSTRY

MEDIUMHIGH BARGAINING POWER OF SUPPLIERS

THREAT OF SUBSTITUTION

MEDIUMHIGH

HIGH

M-COMMERCE APP RETAIL INDUSTRY

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ANALYSIS BARGAINING POWER OF SUPPLIERS

TECHNOLOGY INNOVATION COMPANIES THAT SELL APPS With the increasing capabilities in IT as technology continues to advance, there are endless app developers, whether freelance individuals or large corporations, for m-commerce app creation. The size and scope of the supplier market on the other hand is limited with Google Play and Apples iTunes being the only 2 app retailers and hosts currently in The US. That limits the supplier substitution and gives them high bargaining power.

MEDIUM-HIGH BARGAINING POWER OF CUSTOMERS

RETAIL APP DOWNLOADERS, USERS, AND BUYERS As app retailing is considerably the newest initiative added to the omni-channel retailing mix, many retailers are still struggling to create and implement a srtrong and successful m-commerce retailing platform. Therefore, customers do not have nearly the same amount of retail choices in the app space as they do in the online and physical spaces. We stand to gain from being a trailblazer in the beauty m-commerce retailing industry, thus giving us some power over our customers. However, with the continued rise of mobile retailing development, more companies are implementing apps that stand to offer our customers similar products and services.

MEDIUM THREAT OF SUBSTITUTION

OTHER BEAUTY RETAILING CHANNELS Considering that there are a lot of retailers that sell beauty products across the world in brick-andmortar as well as online, it is evident that there is a high threat of customers being able to find similar products and services in beauty industry. As well as retailers in the US in particular have started to catch on the m-commerce and tablets providing their products through these platforms.

HIGH 49

THREAT OF NEW ENTRANTS

OTHER RETAILERS ENTERING THE M-COMMERCE INDUSTRY As previously mentioned, the rise of m-commerce has led to an influx of apps for every occasion and need. Depending on the level of optimization and depth desired, it can be somewhat time consuming and costly to enter this market. However, for some larger corporations with massive in-house IT departments, creating an app is a simple and relatively unexpensive process to add a new channel to the company’s omni-channel strategy. If not, brands can seek out third-party suppliers to create their platform for them, for a price. For those knowledgeable in IT, the technology to do so is widely accessible and implementation is consierably easy, just a matter of following a few steps to submit the app to the iTunes App Store or Google Play. Therefore, with this ease of entrance, the threat of new entrants can be quite high for the app retailing market.

HIGH COMPETITIVE RIVALRY

M-COMMERCE APP RETAILERS While the app retailing industry is already large and continually growing, our particular niche market of multi-brand beauty m-commerce is relatievly uninhibited. There are great deal of competitors in terms of purely app retailing, especailly ones that involve low switching costs for the customer. However, when looking at just our sector, there are very few apps that sell similar products at similiar prices. Yet, none of these brands offer the calibur of CRM and personalized branded expereince that we have achieved with our customers through the other retailing channels. We believe that despite the possible competitors in this industry, our customers will always remain loyal to our brand.

MEDIUM

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CONCLUSION Taking in all of these considerations, it seems that m-commerce app retailing industry is chacterized by some potentials for rivaly but nevertheless, an attractive and opportune market to exmple. The low threat of substitution combined with our strong digital presence, assures that our brand will dominate the beauty m-commerce market. We also hold the power over our suppliers, especially since we will most likely employ our own IT department to supply the app and its functions.

The high threat of new entrants and competitive rivalry poses a few challeges for our brand, however.

Research shows that the m-commerce retailing industry is well on its way to poses itself as just a prominent platfrom as e-commerce has in the past ten years. Thus, we can expect a large number of retailers to enter this market in the funture. Nevertheless, Seporha has already positioned itself as a leader in digital innovation, thus assisting in our endeavors to earn an even larger profit off of the new enhancement to the mobile app.

