Sephora is giving its 700 stores a major makeover. Here’s why

Sephora is giving its 700 stores a redesign, Sephora CEO Artemis Patrick announced.

Patrick’s announcement, which took place on Monday at the National Retail Federation’s annual conference, was striking. Many other retailers are in crisis. Macy’s is closing 150 stores around the country, in an effort to return the company to profitability. Kohl’s, which has a “store-in-store” partnership with Sephora, plans to close 27 of its 1,150 stores by April.

But Sephora is moving in the opposite direction, with an unmissable big bet big on brick and mortar: The beauty retailer’s investment in these store renovations will mark its largest capital project ever.

Sephora’s already a retail success story

So why has Sephora succeeded, where so many other retailers have failed?

For one thing, Sephora has a long history of innovating in retail. It launched 26 years ago, when luxury beauty brands sold their products almost exclusively in department store beauty counters. Products were behind glass, and you had to rely on a retail associate to test products.

Sephora blasted through the status quo with a new concept: It was a beauty wonderland, where customers could sample products on shelves on their own. And importantly, there were hundreds of brands to try. Sephora didn’t work exclusively with big brands; they sought out small, indie brands too. Patrick told me that that this was, initially, by necessity. “When Sephora first entered the United States, a lot of established brands didn’t want to work with us,” she said. “For sheer survival, Sephora had to start incubating these baby brands.”

These days, Sephora has far surpassed the department stores as the destination for luxury beauty. And that growth trend is happening at a precipitous time—the sector itself is on the rise. Now, Nordstrom is creating beauty departments in-store that mimic Sephora, allowing customers to test products from new brands on their own.

In her two decades at Sephora, Patrick identified that this ability to sample exciting new brands and products continues to be the company’s main differentiator. That’s why Sephora is constantly scouring the market for hot new brands.

Sephora also likes to have exclusivity agreements with these brands which prevent them from working with other retailers. Brands are more than happy to accept this arrangement, because a partnership with Sephora can mean hundreds of millions of dollars in annual sales. Household names like Rare Beauty, Sol de Janeiro, Supergoop, and Urban Decay owe much of their success to Sephora.

Now it’s building on it with a data-driven redesign

Now, Sephora is trying to improve its market-making in-store experience. At the National Retail Federation, Patrick said that she wanted to make updates to the store that are based on data and functionality, rather than aesthetics. “I think too many times retailers talk about the ‘store of the future’ and it’s very much driven by the design team,” she said. “So you have this conversation of form versus function.”

Patrick didn’t offer too many details about how the stores would change. The ones she did mention reflect a focus on pragmatism. To speed up the check-out process, the company plans a greater shift to mobile, with retail staff checking people out from devices. Beauty studios, where customers can get their hair and makeup done, will be off to the side, away from windows. There will also be more lighting—all the better for flattering selfies to post on social.

She offered less detail about how Sephora would redesign the in-store displays of products, known internally as “gondolas.” As I reported, brands pay upwards of $100,000 to build out a few inches of space where their products will be displayed in store. Larger racks can cost multiples more. And seasonal displays at the front of the store can cost a brand half a million dollars.

Patrick says Sephora is committed to making these displays as effective as possible, to help them promote sales. “We’re not a cheap date and we don’t want our brands to be spending a ton of money on building these amazing fixtures, and then it doesn’t work out,” she said on Monday.