Liz Segran
Appearances
Today, Explained
The making of a beauty king
And there, if you recall, there were these beautiful glass cases and there were these brand representatives.
Today, Explained
The making of a beauty king
And the only way for you to try these different products was to have one of these brand representatives talk you through everything.
Today, Explained
The making of a beauty king
But Sephora in 1998 showed up in the U.S. with this completely different concept. And the concept was that it would put hundreds of these carefully curated brands into a single store and there would be no gatekeepers. And that meant that as a customer, you were free to roam the aisles and test all of the products to your heart's content.
Today, Explained
The making of a beauty king
And it also meant that you didn't have to be loyal to a single brand. And this was really a wild concept and it just made the store so much more inclusive. And so consumers just went wild for this new way of shopping. And other retailers quickly tried to replicate this model. Two of the biggest ones I can think of are Ulta Beauty, for instance, and Nordstrom.
Today, Explained
The making of a beauty king
They're all trying to create this kind of more open, exciting, model for shopping for beauty. But Sephora, to its credit, has managed to always stay one step ahead of the competition by ensuring that it has the coolest, trendiest, latest brands in store. And also, you know, I think that it has a role to play in actually just kind of shaping beauty trends from the ground up.
Today, Explained
The making of a beauty king
And so, for instance, I don't know if you've noticed, Noelle, but there are more expensive high-end shampoo brands than I've ever seen. I have indeed noticed. So there's like Pattern Beauty and Olaplex and Virtue. And this is not an accident. Shampoo had always been an inexpensive drugstore purchase.
Today, Explained
The making of a beauty king
But several years ago, Sephora decided that consumers actually would be willing to drop a lot of money on fancy shampoos and conditioners. So it actually went out there and cultivated a new generation of these brands. And lo and behold, five years later, here we are throwing $40 or more on a bottle of shampoo.
Today, Explained
The making of a beauty king
It is a rat race. If you are a beauty founder, you are devoting a lot of time to trying to figure out how to break into Sephora.
Today, Explained
The making of a beauty king
So I've heard all kinds of stories. There are brands that are sending packages of makeup to Sephora on a weekly basis, hoping that somebody at the headquarters will open it up. There are founders who are stalking Sephora buyers so that they can start a conversation.
Today, Explained
The making of a beauty king
So, you know, these brands are all desperate to break into Sephora, but actually Sephora is kind of holding all the cards and it's going out there and deciding which brands are going to be the next billion dollar brands of tomorrow. In order to be in Sephora, you have to spend a lot of money at Sephora.
Today, Explained
The making of a beauty king
So if you sign a contract with Sephora, first of all, it means signing an exclusivity agreement saying that you won't sell your products anywhere else for at least two years. So that's the first thing. But then you have to pay a lot of money for the in-store fixtures.
Today, Explained
The making of a beauty king
So when you go into Sephora and you see those beautiful bays of products, the brands themselves have to pay upwards of tens of thousands of dollars, often a lot more, sometimes hundreds of thousands of dollars, to have those displays. And then... Whenever you make a sale, you have to give 65% of that sale to Sephora, which is much higher than, you know, the industry average.
Today, Explained
The making of a beauty king
And so brands are just paying a lot of money to Sephora in order to be in store. But in exchange for that... They are getting access to this enormous audience of beauty lovers. Their loyalty program alone has 40 million members. And if you think about the number of people who are coming into store every day and going to the Sephora website, there is just nothing like it.
Today, Explained
The making of a beauty king
So brands and founders are willing to do whatever it takes to be in the Sephora store, to spend all of this money, because the upside is just so big.
Today, Explained
The making of a beauty king
If you think about a brand like Sol de Janeiro, you know, a few years ago, it was acquired by L'Occitane for $450 million. And so the founder of Sol de Janeiro had a massive payday. And so it was totally worth it. But they do say that they are basically ceding control of their companies to Sephora.
Today, Explained
The making of a beauty king
And that means that they're not making all of the decisions that a founder and a CEO typically would make. They're letting Sephora make decisions about things like... packaging. There's a brand called Soft Services that creates beautiful skincare products, and it wanted to create these eco-friendly refillable containers. But Sephora said, no, that's too complicated for us to sell in our store.
Today, Explained
The making of a beauty king
So they basically had to redesign their packaging to make it disposable. These are the kinds of decisions that Sephora is helping them make. And You know, there's a lot of pressure on them to sort of take all of this advice because that's basically the only way for these brands to hit the kind of scale that they're looking for.
