forever FEARLESS East zone conference

Sephora held its first ever East Zone conference on the March 22nd- 24th, 2017 in Orlando, FL.

The overarching aim for 2017 is to drive sales and profit by recruiting, developing and retaining top talent, so that clients are provided with the best in-store beauty shopping experience, and operations are improved and made more efficient.

The opening presentation outlined the three main strategic Field Objectives of the conference, namely:

1) Exceptional People: The vision is to improve store leaders’ ability to recruit and retain the best staff teams, develop the skills and expertise of these staff members in a timely manner and facilitate the growth of their Sephora careers. The key actions required to meet this objective include to: build leadership through internal succession planning and external recruiting; implement and put into practice the New Interviewing Model to ensure the right people are hired in order to reduce staff turnover; leverage new leadership competencies to develop and growth leaders and improve leadership retention; and, enhance the quality of skincare cast PD4s with meaningful career activities.

The indicators of success in achieving this strategic objective are: 32% First Year Turn Goal; 29% Annualized Turn Goal; and, 30% Skincare Cast Turn Goal.

2) Place to Play and Learn: The vision is to elevate the client experience and grow their loyalty by offering enhanced services and classes in all worlds by educated experts, reinforcing Sephora as the Place to Play and Learn. The key actions required to meet this objective include:

a. Retail and SUBC: increase the impact of daytime classes by touching more clients through increased sessions with emphasis on Mega Studios and Skincare Studios; and utilize OLR to track beauty and service class attendees and track client impact.

b. Skincare Movement: leverage Beauty Studio to close the sale with moisturizers by utilizing the Moisture Meter; ensure that all new hired cast receives Skincare Consultation and personalized skincare gratis; and Ensure all cast go through Skincare 201 immediately after their primary world; and,

c. Client Loyalty: Drive loyalty through increased BI sign up utilizing mPOs, IQs and Studios.

The indicators of success in achieving this strategic objective are: clients felt that conversations with a cast member encouraged them to purchase skincare; the Mega Studio class Guideline are achieved; and, there is 10% BI growth to LY.

3) Operational Excellence: The vision is to support our average store’s volume growth by creating operational processes that streamline operational efficiencies, reduce shrink and increase profitability. The key actions required to meet this objective include to: train store leaders on new P&L; encourage accountability on Operations Training Videos and QRG’s; select, train and certify OPS/Tech Trainer for all Districts; train staff on and implement a standardized zoning strategy; execute Store Shrink Plans; and flawlessly execute new POS roll out and optimize client checkout.

The indicators of success in achieving this strategic objective are: District/Region Conversion lifts targets are achieved; Shrink Goals are met; YTD payroll budget are achieved by the end of October/ November 2017; and, MPOS reach 11% of all sales.

As highlighted by the introductory presentation, operational excellence is central to helping Sephora achieve our goal of doubling our business by 2022. Currently, the average store volume is $9 million and growing. The presenter highlighted that increasing profitability and reducing shrink is essential to funding our growth, and enhancing operational efficiency will enable Sephora to have the time and sufficient payroll to create memorable, shareable, and repeatable moments with our clients.

Concerning Operations Training, Phase 1 (implemented in 2016) laid the groundwork for achieving the Field Objectives, while Phase 2 is being undertaken in 2017 with Targeted Focuses. These include both New Operations Experts and New Dashboard.

After this opening presentation, the nominee and winning questions for the Best Skincare Question Medallia Survey were presented. The nominee questions included:

1) Did you purchase any skincare products during this visit?

2) Did a sales associate speak with you about your skincare regime or skincare needs?

3) Did talking to a sales associate about skincare encourage your decision to purchase skincare products during this visit?

The winning question is 2. This is important because 90% of clients stated that they purchased skincare products because of their conversation with a cast member, while only 49% of clients said that a cast member discussed skincare with them during their visit. The presented emphasized that if we talked to more clients about skincare, a +5 point lift would amount to an additional $50 million. Thus the new goal is 54%, which will double conversation in skincare and will lift overall store conversion.

The next major topic of the presentation was Client Loyalty. The presenter highlighted the following key points in emphasizing the importance of this:

• 83% of our Beauty Insiders (BI’s) are more likely to return than non-BI’s;

• BI clients are worth more in their first year and over time than non-BI’s’

• The only way that a client can participate in our promotions is through BI

• BI gives access to benefits that create more emotional connections and loyalty (e.g. classes, services etc.);

• BI enhances competitive advantage; and,

• BI is a natural traffic builder.

The presenter then moved on to expand on the first strategic Field Objective: Exceptional People. First Year Turn. The key points made were:

• Attracting top talent is the way to improve First Year Turn through selection;

• In terms of Skincare Retention, most cast members come from part-time, with over 60% of PT skincare turning LY;

• Our mindset: Retention vs. Turnover

The Big Wins for 2016 included:

• Double Digit Comp

• Best Turn Ever

• Highest BI App Ever

• All Regions Delivered

Three areas were highlighted by the presenter as key focus areas for 2017:

• FOUNDATION: 2017 is the Year for Building our Foundations to be Smooth and seamless, blur imperfections and be oil-free buildable. There are 3 steps to ensuring company success in this regard:

1) Have a Company Vision: Define and Dominate unbiased experiential retail through Teach.Inspire.Play.