MEDIUM-HIGH INTENSITY OF MARKET

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RATIONALE

With the surge of the digital revolution, today’s shoppers are lot more demanding and knowledgeable than ones 5 years ago. This is the era of Prosumer: smart, proactive shoppers who are among the most enthusiastic adopters of new technologies and are ahead of the curve in using newly available digital tools to gain an edge at retail. The consumer journey has completely changed with the rise of digital age. Technology is now part of consumer daily lives and retailers have to recognize and use that fact to their advantage. Looking closer at the case study “Digital and the New Consumer: Emerging paths to purchase that surveyed 10,219 adults across 31 countries”, we noticed just how much consumer demands have changed. (Havas Worldwide)

It was said that, “Around half of women (51 percent) buy beauty and cosmetics products online. “ This is a clear indication to us, as beauty retailers, that our consumers are not only tech-savvy, but also enjoy having technology integrated in their daily lives.

In the same research study, it was found a fact that, “Nearly half of respondents (61 percent of Prosumers and 42 percent of the mainstream) say they are frustrated when a retailer is not accessible online.” Considering at this factor, by providing them seamless access to our products, whether they are in Sephora’s brick-and-mortar, e-commerce, or m-commerce space, we would can build strong brand recognition and loyalty amongst our customers. And nothing is worth more than a satisfied costumer.

By introducing new feature, SHO for the Sephora-To-Go app, we want to address the digitally experimental consumer and help them take the step to become a fully digitally integrated consumer.

By definition, digitally Integrated consumers “blend online and offline throughout their lives without making a conscious distinction between them; digital is simply part of where and how they live.” (Havas Worldwide)

We also recognized and wanted to address that in the coming years, “as older shoppers drop out of the market, consumer profiles across the world will shift away from Digitally Dissociated and move inexorably toward Digitally Integrated.” (Havas Worldwide) Looking at the top reasons to shop online, “The 24/7 accessibility of e-shopping was cited by 43 percent globally and is the leading benefit for Prosumers, too (48 percent). Next in importance: convenience (36 percent), better prices and deals (35 percent), and easy price comparison (33 percent)”, we concluded that these consumers would be very adaptive for m-commerce shopping and the integration of the SHO enhancement.

There are 310 million mobile devices in US and “more than 4 in 10 survey respondents (43 percent) have used a smartphone to check for a better price or for customer reviews online while they are in a physical store. This up-to-the-wire approach is most typical of Prosumers (59 percent) and millennials (52 percent).” (Havas Worldwide). The fact that “at present, 1 in 4 respondents is shopping through a smartphone, but it is clear that these figures are set to grow. More than a third of our respondents (34 percent) say they are comfortable purchasing products and services through their smartphones – and the numbers are significantly higher among millennials (42 percent) and Prosumers (48 percent).”, indicates the need for mobile app integration, because clearly consumers are ready for it.

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In the end, we want to address the new consumer journey as well as the digital technology trends and the rise of m-commerce. By addressing these notions, we hope to create a seamless experience for our consumers, whether they visit our online, brick-and-mortar, or our m-commerce platforms. In addition, we want to excite our current customers by introducing a new features that would make their shopping and browsing even faster and more interactive than ever imagined.

Graphs Source: WARC

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PLANNING EXECUTION PLAN

EXECUTION PLAN

In creating and establishing an app enhancement such as SHO, it is necessary to take the time to properly execute every layer of the process. Beginning with research and development, it is suggested that eight moths of research be consistently conducted to stay updated on the latest trends in technology design and innovation. With three months spent on the software design of the app and three on the development, we can be assured that the app will be completely optimized for each platform and highly user-friendly to accommodate all levels of consumer tech-savvy.

Next, we will spend a period of three months focused on the testing of the app. We often see apps hastily released long before they are actually ready and they suffer from countless technical errors and crashes. To guarantee the success of the app and avoid any possibility of errors, it will undergo three separate rounds of testing and correction until the features prove completely seamless and up to par.

Finally, the implementation stage will involve the release of the app in the iTunes App Store as well as Google Play for Android users. As with every app, there is a chance that users may still encounter some errors, and therefore we have included in our plan a time for an update with all bug fixes. With this detailed plan, we are certain that the development and implementation of the SHO enhancement to the Sephora-to-Go app will account for any and all possibilities.

See Appendix: Figure 1

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MARKETING PLAN

To properly spread the word about SHO and its functions, we find it crucial to market the app through a number of different outlets. First, we will plan, shoot, and produce an editorial advertisement and informational video highlighting the new features of SHO as well as how it works. In releasing teaser videos three months for the release of the app and the final editorial video one month before, we can build up a strong enough awareness that will help us in achieving maximum potential downloads.