Today, Explained
The making of a beauty king
Yes. And so the people who are willing to talk about the downsides are those who were in Sephora but then got kicked out. And so I think that's another really important part of this. So there are 300 brands in store. And those brands are constantly rotating because there is a number of brands that are not selling at the rate that Sephora needs them to sell at.
Today, Explained
The making of a beauty king
And so those brands get unceremoniously kicked out of the store. One very notable brand is J.Lo's beauty brand, Even she, you know, her brand wasn't able to meet the targets that Sephora had set.
Today, Explained
The making of a beauty king
And so these brands that are not able to succeed, their founders tell me things like, you know, it's kind of like a pay-to-play model because you have to pour so much money into Sephora in order to succeed that you're basically kind of on this hamster wheel, you know, trying to go out and get value. VC funding, pouring it into your brand so that you can meet Sephora's targets.
Today, Explained
The making of a beauty king
Oh, my gosh. I think that for all the beauty junkies out there and even people like me who casually wear makeup and don't fully understand how to apply eyeliner, I think it's really easy to understand the appeal of Sephora. It's such a fun place to shop, and we love wasting hours there on the weekend discovering new brands.
Today, Explained
The making of a beauty king
And then, you know, that keeps going on and on and on. And it's a very stressful, expensive process. And so those founders would say that, yeah, there are a couple of brands that are big winners, but there are a lot of brands that really struggle to compete in this environment.
Today, Explained
The making of a beauty king
That's right. And, you know, there are thousands of beauty brands on the market today. So the market is just so crowded that it is really hard to get anybody's attention. And so in order to succeed here, you really need a retail partner here. And Sephora is known for being the, you know, the most powerful of these retailers, but it comes at a cost.
Today, Explained
The making of a beauty king
You're spending so much money at Sephora from the in-store fixtures to the samplers. that you see in stores to even training up staff who will be able to do the marketing and doing the in-store trainings. All of this is very, very expensive. And so it's definitely a complicated calculation that founders need to make when they're trying to break into this world of Sephora. Yeah.
Today, Explained
The making of a beauty king
I think that Sephora has created a really exciting in-store experience, and that's really hard to do. You know, across the retail landscape, we're seeing so many retailers shutter and close. And here is Sephora constantly innovating, creating these really, really exciting experiences for us. But I also think that it is creating this culture of excessive consumption.
Today, Explained
The making of a beauty king
It's constantly, you know, cultivating our desire for new beauty trends. And it's making us feel like we'll never have enough makeup or shampoo or skincare to make us feel beautiful enough. And so that's really problematic as well.
Today, Explained
The making of a beauty king
But actually, all of that, all of the innovation around retail has put it in this position of being the most powerful player in the high-end beauty industry, which is worth $30 billion globally. And so we're talking about those brands that are slightly more expensive than what you would find in drugstores. And Sephora has got that market locked up. It has 700 stores in the U.S.
Today, Explained
The making of a beauty king
as well as 1,000 outposts at Kohl's. Wow. So it basically now controls the fates of beauty brands on the market. And that is why so many beauty founders are so desperate to break into Sephora. Right. And even though there are other retailers like Ulta Beauty and Nordstrom that are trying to replicate the Sephora model, Sephora is just one step ahead of the competition.
Today, Explained
The making of a beauty king
And I think that the reason for this is that it is able to identify and pluck these exciting beauty brands and keep the aisles stocked with a new array of beauty brands. And so there's always something to go into the store for, something new to explore the next time you're in the store.
Today, Explained
The making of a beauty king
And actually, I think that what most of us don't fully understand is that we think that Sephora is out there finding these brands, putting them on the shelves, and that's the end of the story.
Today, Explained
The making of a beauty king
But actually, my reporting uncovered that actually Sephora is getting really deep with the founders of these brands into shaping every aspect of the brand from the products that they're creating to the packaging. And founders are willing to cede control over their brands, these startups that they're creating, because being in Sephora guarantees their success.
Today, Explained
The making of a beauty king
Sephora will give these brands mountains of proprietary data to help them succeed. And that's why the biggest brands on the market today, like Drunk Elephant, Rare Beauty, Sol de Janeiro, all of them got their start at Sephora.
Today, Explained
The making of a beauty king
Yeah, I think that the brand that kind of tells the story the best is Glossier.
Today, Explained
The making of a beauty king
As a millennial, I, you know, I'm very, very well versed with this brand. It popped up in 2014 at the height of the direct-to-consumer movement.
Today, Explained
The making of a beauty king
And we all know it because it is this beautifully millennial pink brand, and everything is very minimalist.