2) Have a Strategy: This must entail: Differentiated Product; Best beauty Shopping Experience; Best in Class Digital; Exceptional People; and Industry Leading Loyalty.

3) Cement Your Foundation: through the 2017 Field Objectives.

• KRYPTONITE: This was the one weakness of Superman. Kryptonite comes in many forms each having its own unique effect. Kryptonite removes focus and strength, therefore if we want to win, we must not let our Kryptonite become a distraction. The first step in overcoming this obstacle, is figuring out what is our Kryptonite (e.g. Ulta, Mac, NYX, Bluemercury, Macy’s, Kylie Jenner). In dealing with our own Kryptonite, the presentation reminded us that Sephora is investing in believes in us, and will lead the way with Experiential Beauty Retail. We were urged not to get distracted, and keep focus on what is in our control.

Protecting Sephora’s Culture is one of our most important competitive differentiators within our control. The two main ways to protect our culture is:

o Hiring Right: Attracting Top Talent, which requires interviewing skills that are tied to our values

o Developing Right: Leading the Sephora Way, as in ensuring and enhancing core competencies that are meaningful by position.

The overarching HR Priority for 2017 is to build a cohesive strategy to ensure that Sephora is the BEST PLACE TO WORK in Retail, Beauty and Digital. Subsumbed under this are the sub-priorities which include to: Grow and develop Leadership; Attract, develop and engage talent; Fuel Organizational Coordination and Activity; and Fortify the HR Foundation.

The presentation concluded by reiterating that: 2017 is the Year of Building Our Foundation, dealing with our Kryptonite, and protecting our Sephora Culture.

The second presentation by delivered by Calvin McDonald, President and CEO of Sephora Americas. He emphasized the New Landscape:

• Product is Queen

• Retailers under siege

• Power of Social Influencers

• Shift in E-Commerce

• Promotional Discounting on the rise

Calvin discussed that the path to winning is through the HEART. He talked about the difference between emotional versus transactional relationships, with the former being more memorable, shareable, and repeatable. These qualities define Experiential Retail, which occurs in the store, online (digital) and at home.

Calvin emphasized various challenges that must be overcome in 2017 to stick to Sephora’s growth plan to double our business by 2022. However, there are major company developments to be excited about this year including:

• Digital: Virtual Artist Enhancements; Digital Makeover Guide launch; and the BI Community;

• New Product: a large number of new products and brands are being introduced, especially within the Skincare Movement; and,

• Real Estate: Big investments have been made in 25 new stores and 9 relos; Sephora Studio.

Concerning the latter development, several opportunities are offered by the Urban Studio including:

• An increased client reach by opening stores closer to where she lives;

• Highly dense, urban centers with a good concentration of diversity and high-spending, beauty forward clients;

• Testing service, assortment, personalization and Omni initiatives that could go fleet wide; and,

• The potential to open 100+ locations nationally.

Calvin ended his presentation by presenting some of the recent spots chosen by Sephora for Urban Development (i.e. Fanueil Hall in Boston, 5th Ave and 34th Street).

The third presentation was given by Christie Jack, EVP Retail and Education. Christie opened by talking about Unbiased Experiential Retail. She noted that while these are exceptional times (e.g. highest average life spans, worldwide peace, technological advances), there are also unprecedented levels of self-doubt, isolation, and anxiety that threaten our happiness as humans.

Sephora’s view on beauty is that it can play a huge role in enabling people to feel confident, optimistic, and empowered to uniquely express themselves so that they can make their distinct contribution to the world. In a nutshell, beauty can conquer fear. We believe that beauty is for each person to define and ours to celebrate. Together we support and encourage bold choices, both in beauty and in life. Our purpose is to inspire FEARLESSNESS.

Christie emphasized that Sephora has been so successful because we are in a personal business, we never forget who our boss is (i.e. the Client), and innovation is in our DNA. She talked about what our Boss (the Client) is faced with including:

• A steady stream of social media-fueled micro trends she feels expected to master;

• Lifestyle, fashion, and home brands cashing in on the beauty business;

• Hundreds of influences telling her how she should “do” beauty; and,

• Countless magazines, blogs, podcasts, apps, and more providing conflicting guidance.

Client’s needs have shifted. Today’s millenials and Gen Z consumers want:

• Products that acknowledge their diversity;

• Brands that share their values;

• Seamless experiences between virtual and in-store;

• Guidance, inspiration, and authenticity; and,

• Newness, curation, and excitement.

She stated that Fearlessness is in our DNA, and we will break ground again. This brings us to Unbiased Experiential Retail. We want to:

• Provide a safe place for our Client to be creative and get messy with no judgement – and ultimately, to be herself.

• Sell without commission, educate without overwhelming, and sample without scrutiny.

• Connect her with others who share her interests when it comes to beauty.

• Create an omnichannel world where her beauty experience is made personal and her unique needs are taken seriously and celebrated.

