Last week, Sephora confirmed its acquisition of Feelunique – a deal still subject to anti-trust clearance but set to close between March and July next year. And in June, it announced a partnership with German online fashion retailer Zalando where Sephora would see its entire prestige beauty portfolio stocked on the e-commerce platform.
So, what exactly was behind these important moves from one of the largest beauty retailers in the world?
A ‘key step’ in European expansion and ‘consistent’ online push
Martin Brok, president and CEO of Sephora, said the acquisition of Feelunique marked a “key step” in Sephora’s European growth strategy. In particular, Brok said it gave Sephora access to the UK – an important prestige beauty market with a “very high level of digital adaptation”.
Nick Carroll, associate director of grocery and e-commerce research at Mintel, said the acquisition was “well-timed” for Sephora given online beauty sales were “rapidly growing” in the UK, with Feelunique “at the forefront” of the rush.
According to Mintel data, sales across specialist beauty online retailers grew by over 40% in 2020 to reach €1.64bn (£1.4bn) and 4% of beauty and personal care buyers purchased products via Feelunique – putting the business on a par with the likes of Lush.
At the time of the Zalando tie-up, analysts described it as a “consistent next move” as Sephora worked hard to gain wider online momentum.
Speaking to CosmeticsDesign-Europe about both deals, Marguerite LeRolland, senior research manager for apparel and footwear at Euromonitor International, said they also clearly signalled a desire to engage with younger online beauty consumers – an increasingly important target market after COVID-19.
According to Euromonitor International, the share of e-commerce across total beauty and personal care retail sales in the UK rose from 13% to 19% in 2020 and a February 2021 survey indicated 34% of British millennials and 40% of Gen Z consumers were now buying beauty products online from their smart phones.
“As the shift to online beauty is set to continue in the near future, Sephora’s acquisition of Feelunique and partnership with Zalando is a strategic move by LVMH to secure its growth in the UK market, and get the favours of the British millennials and Gen Z consumers,” LeRolland said.
And these were two consumer groups not especially easy to reach and engage with, she said. “Even before the outbreak of COVID-19, targeting young consumers had been increasingly challenging for beauty businesses as these consumers are known for their love of mixing-and-matching and purchasing high-low, their tech-savviness and their constant appetite for novelty.”
Millennial and Gen Z beauty – progressive, socially responsible and experiential
LeRolland said Sephora expanding its online presence beyond own-brand social media channels and e-commerce operations made sense if it wanted to capture millennial and Gen Z beauty consumers because it enabled them to “be on top of young consumers’ minds and cater to their different demands”.
“By striking a partnership with Zalando and acquiring Feelunique, Sephora ensures they are using seamless technology and increasing their ability to offer different shopping experiences catering for the different tastes and demands of the young British consumers.”
However, as Sephora’s online expansion under the two deals gained momentum, she said it would also be key the beauty retailer understood the “general key traits” of both millennials and Gen Z consumers – notably their tendency to be “progressive, socially responsible and valuing experiences over things”.
Slicing this knowledge down even further, looking at individual attitudes within each group, would also be important, she said. “Indeed, despite sharing common traits, millennials and Gen Z consumers are a consumer base with large diversities in demographics, income and lifestyle. They are also relatively different when looking closer at their attitudes towards money and brand loyalty, and their expectations for technology (for example, TikTok versus Facebook) and social activism. Compared to millennials, Gen Zers are often more pragmatic and conservative in their spending, as they were born in a time of economic recession. Gen Z is also the generation that tends to be the least brand loyal.”