During this same time, we will be utilizing social media constantly over the course of eight months to again, drive awareness and build up hype for SHO. This will be especially important during the winter holiday months when we can remind consumers of the app and how it could make holiday shopping a much less stressful experience in avoiding the hysteria surrounding crowded malls and stores. In addition, we will be implementing a marketing campaign in the streets of Times Square during the month of the app release. This campaign will involve large scaled representations of certain beauty products carried in the store placed throughout Times Square where passersby will be intrigued enough to download the app and try it out for themselves on the large scale models.

Lastly, during the two months before the release, stores across the country will be planning their own “SHO Party� where Beauty Insiders can come and experience all that the app has to offer while also being immersed in the physical Sephora environment. We believe that the combination of all these initiatives will create enough awareness and hype surrounding SHO that we will meet our goals of reaching three million app downloads by the end of the year.

MARKETING PLAN

See Appendix: Figure 2

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LONG TERM BENEFITS PRODUCT REPLENISHMENT GROTWH Consumers can easily scan, save or rebuy their favorite beauty products from the “My Vanity” feature ENHANCED SHARING AND RECOMMENDATION Users can scan their friends’ beauty products that they like and buy in an instance FASTER, EASIER, MORE OPTIMIZED ACCESS Eliminates multiple taps/clicks and searches through immediate recognition and one-tap to buy purchasing IMPULSE BUYING Consumers will be much more likely to make an impulse buy of a product they see and admire with the convenience of the app, thus increasing sales for Sephora UNIQUE REWARDS The app will enhance the current rewards program already in place by offering new rewards exclusive to the SHO function

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IMPACT

With Sephora being the epitome of a customer-centric smart company, it comes as no surprise that they are geared towards making every element of their experience and shopping process as seamless and easy as possible for the customer. “What elevates Sephora’s digital and mobile customer experience strategies to a truly inspirational level is its obvious understanding that customers look to technology (and adopt it) when it makes their lives easier” (Hinshaw). This initiative stands to introduce even more ease into those lives with app features that combined optimized m-commerce shopping with a customercentric experience.

With advanced image augmentation technology, users of SHO will have the ability to scan beauty products carried by Sephora and either save them to their “vanity” or purchase them immediately with the ease of a single tap. The new “My Vanity” enhancement shows each customer’s saved and purchased products in a single space where they can simply tap and replenish any items they choose. In this way, we are bringing the already nurtured customer relationships to an entirely new level of personalization.

One thing frequently experienced between beauty-savvy friends is the “Oh my gosh, I love your lipstick! What brand is it?” exchange. Now, instead of having to remember to pick up that lipstick the next time you stop into a Sephora, our consumers can pull up SHO, scan the lipstick, and buy it immediately on the spot. This again calls to mind the initiative to make customers’ shopping lives easier than ever before.

On that note, SHO will also significantly reduce the endless taps, clicks, and searching it would usually require to find and purchase a beauty product online or in-store. In offering a one-tap to buy feature, Sephora can anticipate an even larger growth in mobile and tablet sales after the enhancement is introduced.

A final benefit of SHO is the opportunity to introduce new and unique Beauty Insider rewards exclusive to the app. This presents even more occasions to get users involved and excited about shopping via the app. Consumers who are not Beauty Insiders will now be enticed to join considering these new rewards, thus helping us achieve our objective of gaining one million additional members within six months.

It seems that SHO will ultimately make the practice of replenishment and impulse buying the most user-friendly than it has ever been. In the previously mentioned situation of one individual’s admiration of another’s beauty product, we no longer risk sales to shopping cart abandonment or the consumer forgetting that particular product after time. Now, they will simply have the opportunity to scan and purchase that item at the same moment. These benefits illustrate how the SHO enhancement is not only necessary to keep Sephora at the front lines of technology and innovation, but how we can also stand to benefit financially and within customer relationship management.

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MARKET ANALYSIS 60

M-COMMERCE THE RISE OF THE APP RETAILING INDUSTRY L2 MOBILE REPORT, 2013

Every dollar spent via a mobile phone today will inspire $13 of purchases in-store and $22 by 2016 • During the 2011 holiday season, the top five retail mobile apps and sites combined reached nearly 60 percent of U.S. smartphone owners • In January 2012, only 57 percent of the 100 brands (like Sephora, Nordstrom, Bobbie Brown, Dior, Fendi, and Mont Blanc, etc.) assessed were engaging in paid search for brand terms on mobile devices. This has risen to 65 percent in 2013 – still shy of the 81 percent that buy their own terms on desktop search engines • On mobile screens, 58% of immediate results are paid ads, which require a different approach altogether. Still, the majority of brands engaged in mobile paid search mirror their desktop efforts.

