How Sephora created a futuristic, omnichannel customer experience

Zendesk_Repeat Customer podcast episode 4

Repeat Customer podcast, episode 4


Cosmetics and beauty products might seem like a tactile pleasure best sampled and enjoyed with your own hands. But Sephora has completely transformed the way we buy makeup—and even the retail experience in general—with a digital-first, omnichannel customer experience.

Featured in this episode:

  • Altimeter Principal Analyst Brian Solis and Alison DeNisco Rayome of Tech Republic take us behind the scenes of Sephora's Innovation Lab
  • Fashion journalist Lauren Hubbard recounts Sephora's original impact on the cosmetics retail experience
  • Sephora super fans Barbara Hodder and Fabienne Rouzeau Valdes share their Sephora love

Learn more about how Sephora's next-level technology impacts the business in another way: by reducing the likelihood of returns. And be sure to check out all episodes of the Repeat Customer podcast.

Subscribe to Repeat Customer via Apple Podcasts, Spotify, Stitcher, or your favorite podcast app (RSS link)

Transcript

[Mio Adilman]
Hey! You’re listening to a business podcast called Repeat Customer. And I’m about to go somewhere I’ve never been before.

[Barbara Hodder]
So let's go into my bathroom and see what we've got here.

[Mio Adilman]
OK.

[Mio Adilman]
I’m standing really close to Barbara Hodder in her small bathroom, which is pretty awkward — like, we just met — but I’m here because Barbara is a major repeat customer.

[Barbara Hodder]
Let me tell you what you're looking at here. First of all, standing up here is all of the eyeshadow palettes.

[Mio Adilman]
There's got to be 20, 25 eyeshadows. In front of the eyeshadows there's a whole bunch of, like, cleansers and creams.

[Barbara Hodder]
And toners and moisturizers.

[Mio Adilman]
Barbara’s bathroom counter is covered with cosmetics containers, cosmetics everywhere. And then she opens the big black case next to the counter.

[Mio Adilman]
Oh, whoa. OK, so now we've opened the Pandora's Box here.

[Barbara Hodder]
Here we've got the foundation primer. This goes on first, and then I like using a tinted moisturizer. Right, so once we’ve sort of created our canvas so to speak, we've got a lip primer, we've got a shadow primer, we've got some concealer here. We've got my mascara, and then over here is the powders and the blushes.

[Mio Adilman]
I don't even want to ask how long it takes you to leave the house in the morning, but that's just the top shelf.

[Barbara Hodder]
Eye pencils, cream, eyeshadow, lip pencils over here. Fancy stuff like glitter.

[Mio Adilman]
Glitter.

[Barbara Hodder]
This is the lipstick, alright? And we have it divided into lipsticks and then we have the liquid lipsticks over here.

[Mio Adilman]
I know pretty much nothing about makeup. Apparently the situation in Barbara’s bathroom is not unique. But what I find remarkable is that all of this stuff comes from just one store.

[Mio Adilman]
Could you … How much, like...

[Barbara Hodder]
Don't ask that question. I don't even want to think about it.

[Mio Adilman]
What question am I going to ask?

[Barbara Hodder]
You were going to ask me how much did this all cost you?

[Mio Adilman]
Well, I know that…

[Barbara Hodder]
OK, I'll be honest. There's a couple of thousand dollars’ worth of makeup here. Maybe even $3,000. Yeah.

[Mio Adilman]
So, you're a Sephora superfan? Can I say that?

[Barbara Hodder]
Yeah, you can say that. I am a Sephora superfan.

[Mio Adilman]
Sephora … so much Sephora!

Welcome to Repeat Customer, an original podcast from Zendesk about great customer experiences, how companies create them, and why their superfans love them so much. My name is Mio Adilman.

And Zendesk is a customer service and engagement platform. The people there are kind of obsessed with what goes into great customer experiences.

Which is why we are looking at Sephora, the makeup chain. But forget about the beauty and cosmetics industry, they’re flat-out redefining customer experience in general, with a fascinating, innovative, you could say futuristic hybrid of retail and digital.

OK. From what I can tell, Sephora is like Disney World for people — mostly women, some men — really into cosmetics. But here’s the weird thing; to me at least: Sephora primarily sells other brands. Stuff you can also get pretty much anywhere. So why buy it from Sephora?

Well, because what’s happening at their stores, online and in-app these days is a total game changer. And we’re gonna get into all of that. But before we do, I wanna tell you about the first time Sephora changed the way people bought beauty products. They’ve actually changed the game a few times. And since I don’t know much about makeup, skincare, whatever, I found someone who does to help me.