So why us?

Teach, Inspire & Playing with our clients is the best version of Experiential Retail available to our clients. We can provide this with our Beauty Services, Beauty Classes along with the multitude of new initiatives like skin studios, TIP Tables, Mega Studios, plus more that are in the works.

Experiential means CHANGE. And that change is happening fast.

We need to think differently, for example Holiday 2016.

Top volume days : only two of them were in December. So we will be thinking much differently for Holiday 2017 to maximize promotions and clients shopping trends in November and to start to market around playing at holiday with events and services. We will also focus on eliminating client friction points with lines, and maximize MPOS.

Another aspect that is being tested is revisiting the fact that we have existed with the same leadership model. We have to evolve to a model that allows structure that works and scales. Tomorrow's leadership model will be broken up by

Talent and Business Management

Talent management and development, inventory management, visual and appearance standards, loss prevention, system/digital; HR & Inventory Systems, new competency model, social impact. In store education and training oversight, Welcome to Sephora Facilitation

Client Experience

Beauty Insider, POS/MPOS, BOPIS, Beauty Community. Celebrate Beauty Facilitation, Sephora 101/201 Facilitation, Product Education

Services

Artistry, Studios (skin, beauty, fragrance) system/digital, personalization, outreach, services in all worlds. Store Event and Class Oversight, Brand Education, Brand Relationship Management .

This is as much about people as it is about strategy. You will lead in bringing Experiential Retail to life. The plan is piloting in 2017.

Next....

We need to adopt quickly. We will be launching our digital makeover guide that will allow our clients to see every product that the cast member used from skin prep to every single brush and accessory through all makeup item incorporated and how to apply. It will be a amazing tool for clients to feel her experience with us continues to build long after she walks out the door.

Our beauty community will also be a game changing social experience that allows beauty insiders, cast, and brands to interact in real time on Sephora.com with top beauty influencers. This will take a disjointed all over the place content, to a one unified experience. Social shopping is crucial because clients care more then ever about getting feedback from peers. 84% of millennials say user generated content influence what they buy. And 70% of consumers place peer reviews above any other marketing content.

FEARLESSNESS is in our DNA, and we will break new ground again.

Merchandising

Competition is mounting

Given the attractiveness of the beauty category, competition continues to intensify on many dimensions:

Masstige pressuring prestige with client favorites like elf and nyx, specialty drug and department stores are continuing to invest in beauty. We continue to see success in direct to consumer brands & social media successes. Ultra and Amazon are aggressively courting our brands.

2017 Discovery Brands

Brands are intended to be exclusive limited distribution. Sephora is the first point of large retail distribution. It creates a pipe for future growth, this allows us to inject new excitement into our assortment to test and learn . These brands are anchored in strong story telling and require a lot of focus to develop and incubate. Some of the brands that we are focused on include Drunk Elephant, Tatcha, Ouai, Pat McGrath, Natasha Denona, Velour Lashes, Commodity, Surratt, MCJW, Black Up, Wander, & Pinrose.

2017 VIBR Brands

These brands are intended to remain exclusive limited distribution. They will have a strong product pipeline that will build a pillar for future growth of Sephora and gives us credibility to specific categories (curly hair, niche fragrances). These are brands like the highly anticipated Fenty launch, Sephora Collection, KVD, MUFE, Fresh, Boscia, Sunday Riley, Milk, Nest, Atelier, Bite, Ole & Marc Jacobs.

2017 Catagory Stategies

We will have focus categories that we anticipate represent key business opportunities that will drive sales; they will be lips, primers and setting, hydrators and highlighting. The idea is to win in all worlds.

Skin: Product Movement : Great Skin for All

  • Initiatives to strengthen pillar brands, and focus on allowing small to be the new big. Our small scouted brands will drive 50% of skincare growth in 2017. We are going to concentrate on teaching the why behind skincare so that all clients feel empowered to have great skin.
  • X2 the hair business by 2019: Dyson and Moroccanoil will be 42% of the growth in 2017. We will utilize discovery and incubation brands to build strength in our assortment. Catagory focus will be on curly hair, and we will have a huge push with in store sampling and marketing to allow our clients to see us as experts.

Sephora collection will continue to build as a killer acquisition under the brand promise of beauty uncomplicated.

Fragrance our Way!

  • Product differentiation with the objective to grow 40% of sales by end of year with discovery brands to deliver on Sephora DNA as the place to find the exclusive and elusive.
  • Cross world campaigns to double down in Sephora franchises and reinforce fragrance as a integral part of her total beauty routine.
  • Pillar brands will maintain 50% of sales in top ten brands like Chanel, Dior and YSL. We want to ensure we keep these as priorities due to marketing support and clients desire and awareness
  • Experiential Retail will be to bring Teach, Inspire, Play to Fragrance and use it to meet clients expectations and build long term loyalty

Color will continue to dominate the industry!

  • Hot new brands
  • Power of social
  • Strategic expansions with Too Faced, Milk, and Tom Ford
  • Catagory dominates with highlighting, priming and setting, and lip

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