Only 25% alter content by pushing mobile offers, embedding direct phone numbers, or including directions to local boutiques. Sephora is amongst the 25% that does so.

• Across the 238 apps assessed, the average app has been live on the App Store for 17 months. 27% of the apps reviewed have never been updated after initial release Signaling inattention to fixing bugs, ensuring compatibility with new devices, incorporating user feedback, and enhancing features and functionality • 58% of beauty brand apps found in the U.S. App Store were created for APAC markets (45% have no user ratings.)

• Despite the fact that m-commerce still only accounta for less than 1% of total retail sales, their impact on offline sales will ultimately be tremendous. By 2016, $689 billion in sales will be influenced by mobile, more than 20 times the m-commerce market.

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THE M-COMMERCE

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MARKET

Graphs Source: L2

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Graphs Source: L2

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PESTEL

POLITICAL The US still is has major influence and power when it comes to political, economic and military spheres.

It is the 3rd largest country in the world by size after Russia and Canada. US also take 3rd place when it comes to population, this time coming after China and India. The capital of United Sates is Washington, DC, geographic coordinates 38 53 N, 77 02 N. On 4th July, 1776 U.S. declared independence from Great Britain that was recognized, accepted on 3rd September 1983. The US government type is constitution-based federal republic with strong democratic tradition. The executive branch consists of chief of state, head of government, President Barack H. Obama and the cabinet that is appointed by the president with Senate approval. Political pressure groups: environmentalists; business groups; labor unions; churches; ethnic groups; political action committees or PACs; health groups; education groups; civic groups; youth groups; transportation groups; agricultural groups; veterans groups; women’s groups; reform lobbies. United States takes part in many international organizations like WTO, NATO, NAFTA, UNESCO, MIGA and etc. (The World Factbook)

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ENVIRONMENTAL United States of America is located in North America, it is bordering with North Atlantic Ocean, the North Pacific Oceans well as Canada and Mexico. The total area of the country is 9,826,675 sq km, from it land takes up 9,161,966 sq km and water takes up 664,709 sq km. The U.S. climate has variations from tropical in Hawaii and Florida to arctic in Alaska, to semiarid in the Great Plains west of the Mississippi River, to arid in the Great Basin of the southwest. Overall the climate is mostly temperate. CIA world fact book states that the current issues in environment are, “air pollution resulting in acid rain in both the US and Canada; large emitter of carbon dioxide from the burning of fossil fuels; water pollution from runoff of pesticides and fertilizers; limited natural freshwater resources in much of the western part of the country require careful management; desertification.” United States natural resources are: coal, copper, lead, molybdenum, phosphates, rare earth elements, uranium, bauxite, gold, iron, mercury, nickel, potash, silver, tungsten, zinc, petroleum, natural gas, timber. The U.S. has the world’s largest coal reserves – 491 billion short tons that accounts as 27% of the total coal reserve in the world. (The World Factbook)

SOCIAL When it comes to language 82.1% of population speaks English, 10.7% Spanish, 3.8% Indo-European, 2.7% Asian and Pacific island and 0.7% speak other languages. Although there is no official national language, English has been named as official language in 28states out of 50. Hawaiian is the official language in the state of Hawaii.

Ethnic group breakdown is as follows: white 79.96%, black 12.85%, Asian 4.43%, Amerindian and Alaska native 0.97%, native Hawaiian and other Pacific islander 0.18%, two or more races 1.61% The median age for both genders - 37.2 years if we break it down it is 35.9 for male and 38.5 for female.

The population’s growth rate is 0.9% with the birth rate of 13.66 births per 1,000 populations. 82% of the entire population lives in urban areas, the rate of urbanization is 1.2% annually. The major urban areas where the majority of population has concentrated are, New York-Newark 19.3 million, Los Angeles – Long Beach –Santa Ana 12.67 million, Chicago 9.13 million, Miami 5.69 million and Washington, D.C. 4.4 million.