[Lauren Hubbard]
Hi, my name is Lauren Hubbard. I'm a freelance beauty journalist, and I write with many sites including Fashionista and HarpersBazaar.com. I'm from Texas; makeup's a big deal. Down South, we tend to wear more of it than maybe some other sections of the country.

[Mio Adilman]
Lauren remembers what it was like buying makeup before she ever walked into a Sephora.

[Lauren Hubbard]
My first foray into the makeup world was the very traditional, go to the mall, go to the beauty counter, get … I think it was Clinique that we went to. And it was like, OK, you just buy all of their products and you buy whatever they tell you to buy and that's the thing.

[Mio Adilman]
Was there pressure from them to stay with one?

[Lauren Hubbard]
Oh, definitely. I mean my mother and I, when we'll go to Saks Fifth Avenue, we call the beauty section the gauntlet. Because if you ever get caught by anybody then you're just like sucked in, and you're stuck for 45 minutes at least, as they tell you everything that you're doing wrong. And why all of the products you're using aren't the right products.

[Mio Adilman]
The gauntlet! Otherwise known as the department store beauty counter, a perfumed maze of kiosks fronted by clerks with really shiny skin gently demanding your allegiance to their brand, and only their brand. In North America, this was pretty much the main way to buy makeup until the very late 1990s.

Meanwhile in France—there should always be a “meanwhile in France” moment in any fashion story—Meanwhile in France, in 1969, a guy named Dominique Mandonnaud started a chain of perfumeries called Shop 8. He would later buy a small cosmetics chain called Sephora, and merge the two companies under the Sephora brand.

Mandonnaud is notable because he revolutionized the way people bought beauty products. He took them out from those cases guarded by the gatekeepers Lauren Hubbard was just talking about. He encouraged customers to try the products for themselves before buying anything. This new customer experience came to be known as "assisted self-service." What’s crazy though, was that this new thing didn’t come to the U.S. until 1998, when Sephora opened their first store here, in New York City.

[Lauren Hubbard]
You could walk in and there were these different aisles dedicated to different brands and they had representatives of the store who could say, "Yeah, so you like the blush from this brand, but really, I think that maybe you would be better off with a stain from these people over here." And it was a model that really encouraged not just consumers to be able to go in and mix and match their experience, and to play with it. Because they had all of these testers out and everything was kind of, for lack of a better term, open source. But it also had ... You had salespeople who weren't beholden to any particular brand.

[Mio Adilman]
This didn’t just free up the buying experience, the mixing and matching encouraged people to create their own individual looks. It helped that Sephora encouraged their employees to do the same.

[Lauren Hubbard]
It sort of encourages a customer to say, "OK, I believe this girl who's wearing hot pink lipstick when she tells that this hot pink lipstick is great, because obviously, she's somebody who is used to using these things and has a real opinion. So yeah, I think in that way they sort of encourage personalization almost via avatar.

[Mio Adilman]
And key to this emphasis on individuality, or maybe as the result of it, was a recognition of diversity. From the beginning, Sephora has sold a lot more products for people of color.

[Fabienne Rouzeau Valdes]
Not even a lot more, they just had them.

[Fabienne Rouzeau Valdes]
Hi, my name is Fabienne Valdez, I live in Massachusetts, and I am a nurse.

[Mio Adilman]
What’s your background?

[Fabienne Rouzeau Valdes]
Primarily Haitian.

[Mio Adilman]
Oh really? Cool.

[Fabienne Rouzeau Valdes]
When you're a person of color especially when I was young, you couldn't just walk into any drugstore and find what you needed. I remember going on a trip with friends to New York City and seeing a huge Sephora and going, oh my goodness, and, like, running in. Because to me it was like makeup Mecca. Oh, I can actually find a foundation here. And my skin is pretty light for a person of color, so to not be able to find something is like really? [laughs] You know? It's like if I walk in with my cousin, sorry, we have to go to Sephora because they're not gonna have anything for you in Macy's. [laughs]

[Mio Adilman]
Later, this openness extended beyond race to the breaking down of gender norms. Sephora was one of the first brands to embrace trans models. And according to Lauren, this would prove to be very forward-looking.

[Lauren Hubbard]
Gen Z is poised to be easily the most diverse generation in modern history anyway, since we started kind of tracking demographics.

[Mio Adilman]
Gen Z is the generation after millennials. We’re starting to run out of letters.

[Lauren Hubbard]
There's more mixed-race kids, more kids who are identifying as queer, gender fluid, or gender neutral, or who are just comfortable with saying, "Yeah, OK, I'm a guy, but maybe I would just like something to cover up this zit and that's OK, that doesn't make me a girl because I put on cover up, or whatever."

