Sephora Direct: Investing in Social Media, Video and Mobile

1. Competition

At first glance, it would appear that ULTA would be the biggest competition for Sephora. ULTA and Sephora target the same 25-34 year old customer. The share for Sephora of this target group is only slightly more than ULTA (30% for Sephora versus 29% for ULTA). The success of ULTA’s e-commerce site and loyalty program is something that Sephora can’t afford to ignore. In 2009, the loyalty program for ULTA had over 7 million members. By comparison, Sephora had 15 million customers signed up for their loyalty program, Beauty Insider. Of those 15 million customers, 9 million were considered active members. So, while only 1% of share separates ULTA and Sephora, Sephora has a significant advantage when it comes to loyalty program customers. If ULTA is able to close the gap in the number of loyalty members they have, then they could steal share from Sephora or other competition and become the leader in share for beauty care products.

While ULTA might steal some share from Sephora because of their loyalty program growth, online merchants might continue to grow in popularity and become the trusted source for beauty products. Acceptance of online retail sales has grown exponentially. Ratings and reviews are available on most online merchant sites as well making the differentiation between what products a customer can expect from their purchase. User generated content on YouTube, Facebook, Twitter and other social media sites isn’t available in the same way on online merchant sites like it is on beauty product specific sites like Sephora.com and their social media sites. However, the need to provide value to customers as more sales go to online sales will increase in importance.

2. Proposed funding cuts

In 2010, key elements of the marketing mix included store window merchandising, print catalogs, print advertising, direct mail, sales promotions, gifts and animations. Animations seem to be a really important aspect of the marketing mix...