Age structure: 0-14 years: 20% (male 32,344,207/female 31,006,688) 15-24 years: 13.7% (male 22,082,128/female 21,157,025) 25-54 years: 40.2% (male 63,802,736/female 63,581,749) 55-64 years: 12.3% (male 18,699,338/female 20,097,791) 65 years and over: 13.9% (male 19,122,853/female 24,774,052) (2013 est.) (The World Factbook)

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TECHNOLOGICAL US firms are at or near the forefront in technological advances, especially in computers and in medical, aerospace, and military equipment; their advantage has narrowed since the end of World War II. The onrush of technology largely explains the gradual development of a “two-tier labor market� in which those at the bottom lack the education and the professional/technical skills of those at the top and, more and more, fail to get comparable pay raises, health insurance coverage, and other benefits.

Since 1975, practically all the gains in household income have gone to the top 20% of households.

There are 310 million mobile cellular devices in US. United Sates takes 3rd place in the amount of the cellular devices after India and China. The telephone system serves as large, technologically advanced, multipurpose communications system. The US hosts 505 million different domains with the following host addresses: us, .com, .edu, .gov, .mil, .net, and .org. It takes 1st place when it comes to Internet host and 2nd place when it comes to Internet user amount. There are 245 million + Internet users in US. (The World Factbook)

ECONOMIC The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $49,800. In this market-oriented economy, private individuals and business firms make most of the decisions, and the federal and state governments buy needed goods and services predominantly in the private marketplace. US business firms enjoy greater flexibility than their counterparts in Western Europe and Japan in decisions to expand capital plant, to lay off surplus workers, and to develop new products. At the same time, they face higher barriers to enter their rivals’ home markets than foreign firms face entering US markets. In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, a health insurance reform that was designed to extend coverage to an additional 32 million American citizens by 2016, through private health insurance for the general population and Medicaid for the impoverished. Total spending on health care - public plus private rose from 9.0% of GDP in 1980 to 17.9% in 2010. Wars in Iraq and Afghanistan required major shifts in national resources from civilian to military purposes and contributed to the growth of the budget deficit and public debt. Through 2011, the direct costs of the wars totaled nearly $900 billion, according to US government figures. US revenues from taxes and other sources are lower, as a percentage of GDP, than those of most other countries. (The World Factbook)

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LEGAL United Sates legal system: common law system based on English common law at the federal level; state legal systems based on common law except Louisiana, which is based on Napoleonic civil code; judicial review of legislative acts. (The World Factbook) Federal regulations are issues by federal agencies, boards, or commissions. Federal regulation explains how the agency has planned to carry out the law. (usa.gov) There are in place laws like consumer, antitrust, employment, discrimination and health and safety, these laws are monitored in United States by different agencies one being OSHA. OSHA was created to, “assure safe and healthful working conditions for working men and women by setting and enforcing standards and by providing training, outreach, education and assistance.” (osha.gov)

ANALYSIS Based on Pestel analysis, we have concluded that the releasing Sho for Sephora in North America region first is the right decision. Sho is a technology improvement for Sephoras app and as we found out, “The US has the largest and most technologically powerful economy in the world, with a per capita GDP of $49,800.”(The World Factbook) The US has 310 million mobile cellular devices, 505 million online domains and 245 million + Internet users, that only gives us wider reach to our customers. The US is advanced technology country where m-commerce is growing every year. Technology aspect of this country is the main driving force why we decided to introduce the Sho here. Looking of the development of Internet its main milestones have happened here like the .com bubble, the rise of tablet and m-commerce as well it is the country of origin for tech power companies like Apple, Microsoft, Intel and Google. Also there are positive legal, political, environmental and social factors that affect our business. The US takes part in many international organizations, has a good geographic location with large ports that thanks to technology can process incoming goods very fast. The US is the 3rd largest country when it comes to the size and population that converts as a broad selling area with a lot of consumers

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KEY PLAYERS AMAZON “FLOW” (COMPANY) & A9 (SUPPLIER) The primary and only key player currently employing this type of technology initiative is Amazon and a9.com with their “Flow” Powered by Amazon app. Inspired by this app, we want to our initiative to utilize the functions that Flow currently employs in the Sephora-To-Go app.

