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How Sephora drives customer loyalty with logistics and became the fastest growing business within LVMH
Sephora calls itself the “leader in prestige omni-retail” — a title they’ve earned by blending ecommerce into many of their 2,700 stores in record time. This didn’t come easy, and it wasn’t perfect, but it was approached head-on when its customers (or “clients” as Sephora calls them) wanted their daily care products but were hesitant to go to stores to replenish them.
When the demand for fulfillment options like buy online, pickup in-store (BOPIS) was created in 2020, Sephora quickly responded with a “reserve online, pickup in-store option” to offer clients faster and safer in-store shopping. It was a workaround to technology limitations for true BOPIS but beauty isn’t always blemish-free. Sephora launched the new feature and, like a good skincare routine, aimed to improve it.
BOPIS launched the following year and, in 2022, Sephora replaced its legacy ecommerce platform with “headless commerce technology” to further improve the omnichannel fulfillment feature.
If you’re unaware of the term “headless,” all you really need to know is that it removes third-party technology restrictions without requiring a company to build the technology in-house. This is possible due to another techie term: application programming interfaces (APIs). Using headless platforms and APIs, Sephora can launch and improve loyalty-driving features faster than competitors trapped in outdated systems.
Like Sephora improved BOPIS and same-day delivery — starting with Instacart in 2020 and upgrading to native same-day delivery in 2021 — I expect Sehpora will improve its curbside pickup feature next. Right now, the feature is manual like early BOPIS and requires clients to call the store. But Sephora could easily connect its headless ecommerce platform with a headless logistics platform to upgrade this feature.
It’s impressive what Sehpora was able to accomplish with a legacy tech stack and I’m interested to see what they do now that technology is not a blocker. While it’s unclear if headless technology is already part of new upgrades, what’s very clear is that Sephora is growing faster than any other business inside its parent company, LVMH. Revenue for the first quarter of this year neared $4 billion, up 30% from the previous year, while growth across other businesses hovered around 10%.
Sephora’s investment in omnichannel fulfillment is clearly paying off, and logistics continues to drive demand for its loyalty program, Beauty Insider.
Last year, Sephora reportedly opened up free shipping with no minimum purchase requirement to loyalty members in the “free to join” tier. I’ve written about how this might be unnecessary for companies if they offer a variety of fulfillment options like Sephora, but it’s an experiment worth trying and their logistics network supports it. As a company that started with a single fulfillment center in Maryland, Sephora now operates five fulfillment centers that support two-day shipping to nearly every area in the United States.
With this network, free shipping for free might not eat too far into margins, especially when local pickup and paid same-day shipping are prominently featured on its ecommerce properties. But let’s wait and see. Nike experimented with offering free shipping with no minimum purchase requirement for loyalty members and just rolled it back after identifying “logistics costs” as a cause of lower margins for Q1.
To earn loyalty through convenience rather than free shipping , Sephora displays same-day delivery and local pickup options as filters on its category pages. They even provide “rich snippets” regarding availability beneath each product when a specific fulfillment method is selected.
It gets even better though. If a client wants to do BOPIS for one product and have other products shipped with Sephora’s auto-replenish feature, Sephora supports multi-fulfillment checkout so clients can pay for everything at once. This is actually not as common as you might think. Many iconic brands (including Nike) require you to perform two checkouts or select one fulfillment method for everything in your cart.
I’ve heard leadership at Sephora talk a lot about consistency in experiences no matter where the client is and this accomplishment in ecommerce fulfillment backs that up. You wouldn’t perform two different checkouts for two different items in a store, so why would you require it on your ecommerce site?
Sephora has excelled at solving technical challenges to answer simple questions like this yet is not afraid to launch MVP features while figuring those challenges out. It’s a balancing act that makes Sephora the leader in omnichannel retail.