How Sephora is revamping its fragrance category

Sephora, which first entered the Parisian beauty market in 1970 as a perfumery chain, is making strides both in stores and online to get its customers to buy more fragrances.

At a press event last fall, Calvin McDonald, Sephora’s president and CEO, said the category has been “commoditized by discounts,” and that shoppers are most driven by price than any other factor when making purchase decisions. He added that, while fragrance is an underperforming category at Sephora — it follows beauty and skincare — the company is making efforts to simplify the purchasing process within the category as well as differentiate its fragrance department from that of more saturated retailers.

While Sephora’s fragrance department has lagged behind the growth of its beauty and skincare departments, the global fragrance industry is set to grow 3.6 percent between now and 2020. To bulk up its department, Sephora, which is expected to make $4.4 billion in revenue this year, is borrowing strategy from its beauty category, which is believed to account for 60 percent of the retailer’s business, according to market estimates. (Fragrance, meanwhile, is said to account for 10 percent.)

According to McDonald, Sephora’s approach to beauty is to educate customers to empower purchases. In fragrance, it has built out digital tools to create perfume profiles for customers, laid out buying guides online and set up in-store demonstrations to help customers identify their best scents.

“We know that finding a fragrance is a personal experience, but it needs to be simplified and smart as it can be an overwhelming selection process,” said Brooke Banwart, vp of fragrance merchandising at Sephora. “We’ve created innovative digital tools to simplify it.”

That includes the Sephora Fragrance IQ, an online or in-store quiz that accounts for scent notes like floral or fruity, and other fragrance characteristics, to match customers with a selection of perfumes best suited to their preferences. The method takes after Sephora’s Color IQ, a tool that scans customers’ skin tones and matches them with a number corresponding to the right shades of foundation.

“This tool helps filter our thousands of fragrance options to unveil personalized recommendations based on a number of different filters that can be tailored to the client: specific notes, general scent family preferences, other fragrances they like, personality type,” said Banwart. “We’re always looking for ways to enhance this.”

Sephora’s IQ programs are useful for giving customers a reason to keep returning to the retailer, acting like a modern loyalty program.

“Modern day loyalty is about generating relevance with customers,” said Zach Paradis, director of experience and innovation strategy at SapientNitro. “Customers can go to a Sephora knowing that employees aren’t going to be pushing irrelevant things on them. It’s an authority that’s hard to get otherwise.”

In some stores, Sephora has begun rolling out “InstaScent” stations (formerly called “Poof”) that lets customers smell isolated notes to figure out which core scents they like best and learn more about the 18 different “scent families.” According to Banwart, the educational process helps customers make up their minds. Similarly, in the beauty category, Sephora has begun installing video tutorial stations that help customers figure out how to master different makeup looks. McDonald said that helping to make sense of beauty and fragrance products pushes customers to purchase.

“When you demystify, people feel empowered to buy. This translates into her being more engaged in beauty, and that translates into her buying more items,” he said.

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