Flow is an augmented reality app that first was lunched back in 2011 by A9 Innovations, LLC. A9’s responsibility is to power and innovate the Product Search for Amazon. (a9.com) When it first was launched, people, “had to snap a picture of individual products to compare prices, but they didn’t have the ability to make purchases with the standalone app.” (Thompson) This function was finally achieved when A9 Innovations acquired SnapTell’s image recognition technology. “SnapTell’s visual product search technology lets users take a photo of the cover of any CD, DVD, book, or video game, and the technology will automatically identify the product and find ratings and pricing information online from Google, Amazon, eBay and more” (Rao). Just recently, they also introduced a vairety of other functions. Now when you point your phone at book cover, video games, DVDs and CDs, Packaged goods like games and toys you actually can purchase it via your phone at the exact moment when you are looking at the item. (Baldwin) Flow can also decode, UPC barcodes, QR codes phone numbers and web addresses. It uses A9.com scan technology to recognize items and overlay information using augmented reality. Flow app utilizes barcode, image and text recognition features that let it recognize products in a live camera view. When you point your camera at for example water bottle, things like price, availability, reviews, media content will be displayed just like it would be when you search it on amazon.com. If you really like a product you can share it via social media platforms like Twitter or Facebook or you can just email it to your friend. It also lets you access your entire searched items via history tab that keeps track of the products you have looked for. This app is linked directly to amazon and if someone wants to make a purchase while he is comparing prices or looking up items, they can do it through immediate purchasing and get Amazon Prime shipping. Flow is free to download for iPhone via Apple app store and for Android via Amazon app and Google Play stores. (a9.com) Looking for other key players we came across the fact that combined with Amazon, eBay, Gilte groupe and Groupon, generate a third of all m-commerce retail revenues. Their primary point of differentiation: targeted offers combines with express checkout functionality, often requiring only “one click” to purchase.

(L2 Mobile, 2013)

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COMPETITION DIRECT There are a couple of current multi-brand retailers currently employing strong mobile and tablet app presences to drive new sales and awareness. We could look at our direct competition one way at single brand web sites like Bare Minerals, that offer great deals and sample with purchases. Looking purely at multi-brand m-commerce retailing, our direct competitors would be other apps where you can purchase beauty products, such as the NM, Macy’s, Ulta, Nordstrom, and Net-A-Porter apps. In using the department store apps, consumers can shop both fashion and beauty products. Many of these apps also have similar features to Sephora’s, like the ability to search the products, locate the nearest stores, find special mobile offers, and scan bar codes. Also similar to Sephora, Nordstrom has created separate apps for iPhone users and iPad users that are each designed to be both user-friendly and the perfectly fit the dimensions and functions of the particular device.

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INDIRECT Some indirect competitor that could pose substitute offers and persuade our consumers to spend their money on their product/services could be spas or health and wellness treatments or staple necessities like groceries or rent.

Spa and wellness services provide the same benefits as a number of beauty products do, with the added touch of indulgence and personal luxury. The question might come down to whether a consumer wants to spend their money on a pricey facial serum at Sephora or go and have a facial. In the retrospect, we see spa treatments as one of our largest indirect competitors.

Beauty products satisfy the self-esteem, confidence and respect levels that individuals need, when looking particularly at Maslow’s hierarchy of needs. It is not a survival necessity purchase, such as food or rent for an apartment, and if someone is running low on money they will most likely save up to pay the rent or buy their groceries before they splurge on something superfluous like beauty products.

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TARGET CONSUMER 76

ACHIEVERS

Motivated by the desire for achievement, Achievers have goal-oriented lifestyles and a deep commitment to career and family. Their social lives reflect this focus and are structured around family, their place of worship, and work. Achievers live conventional lives, are politically conservative, and respect authority and the status quo. They value consensus, predictability, and stability over risk, intimacy, and self-discovery.

With many wants and needs, Achievers are active in the consumer marketplace.

Image is important to Achievers; they favor established, prestige products and services that demonstrate success to their peers.

Because of their busy lives, they are often interested in a variety of time-saving devices.

FAVORITE THINGS: • Recognition and rewards • Peer-group acceptance • Material possessions • Rules following that leads to success (VALS)

URBAN ACHIEVERS

LOWER MID YOUNGER MOSTLY W/O KIDS Concentrated in the nation’s port cities, Urban Achievers is often the first stop for up-and-coming immigrants from Asia, South America, and Europe. These young singles, couples, and families are typically college-educated and ethnically diverse: about a third are foreign-born, and even more speak a language other than English.

