This week, we look take a first look at Sephora and Kohl’s partnership and spend time with E.l.f. Beauty’s Tarang Amin.
There’s been a flurry of beauty consolidation news: The Hut Group acquired Cult Beauty last week, and in late July, Sephora bought Feelunique, and Target and Ulta Beauty unveiled the brands included in their anticipated shop-in-shops. Then on Friday, a select group of editors got a first look at Kohl’s plans for Sephora.
At Kohl’s Ramsey, New Jersey location, guests got a chance to view an immersive Sephora experience, with center-of-the-store placement, a compelling assortment of about 125 brands and 8,500 products, digital/e-commerce integrations, and beauty-worthy lighting and signage. While customers will absolutely know they are in a Kohl’s store, the 2,500-square-foot space is more in line with a small Sephora store than a tucked-away beauty afterthought, unlike beauty departments found in other retailers. More than 70 Sephora outposts at Kohl’s are opening this month, with 200 planned to open by fall and 850 by 2023.
“First and foremost, it really is about the true brand representation that you would experience in a Sephora,” said Artemis Patrick, Sephora evp and global chief merchandising officer on Friday. “We have over 125 brands, several of which are new in just the last few months. So from makeup to skin care to hair care to fragrance and bath and body, it is the full gamut.”
Major brands — including Estée Lauder, Clinique, YSL and Armani Beauty — are present, but so are challenger brands like Olaplex and Milk Makeup. Sephora-exclusive brands including Rihanna’s Fenty Beauty, Jennifer Lopez’s JLo Beauty and Selena Gomez’s Rare Beauty will most certainly be a draw, as will Sephora’s dominant position in clean beauty. While the product assortment is ultimately prestige, Sephora made sure to appeal to Kohl’s price-conscious and busy consumer with “Clean Beauty Under $20” and “Sephora Collection Under $20” sections, as well as Sephora-favorite designations for mascara and eyeliner.
Much like Target and Ulta Beauty’s partnerships, consumers will be able to earn both Sephora Beauty Insider Rewards and Kohl‘s Rewards on Sephora at Kohl‘s purchases. However, shoppers cannot earn or redeem Kohl‘s Cash on Sephora at Kohl‘s purchases. Kohl has more than 60 million loyalty members in its database and 65 million active customers; 70% of those consumers are women, who historically have not come to Kohl’s for beauty.
While Kohl’s, like Target, has spent time elevating its beauty assortment over the last few years, there is a limit to what elevated beauty can look like in mass environments. And that’s equally true online. According to Stephanie Wissink, equity analyst at Jefferies, an initial scan of online beauty bestsellers suggests only 20% crossover between Kohls.com and Sephora.com products.
“Our customers have been asking us for bigger and bolder assortments in beauty. We had a very small business before, but it was growing significantly,” said Doug Howe, Kohl’s chief merchandising officer.
In November 2019, Kohl’s launched a 1,500-square-foot (up from a 750-square-foot) concept beauty department in 12 of its stores. At the time, Howe said beauty accounted for less than 2% of Kohl’s sales, while the category is approximately 15% of the sales of competitors including Walmart and Target. Dedicated beauty advisors were a part of the previous strategy. This time around, Kohl’s associates have been Sephora-trained for the last eight months.
“How we define prestige beauty is certainly the look and feel of the visual merchandising that elevates the experience, but the other part of that is our beauty advisors. They are unbiased. They truly think about what is right for the consumer, and they are trained on every single product and every single brand. That is something that is very unique and continues to be one of our strengths” said Patrick.
Howe added, “We recently revised our strategy back in October to really double-down on [being a] destination [for] active and casual, wellness, beauty and lifestyle, and if we were going to do it, we had to do it right. The tailwind that we’ve had through active was strong, and it got even stronger during Covid. This is now a huge moment to reestablish ourselves as a player in beauty, enabled by the power of the partnership through Sephora.”
Beyond offering Sephora new customers, Kohl’s gives Sephora the much-desired strip-mall locations that it had been eyeing pre-pandemic. In February 2020, Sephora had announced a 100-store push to smaller format stores in second-tier markets. But like many of the best-laid plans in early 2020, those locations had to be rethought. And while Sephora had great e-commerce success (that is ongoing) during the height of Covid-19, its mall-centric locations didn’t set it up to respond to the shift to convenience, namely buy-online, pickup-in-store, that swelled last year.
Thanks to Kohl’s 1,162 stores in 49 states — 75% of which Sephora hopes to be in by 2023 — Sephora will be better equipped tactically to become bigger. And right now, that’s every beauty retailer’s goal, whether it’s Ulta Beauty, Amazon or Sephora. –Priya Rao
E.l.f Beauty CEO Tarang Amin on the company’s outlook
Fresh off announcing a 50% sales increase to $97 million for the most recent quarter, E.l.f Beauty CEO Tarang Amin shares his thoughts on the ever-changing beauty market and makeup, and his plans for the greater company.
With the Delta variant in mind, what are your expectations for the ongoing demand for makeup?
“I’m quite bullish on the ongoing demand for color cosmetics. A lot of that has to do with looking at consumer behavior. There is a lot of pent-up demand. June was the first month we saw where the category did better than in 2019. Certainly, with the environment we’re in, you’re going to continue to see some volatility, depending on what happens with other restrictions. But overall, from a consumer standpoint, we feel consumers are coming back to color cosmetics.”
What’s the status of W3ll People and Keys Soulcare?
“We’re seeing great momentum across our entire portfolio. Beyond just the sheer numbers, the thing I’m really proud of is how we’re developing this distinct portfolio of brands that are resonating with consumers. We did a brand recharge for W3ll People with new packaging and reformulated products. Keys Soulcare is still in the early days, but I’m pleased with what we’re seeing there, including the level of engagement from the community and from Alicia Keys herself. We had a total store takeover at Ulta Beauty and rolled out in eight countries including [in England] with Harrods.”
What is E.l.f Beauty’s appetite for acquisitions and brand incubation?
“We remain interested in growing our brand portfolio. Our first and foremost focus is the three brands we already have, but we’re open to acquisitions of other brands that can fit this portfolio and complement what we do, similar to what we did with W3ll People. W3ll People will be having first-in-line placement at Ulta Beauty in spring 2022. This shows what we’re capable of doing [with acquired brands], as well as incubated additional brands.” — Emma Sandler
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