Julie Bornstein, the senior vice-president of Sephora Direct group is in charge of all direct marketing for the products of Sephora group as well as the digital marketing initiatives. She is seeking additional funding so as to double the budget used in social media in the company for effective marketing. So as to determine whether additional funding for social media is viable for enhancing sales of the firm, it is imperative to explore the background of the company so as to explore whether such funding is necessary.
Sephora Company was started in the year 1969 and entered the U.S market in 1998. By the year 2010, the company had grown to be the biggest prestige beauty specialty retailer with a turnover of more than $2 billion. The firm was popularly known for its vibrant stores that encouraged the method of trial and experimentation for the market of its products. In 1979, the company’s founder expanded the then nascent business to numerous stores designed to enable its customers to try different brands of its products in a self service environment assisted by the firm’s attendants.
In the first few years after entering the U.S market in 1998, Sephora faced challenges with the supply of its products. This is because the dominant players in the supply market at the time did not consider the style of marketing of Sephora as likely to attract customers. This, however, changed with time. This being the case, it is crucial to determine what benefits the company had accrued from social media mode of marketing, so as to understand the reason for the clamor by Bornstein for additional funding to the sector.
Bornstein had begun to experiment with Face book and online videos in 2008 and had began making plans for mobile applications by the following year. It is this that informed the decision in the year 2010 by the company’s president David Suliteanu to give the green light for the creation of a new group within the Sephora Direct Group to take care of these initiatives. Bornstein wanted $1 million as additional funding to channel into this sector of social media and online videos. The company’s president offered his support during the budget meeting only on the condition that she would win in the digital space. Assuming that Bornstein gets the additional funding she needs to channel into the sector, what digital categories does she need to allocate the funding into? In answer to this question, we must examine the different categories and their contribution to the sales of the firm’s products.
The launching of the e-commerce site, Sephora.com in 1999 and the subsequent inclusion of other brands sold at the Sephora stores brought with it good tidings for the firm in terms of increased sales as evidenced by statistics. It was projected that this accounted for nearly 15-20% of the total sales of the firm in the US in the year 2010. This without doubt is a phenomenal growth rate in a space of a year. Around 3 million visitors visited the site each month pushing the company to o the top 50 retail houses in the United States. The firm also encouraged online purchase of its products by offering free samples for some online orders. Since the launching of the e-commerce site resulted in an increase in the level of online sales made, it would be prudent for Bornstein to channel the additional funding towards this sector. This move can also be rationalized on the footing that the profit margins derived through online sales are higher compared to sales from stores that are marked by high overhead costs.
Another foray that Bornstein need to channel the additional funding is in the social media in the rating and reviews in the e-commerce site. As a result of Sephora of launching software integrated into the company’s website and opening the ratings and review boards, the company received an unprecedented number of responses from customers. The responses from customers led to the reception of better information on the part of the company thus helping it know the tastes of its customers. Similarly, the reviews served as a marketing platform for the company’s products. Additional funding towards this would be a good gesture as such information as received from reviews is difficult to obtain through other means.
It is the proposal of this paper that budget cuts need be done on the traditional method of marketing such as that of displaying the products in typical stores. This is because the overhead costs incurred in paying the attendants who provide services to the customers are high as compared to the reviews done on the online site which requires only electronic screening. It is trite that Facebook as an advertising platform of the company was successful in every way imaginable. Which brings up the question: was it wise to create a separate platform of engagement in the name of Beauty Talk? The answer to this question can be answered by understanding the context and circumstances which necessitated the launching of the separate platform. Beauty Talk was formed to plug the inadequacies presented by Face book. One was the inability of masking one’s identity by a client while asking a personal question on Face book. Another was the need to massage the egos of the super users who regularly answered questions on social media and who crabbed for more attention. This would not have been possible on Facebook. The same was also informed by the need to have an archive of responses from customers for future references, a feature that was not possible on Face book. In view of this, it was indeed wise to have launched Beauty Talk to complement but not supplant Face book.
As Sephora Company transits into the digital marketing world, it also needs to be wary of its competitors. Macy and Nordstrom department stores and single brand prestige beauty stores provided competition to Sephora. The fiercest rival was ULTRA Beauty which is a multi-brand specialty store which operated nearly 400 retail stores in the U.S. However, Sephora needs to be overly circumspect about the new online companies-Birchbox and Gilt Groupe which are bound to offer the biggest challenge to Sephora with the advent of the digital age.
Going forward, effectiveness of the company’s digital efforts can be measured by increased online sales and reviews and ratings as happens in the e-commerce site. More so, in the video category for personal care products needs to be one of great content. The overall strategic goal of Sephora in the digital marketing should be to integrate the videos of the firm for personal care products with UGC segments. A mobile application to serve as a bridge between the company’s website and the stores aids customers while shopping by giving the information needed such as ratings and reviews.
The company’s CEO pegged the support of additional funding on the project on the company winning in the digital place. The company can satisfy the CEO of achieving this noble ideal by partnering with mobile platforms to enable consumers shop at multiple retailers through a single application. Other measures include launching an e-commerce site and contracting with other parties to set up a software for enabling ratings and reviews by customers.
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