DEMOGRAPHICS TRAITS • Urbanicity: Urban • Income: Lower Mid • Income Producing Assets: Low • Age Ranges: <35 • Presence of Kids: Mostly w/o Kids • Homeownership: Renters • Employment Levels: White Collar, Mix • Education Levels: College Graduate • Ethnic Diversity: White, Black, Asian, Hispanic, Mix LIFESTYLE & MEDIA TRAITS • Shop at Ikea • Frequent bars & health clubs • Read New Yorker • Watch soccer • Drive a Toyota Yaris (PRISM)

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EXPERIENCERS

Experiencers are motivated by selfexpression. Young, enthusiastic, and impulsive consumers, Experiencers quickly become enthusiastic about new possibilities but are equally quick to cool. They seek variety and excitement, savoring the new, the offbeat, and the risky. Their energy finds an outlet in exercise, sports, outdoor recreation, and social activities.

Experiencers are avid consumers and spend a comparatively high proportion of their income on fashion, entertainment, and socializing.

Their purchases reflect the emphasis that they place on looking good and having “cool” stuff.

FAVORITE THINGS: • A social-media following • Being entertained • Being established • The ability to purchase (VALS)

YOUNG INFLUENTIALS MIDSCALE YOUNGER W/O KIDS

Once known as the home of the nation’s yuppies, Young Influentials reflects the fading glow of acquisitive yuppiedom. Today, the segment is a common address for younger, middle-class singles and couples who are more preoccupied with balancing work and leisure pursuits. Having recently left college dorms, they now live in apartment complexes surrounded by ball fields, health clubs, and casual-dining restaurants.

DEMOGRAPHICS TRAITS • Urbanicity: Suburban • Income: Midscale • Income Producing Assets: Below Avg • Age Ranges: <35 • Presence of Kids: HH w/o Kids • Homeownership: Renters • Employment Levels: WC, Service, Mix • Education Levels: College Graduate • Ethnic Diversity: White, Black, Asian, Hispanic, Mix LIFESTYLE & MEDIA TRAITS • Shop at Amazon • Play racquetball • Read Details • Watch Shark Tank • Drive a Mitsubishi Eclipse (PRISM)

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PROFILE

RACHEL Age: 24 Location: New York City, New York Occupation: Fashion/Beauty Blogger Income: $ 65,000 Marital Status: Single Education: Belmont University Interests: Traveling, Fashion, Beauty Products, Blogging, Technology, Innovation Product Interaction: She is a Sephora VIB Rouge Beauty Insider, and buys their beauty products based on new arrivals and seasons. She then uses these products to make new beauty tutorials for her blog. She loves going into store exploring and trying the product while ordering it online. The new addition Sho for Sephora would be the perfect addition that would enhance and make her consumer experience even better.

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ANALYSIS By starting our initiative in New York we have located that our main target consumer groups are the Urban Achievers and The Young Influentials, both representing women less than 35 years old. They seek products and services that will help them save time in their busy lifestyle. These consumers are tech-savvy and interested in fashion, technology, and navigation due to the fact that they live in a major city. Their income level varies from lower-mid to midscale that gives them enough of a disposable income to spend on beauty products at a retailer like Sephora. SHO would help us reduce the number of abandoned shopping carts by offering customers an easy, fast, and optimized way to purchase favorite beauty products on the go. As we mentioned previously, this consumer seeks ways to save time on shopping, and “My Vanity” and the one-click refill enhancements give them a more efficient product replenishment outlet.

These consumers are also heavily involved in social media and both the e and m-commerce platforms. Social media helps them not only express their individuality and creativity, but also assists them in them purchasing decisions and shopping strategies. In appealing to these customers through our current social media platforms, we will be advertising SHO in the correct capacities to the correct markets. Referring back to the “prosumer” discussed in our rationale, we believe that niche of confident and digitally integrated shoppers will utilize and appreciate SHO and how it helps make their daily lives easier, one tap at a time.

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Graphs Source: WARC

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COMMUNICATION & PROMOTION 84

OMNI-CHANNEL PLAN

Considering Sephora leading stance in all platforms of omni-channel retailing for the beauty industry, we will carry that same approach throughout all elements of our communication and promotion strategy. However, Sephora does not rely too heavily on traditional advertising techniques to promote its brand, and therefore we will not go overboard in those channels in communicating the coming of SHO.