[Mio Adilman]
So this was the first time Sephora changed the way people bought beauty products. They liberated makeup from those glass cases, and, over time, we used it to help liberate ourselves from traditional notions of beauty and identity. This kind of huge shift within the retail customer experience of the cosmetics industry had a larger cultural impact which is kind of amazing to think about.

But in changing the way people bought beauty products for a second time, Sephora would become a leading example of innovative customer experience for companies in any retail industry.

This second disruption, still ongoing, is a digital one that has seen Sephora be an early adopter of cutting-edge technologies.

In 1999, Sephora launched a U.S.-facing online store. After that they started a popular customer loyalty program called Beauty Insider, in 2003, giving exclusive status and benefits to top spending customers. I might be standing in one of those customer’s bathrooms right now.

[Barbara Hodder]
I am a VIB Rouge, so I'm at the toppest level of their loyalty program.

[Mio Adilman]
What does VIB mean?

[Barbara Hodder]
VIB, a Very Important Beauty.

[Mio Adilman]
OK. So you are in a very exclusive club.

[Barbara Hodder]
But there's more of me out there, people you don't even know about. And then they all get together and they get really excited about makeup at these events.

[Mio Adilman]
When you're out in public, do you ever see another person go that's a VIB member?

[Barbara Hodder]
Yeah, you can kind of tell by how well their face is done and how long it probably took them to do. Yeah, I can tell.

[Mio Adilman]
Beauty Insider eventually led to something called Beauty Talk in 2010.

[Fabienne Rouzeau Valdes]
And it was basically a place where you could come, ask questions, give advice, get advice and just kind of hang out. So, I first started going there in 2010 ,and it was a time in my life where I had just experienced a tremendous personal loss. I had lost a child, and for me it was a place where I could connect with people who weren't going to kind of tiptoe around me, I could have a good time, no expectations, make really good connections, make friends and talk about something that I really enjoyed.

[Mio Adilman]
I’m usually pretty skeptical of social networks created by brands. It just seems like an marketing idea that rarely offers a satisfying or deep user experience. But with Beauty Talk, which was later changed to BIC, short for Beauty Insider Community, Fabienne and many others experienced real community around a shared passion for makeup.

[Fabienne Rouzeau Valdes]
People will get on there and ask for advice; "Oh, I'm thinking about getting this lipstick, does anybody have swatches of it comparing to this lipstick from this other brand?" People will post pictures of that, comment about it, there is a lot of just sharing of ideas and sharing of resources, really.

[Mio Adilman]
This community was also an invaluable resource as well for Sephora, to study its customers. And it produced some pretty surprising insights.

[Brian Solis]
They're realizing that the consumer, the hyper-connected consumer is … There is no offline and online. It's all one experience.

[Brian Solis]
Hello, my name is Brian Solis. I am a principal analyst at Altimeter, which is a Prophet company. I'm also a futurist there, and I try to keep busy by writing books and speaking about the future of business and society.

So what Sephora did is they started to integrate all of the groups that were responsible for the customer experience. They actually created new operating models, which I think is a shining light example of what a lot of these retailers are not doing, which is uniting around this hybrid customer. Not assuming that they're digital for 15 minutes out of the day and then maybe mobile for a couple hours and then maybe physical over here. That it's all one, and it should act as all one, and everybody should be connected on the Sephora site and on the retailer side to cater to this very demanding and very sophisticated consumer. Their digital transformation started with this unification around the customer.

[Mio Adilman]
As digital creeped further into our lives, customers were having one retail experience but conducting different parts of it in different ways. All at the same time. And no one was really focused on making that a more seamless experience.

[Fabienne Rouzeau Valdes]
A lot of times I'll do my research for what I want to look at in person online. I'll peruse the website, and then I'll add it to my, what they have called a Love List, where you can add the things that you're interested in, and then when I go to the store, I'll be like oh ... I'll go into the app and say, “Where is this available within 50 miles of my location?” And that way I'll choose which one to go to, and then I'll know that they have it then I can just say can you direct me to where product XYZ is, and then they'll find it for me. So I use it to pre-plan.

[Mio Adilman]
Fabienne’s online research might happen on Sephora’s website, YouTube tutorials from Sephora-sponsored influencers, that sort of thing. Now, with most products these days, one might just finish the transaction online right there. But, in this case, retail remains a vital part of the customer experience, because makeup is so personal. There’s certain things you need to touch and feel before buying. So Fabienne’s wishlist gets uploaded to the mobile app on her phone. And she walks into the bricks and mortar location to have a real life interaction with a Sephora cast member, as they are called, but she is also still using Sephora’s mobile app as a reference in the store.