Today, Explained
The making of a beauty king
And it basically pioneered this concept of makeup that looked like you weren't wearing any makeup at all, like you just woke up in the morning glowing.
Today, Explained
The making of a beauty king
And so Emily Weiss, the founder of Glossier, came up with this brand and she publicly stated that she wanted to build a beauty brand without partnering with a retailer.
Today, Explained
The making of a beauty king
who are going to make you your brand become something so that it fits on a certain gondola or a certain you know aisle of a store glossy emerged at this time when all of these venture capitalists were just pumping money into startups and emily weiss was really really good at raising money for glossier in total glossier has raised
Today, Explained
The making of a beauty king
$266 million, which is just an astronomical amount for a beauty brand. And its last valuation valued it at $1.8 billion. And so it had all of this money to pour into acquiring new customers, creating really innovative products that consumers wanted. Glossier sent me all of their bomb.coms. Look at how cute these packages are.
Today, Explained
The making of a beauty king
And even building these gorgeous stores that we're seeing pop up in New York and in Boston and all of these different places.
Today, Explained
The making of a beauty king
It was just a fascinating time because the internet had created this entirely new way for brands to emerge.
Today, Explained
The making of a beauty king
And so that's why all of these investors were so eager to pour money into these brands because they really thought that this was going to be the future of the way that we shopped, that we wouldn't need retailers anymore because we could just go online or go to Instagram, discover a brand and buy products directly from those brands.
Today, Explained
The making of a beauty king
And actually, during this time, we saw just an explosion of beauty brands because it's actually really easy to launch a beauty brand. All you need to do is partner with a lab, come up with some nice branding, and there you go. You can have a small number of products, and you have a beauty brand up and running.
Today, Explained
The making of a beauty king
And so there were there were about a thousand new beauty brands that popped up between 2015 and, you know, last year.
Today, Explained
The making of a beauty king
So Emily Weiss was the face of her brand, Glossier. In many ways, the success of the brand was tied to her being this charismatic fashion female founder who was part of, you know, what we would call the girl boss era. Girl boss. Girl boss. I got excited. That's right. That's right. And at the time, that was still considered a really wonderful thing.
Today, Explained
The making of a beauty king
But the whole concept of the girl boss sort of soured because during the Black Lives Matter movement and that period where we were scrutinizing what was happening at all of the brands that, you know, that we shopped from, it became clear that Glossier wasn't really treating women of color very well, both in terms of its customers and in terms of its sales staff.
Today, Explained
The making of a beauty king
And it was also really hard as a woman of color to find shades at Glossier that really, you know, spoke to me and that I could use. And so I think the world sort of began to see that, you know, there were problems, right, with Glossier. And so... At some point, Emily Weiss stepped down and brought in another CEO.
Today, Explained
The making of a beauty king
And it was this new CEO who basically said, you know, let's just, like, rethink what we want Glossier to be. And in addition to... sort of setting new policies in place that ensure that the brand was, you know, more inclusive across a lot of different dimensions.
Today, Explained
The making of a beauty king
She also had the idea that the best way for Glossier to succeed and to grow was to give up the stance that it was just going to be a direct-to-consumer brand and just fully sort of give itself over to Sephora. So about five years after it launched in 2019, it had reached upwards of $100 million in revenue, which is a lot, especially for a beauty brand.
Today, Explained
The making of a beauty king
There are very few beauty brands that are able to get to that level of scale. But it just wasn't enough. It wasn't the kind of money that would justify Glossier getting acquired or getting a major IPO, which is what its investors needed of it. And so in order to get that kind of money, Glossier had no choice but to enter Sephora.
Today, Explained
The making of a beauty king
And so in 2022, everybody was shocked to discover that when you went inside a Sephora store, there were these beautiful millennial pink displays that Glossier had set up. And so Glossier totally reversed its stance, and suddenly it was there next to 300 of its competitors. But it realized that that was the only way for it to get the kind of scale that it needed to satisfy its investors.
Today, Explained
The making of a beauty king
Okay, how Sephora is changing the way we think about beauty itself. Oh, love it.
Today, Explained
The making of a beauty king
It would put hundreds of these carefully curated beauty brands in a single store. And as a customer, you were free to roam the aisles and test all the products that you wanted to your heart's content. And that was just a very unusual idea at the time.
Today, Explained
The making of a beauty king
You know, what was so interesting as I was reporting this story is that it allowed me to kind of go back to what beauty brands were like when I was in high school, so 20 years ago. And back then... The only way for us to really get access to these high-end beauty brands was to go to a department store.