BLOG ADVERTISING

We will continue to develop our current advertising strategy in fashion and lifestyle blogs, specifically Refinery29. Refinery’s current readership and target market lines up perfectly with Sephora’s, and therefore is an excellent space to reach out to those tech and fashion-savvy consumers about SHO. Whether through banner ads or custom articles about the new enhancement, Refinery29 will prove to be an excellent promotional platform. In fact, “A Refinery 29 user averages 9.8 page views and 5 minutes on the site during each visit. 50% of them come back at least 6 times per month and 30% return an astounding 50+ times.” (Refinery29.com)

ABOUT REFINERY 29

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SOCIAL MEDIA MARKETING

Again, in concurrence with our current social media endeavors, we will announce and promote SHO heavily throughout various social media strategies over the course of the year. Pinterest will be used primarily for offering deals and rewards using SHO while Instagram will show examples of how the feature works and how customers can interact with it. On the other hand, Facebook and Twitter will be used consistently throughout the year to both promote the app before its launch and encourage use after its release. Lastly, our Youtube channel will be used specifically for the release of both the teaser and official editorial video s.

LAUNCH PARTY

We will hold three separate in-store events for each level of Beauty Insiders to help spread the word and get customers excited about SHO. Every party will include entertainment, gifts, contests and games designed around the app feature, and knowledgeable SHO experts to assist with any questions that party-goers may have about the app. The contests will be a variation of a scavenger hunt, where guests can search for posed particular products within the store and scan them with SHO to instantly unlock prizes, like free samples, complimentary makeovers, or even gift cards for a Sephora shopping spree.

TIMES SQUARE CAMPAIGN

For our final advertising campaign, we will be producing large scale replications of some of our most popular products and placing them throughout Times Square, perhaps one of the most populated place in New York City and the same location of our largest New York store. With that kind of exposure, in addition to a large billboard in also in the square, people will be both intrigued and excited to download and try out SHO for themselves. With the billboard encouraging passersby to download the Sephora app, they can then find and scan the physical large products throughout Times Square and see exactly how SHO works and perhaps might even buy the product right then and there. This campaign will run the course of the launch month, September, and will hopefully prove to be a unique and successful marketing tool that is both educating and exciting and will ultimately result in more app downloads and therefore more sales for Sephora.

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THE PLAN SHO PROMOTIONAL CALENDAR

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FORECAST

With our new initiative, SHO for Sephora, we expect to improve Sephora’s revenue coming from its m-commerce channel. Based on the fact that the app’s previous release of the Beauty Insider feature throug iOS Passbook brought in 1.1 million new downloads, we expect those similar results within the first year of the SHO release.

With the conversion rate of 4%, we expect that the launch of SHO will also bring 44,000 new purchases that will result in $2,917,256 in revenue. Although not the most expensive category when looking at the average price, Sephora’s makeup category carries the most SKUs and therefore is projected to bring in $1,540,00 in revenue. Looking at our expenses, we have projected them to be around 11% of our total revenue. Our three main expense categories are the design of SHO and its research and development, additional staff and training, and finally the Time Square marketing campaign. Our earnings after the first year are project at $2,917,256.

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SHO BUDGET

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SALES PROJECTIONS

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SALES BREAKDOWN

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CONCLUSION

In a time where technological innovation is key for the success of any omnichannel retailer and augmented reality is the new frontier, it is so important now more than ever to introduce a new retailing initiative for Sephoraâ&#x20AC;&#x2122;s consumers.

To remain a leader in digital innovation and retail, SHO is both perfect in timing and opportunity as our customers begin to crave better optimization and accessibility of their favorite beauty products. This new initiative will make their shopping experience even more easier, with the combination of instant product recognition and one-tap replenishment. In the end, we hope that our tech-savvy Beauty Insiders will appreciate the enhancement and new consumers will be so intrigued to the point of download, thus increasing Sephoraâ&#x20AC;&#x2122;s overall app downloads and sales and therefore achieving our set key objectives for success.

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APPENDIX Figure 1

EXECUTION PLAN

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MARKETING PLAN

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Alison Wild | Zita Freidenfelde Professor Roy FASM 415 March 2014