[Fabienne Rouzeau Valdes]
There's a live chat with other customers feature, where you can ask another community member their opinion on a product if you're looking for it and you're looking to try it, what's the best mascara, or what did you think of this particular skin treatment. And then get feedback and that can help you make your decision about what to purchase.

[Mio Adilman]
From within the app?

[Fabienne Rouzeau Valdes]
Yeah.

[Brian Solis]
This has a name, it's called the assistance economy. Or the age of assistance. But where most companies are still not set up to succeed, in fact they're more likely to fail, is that as choice becomes more pervasive, as customers have more options and more sources to help them make those choices, you're either part of that decision or you're not part of that decision. So the age of assistance, as we’re calling it, is an opportunity for brands to reverse engineer the questions that people are asking where they're going, and ensure that there's advertising and content and apps or mobile sites that help them connect the dots and lead them to that retail experience.

[Mio Adilman]
Sephora now does much of this reverse engineering in their Innovation Lab in San Francisco’s Dogpatch District. They’ve come up with a bunch of stuff that straddles this weird, new, divide of retail, mobile, and online.

[Alison DeNisco Rayome]
They use artificial intelligence, augmented reality, RFID trips, and a bunch of different kinds of technology. And the team there is developing and pitching really cutting edge digital solutions and customer service experiences with the goal of adding value to its customers.

[Alison DeNisco Rayome]
Hi, my name is Alison DeNisco Rayome, and I'm a staff writer and deputy editor at TechRepublic. I cover leadership, digital transformation, and cyber security.

[Alison DeNisco Rayome]
You can really start online with something like Sephora Virtual Artist, which is something that you can pull up on their app on your phone, it can map your face digitally and you can try on makeup virtually, which it also helps narrow down what colors look best on you, what products you're looking for — every single color of a virtual product matches the product in real life, and so now on the Virtual Artist, you can match with more than 20,000 products sold at Sephora, so it's really a wide range.

But they also have some specific things in the store that you wouldn't be able to find online. In two New York City stores, Sephora has something called Tap and Try. So this basically looks like a mirror on an end cap at the store, and you can go up to it and pick any lip product, or lash product that's on the display, and when you look into this mirror, it can virtually look like it's trying it on your face. So basically, the mirror scans your face with RFID technology and augmented reality, and you can see what the makeup will look like when you try it on, without actually trying it on physically.

[Mio Adilman]
To put this into context for a moment, I’m still ordering pizzas by phone. I mean, I feel like I’m living in a completely different century. While people like Barbara Hodder, that Sephora superfan, are in some alternate futuristic reality.

[Barbara Hodder]
Sephora now has the ability to color match your foundation to your skin with this cool product called Color IQ and it's essentially a scanner for your skin. They scan your skin tone and then this computer program will suggest the different foundation products and brands that match your skin tone perfectly, because there are so many colors out there. There are so many different shades of skin. You want to be able to have the right product, but in the thousands of colors how do you find that right match?

[Mio Adilman]
And you did it?

[Barbara Hodder]
I've done it. It's wonderful.

[Mio Adilman]
It taught you something about your face or about your color that you might not have known before?

[Barbara Hodder]
Yeah, it told me exactly what I need to be buying to save time.

[Mio Adilman]
There’s also a moisture meter that tells you how oily or dry your skin is so you can choose the best kind of moisturizer. Some stores have Fragrance IQ. It lets you test a bunch of scents using a dry air delivery system so you can avoid a perfume-induced headache.

[Alison DeNisco Rayome]
And if you go to a store with Beacons, you can get kind of a notification on your app. So, if I'm shopping for lipstick, say, I can use Virtual Artist to decide a few shades I like that look good on me, I put them in my cart, I walk into a store with the Beacon, and if I have it in enabled on the app, it'll tell me, "Oh, two of these three shades are in this store right now, you can go try them on in person" or "You have this coupon right now that you can use if you want to come in and shop."

[Mio Adilman]
This is all completely mind boggling. It’s like a sci-fi makeover station on Mars. But we’re talking about cosmetics! This mashup of technology and makeup is so jarring to me. Makeup seems like such an analog thing. Powders, paints. How is a beauty company the one innovating retail instruments well ahead of other, seemingly more tech-savvy industries?

[Brian Solis]
Female mobile shoppers represent the majority of research and, often, decision makers. When you look at, especially in the beauty industry, when you look at how those behaviors play out you can see exactly what you would need to do.

[Brian Solis]
Sephora's customer experience is well ahead of the game, and rightly so. Because the thing about customer experience that they get, that most miss, is that they're looking at the customer's experience as a possessive experience, meaning that it's yours, it's mine, and they're designing it as if it was ours. They're very data-driven, they're very technology-driven, so I don't know that they would tell you anything other that they just care about her. And when I say "her", that's what they refer to when they're talking about their customers. It's her … they're hyper-focused on her.

[Mio Adilman]
And so when they're in that innovation lab, are they role playing? Do they walk through it to have her experience, and then come up with the digital assistance that you're talking about?

[Brian Solis]
Yes, but they also have her go through the experience as well, and there's many “hers.” It's like a storyboard, if you will, from, say, a Disney or Pixar movie; you're not writing the stories until after you've created the characters and the depth of the characters, and an understanding of them, and making sure that they're believable, and there's something that you could attach your own emotions to them. That's a process that when you go through the customer journey, when you're looking at the different faces and behaviors of a digital customer, or let's just say the hybrid customer, you're categorizing them into these different character sets to go through the experience so that it's playing out in a way that's natural to them. This is key.

[Mio Adilman]
Wow. They bring segments of the population in and watch how they interact in the retail space.

[Brian Solis]
Oh yeah, and there's good old-fashioned interviews, too. They still do things the way you should, which is get input from people. But also a lot of the start-ups they work with are their target demographics and psychographics, so they get the best of both worlds. I mean, they live in an area where innovation is what we have for breakfast.

[Mio Adilman]
Sephora’s American head office, and Innovation Lab are in San Francisco, next to Silicon Valley which is the center of the world’s startup universe. And not only is Sephora employing similar tech strategies as really big startups, those startups want to play in Sephora’s sandbox.

[Brian Solis]
These companies are founded by people who want to solve problems that they have, and so they innovate to create solutions for their unique problems. Sephora can plug in these startups into their ecosystem to explore how Sephora can partner with these types of companies to cater to needs that they might not have seen in the customer journey, because these trends are starting to take off in new directions. They have access to Instagram, right? Everybody's in everybody's backyards, but because they have an innovation center, that also invites startups from all over the world to want to be part of this ecosystem, because they want to test and learn their technologies in a retail environment, or in a digital environment, or in a mobile environment.

[Mio Adilman]
So again, in radically altering the beauty and cosmetics customer experience, Sephora is having a larger impact, collaborating with and influencing other industries.

[Brian Solis]
If you want to be like Sephora, it has to start with a genuine desire to care, and a genuine just ambition to change how things are done today. That's why this is not easily replicable. You have to care about how someone's different than what you know, challenge your own conventions and beliefs, have a team that supports that experimentation, and treat innovation like an investment not a cost center, and tie real ROI to those experiments, and I think what you'll see is that you're on the right path to becoming a Sephora or a Starbucks or a Domino's, because they all took the same steps.

[Mio Adilman]
I guess the lesson for me in all of this is, never judge a person or even a company by just their makeup, because there’s probably a lot more going on underneath the surface that I’m not seeing.

[Barbara Hodder]
“O mio babbino caro.” How's that?

[Mio Adilman]
That was unbelievable. You are an opera singer.

[Mio Adilman]
Barbara Hodder is a trained opera singer, she is also a reservist in the army, she’s studying for her MBA. And she’s a Sephora superfan who has more makeup than I’ve ever seen before, in my life.

[Mio Adilman]
So you live in this condo with your husband, and all I see in this bathroom on the counters, underneath the sink, in the cupboards are beauty products. Where's his stuff?

[Barbara Hodder]
His stuff is right over here. So look it. Here's his toothpaste and his deodorant.

[Mio Adilman]
His toothpaste and his deodorant.

[Barbara Hodder]
And his razor.

[Mio Adilman]
Hidden behind all of your stuff.

[Barbara Hodder]
And his Listerine. His stuff is here.

[Mio Adilman]
Does he ever accidentally mess up your makeup organization?

[Barbara Hodder]
No. He knows not to touch it. Absolutely. He does not even go over here. This is a no-go zone.

[Mio Adilman]
OK, you’ve been listening to Repeat Customer by Zendesk. A show about how customer-focused companies create great customer experiences. We post a new episode every two weeks.

If you're looking to elevate your company's customer service game, check out zendesk.com. Because the best customer experiences are built on Zendesk.

And you can learn more about this podcast at zendesk.com/repeatcustomer.

Thanks for listening.