PESTEL And Porter's Five Forces Analysis Of Sephora

Sephora’s nature of business is beauty-retail, launched in France and first started out in 1969 by Dominique Mandonnaud. Sephora provides customers with the open-sell environment features and works with brands across a variety range of product categories such as makeup, skincare, fragrance, body and hair care. Sephora is a stand-alone company and opened about 2300 stores in 33 countries worldwide. It has and expanding base of over 430 stores across Asia pacific region such as Singapore, Malaysia, Australia, Thailand, China, India and Indonesia. “Sephora encourages bold choices in beauty – and in life with the purpose of inspiring fearlessness. Launched in 2016, Sephora Stands social impact programs utilize our strengths to promote even greater good by supporting female entrepreneurs in beauty via Sephora Accelerate, our communities via Classes for Confidence and our people via Sephora Stands Together. ” This Sephora’s stand which made itself an independent and brave company that works with achieving a specific goal which is to provide well improved goods.

Pestel Analysis

1 Political

Sephora make-up brand itself is not what people called “cruelty-free”. Sephora does not require animal testing other than in China. As Sephora’s products are being sold in China, animal testing of their product is necessary as it’s by law. Sephora is FDA approved, which means that they provide consumers with natural products and little toxic chemicals which are harmful to the environment or unsafe if inhaled or absorbed into your skin. In another word, their products are safe to use and free from harm. It’s said in one of their product’s ingredient note “…satisfy the strictest internal requirements of development, quality, traceability, and safety, and lead by example with a Restricted Substance List that excludes more than 1,400 substances. ”

2 Economic

Sephora’s top competitor has to be Ulta. Both companies are in the beauty-retail line, however they shine in different ways. Ulta carries products ranging from drug store brands like Maybelline and Revion to high end brands like Chanel and Gucci. Nevertheless, Sephora is still competitive. They sell popular prestige brands that Ulta don’t carry, such as Fenty Beauty by Rihanna and Kat Von D. As compared to Ulta, The price point among competitors, Sephora’s very own products are sold the least expensive in the store. Sephora allows shoppers from different part of the world to be able to reach their products easily. With that, they provide users with Sephora mobile application which came in handy to countries that do not have Sephora stores. This allows many Sephora users with convenient deliver to home by shopping on their application.

3 Social

Customer’s lifestyle is a way to understanding their needs and wants better. Understanding their needs and want can have a direct impact on current and future business of the company. For example, comprehending the perspective of users, what are they looking for, their skin type or whether their skin is sensitive to the product or not. Another example is keeping in trend. That will allow users to have a desire to possess or do which results them in getting the products to keep themselves in trend. Sephora is generally targeted on women and few men. Its’ target demographic are young millennials which are ages of 22 to 37 years old.

4 Technological

Sephora provides users with global communications like Facebook, Instagram, Youtube and their very own website. This allows Sephora to reach a larger range of users and knowledge them of the company. Sephora also provide users with user-friendly online store and Sephora app. Their users do not have to go through any fuss or trouble of making the trip down to a Sephora store if provided it’s far or not available in their country, there’s no need for queues or crowd, and there are more variety of choice.

5 Environmental

Due to global warming and with greater environmental awareness, Sephora and other beauty companies come together and decide to not contribute to landfill waste. To do that, they started with saving energy resources, dedicated to the sorting, recycling and recovery of all waste generated from the manufacture, packaging and distribution. They moved towards with not using packaging for certain products, packaging that can to reused to refill more products or even recycling waste and emissions of excess product. And of course, they had transformation of raw materials, specifically through eco-design as well. This is a pretty good idea to help saving the environment and preventing unexpected circumstances like global warming.

6 Legal

With China’s law of animal testing, Sephora is unable to be called “cruelty-free”. This resulted many people to have a bad impression of Sephora as animals receive inhumane treatment, causes animal death, involve performing unnecessary tests and passes drugs that are potentially harmful. As most animals would just suffer and even die in vain from risky tests which many people would disagree with not just animal lovers.

Porter’s Five Forces Analysis

1 Competitive rivalry within an industry

Sephora have a few competitive rivalries such as Ulta, Bath & Body works and Victoria’s secret therefore they are highly competitive. There are rapid changes and improving of products due to consumer preferences and industry trends. With discount pricing strategies by competitors, Sephora place a huge investment in advertising, promotion, merchandising and packaging. Thus, the competitive rivalry within an industry is high for Sephora.

2 Threat of new entrants

Sephora has a lower threat of new entrants. Reason being is that the entry boundary of starting a cosmetics chain that features distinctive brands is high. Sephora is highly competitive with big players such as L’Oréal, Revlon and Maybelline. Also, It is difficult to leave without achieving the costs for production Therefore, it is important to set their competitors as an example, compare yourself with them, research and make yourself stand out from them or be better from them. For example, Sephora provides customers with beauty services, providing consumers with beauty advise, giving them a makeover and consultation to meet their needs. However, Ulta do not provide such services which made Sephora stood out more.

3 Threat of substitutes products or services

There are many competitors with similar products as Sephora to purchase from, therefore users have a large variety of products to consider. Since competitors like Ulta sell similar products as Sephora, the threat of substitutes therefore is high. As Ulta is also a popular cosmetic chain, this feature brands of similar products. Sephora provides consumers from all over the world with online platforms and Sephora application. This allowed their consumers to shop with convenience. However, their competitor Ulta does not provide international shipping except in Canada. This limited them to a smaller number of consumers compared to Sephora.

4 Bargaining power of Suppliers

Customer’s bargaining power is low as Sephora provides their consumers with great offers such as testers and discounts and provides alternative choices which makes the demand for Sephora products high. There is a high number of market players and large supply of diverse products to the market. Therefore, suppliers power is lower.

5 Bargaining power of Customers

In the beauty-retail line, customer’s power of well-known brands is average because sales earned from them in Sephora helps to increase Sephora’s revenue. However, these well-known brands have more bargaining power considering that Sephora target is to feature a popular brand. As Sephora attracts a large base of customers, it would be a loss for unpopular brands if they don’t introduce their products to Sephora.

Therefore, this results the bargaining power of non-popular brand low. Management RecommendationsFirstly, as some men today also uses make-up products, Sephora should work towards creating products which best fits their skin and provide them with a wide range of selection. This would indeed help sales grow robustly as these make-up products will draw attention of men with more new products that are introduced into the growing market. In order for Sephora to continue meet the demand of market, improvising, improving and developing of new product will help to boost the name and revenue of Sephora. Also, this would help Sephora remain competitive as consumers today emphasise a lot on the quality and trend of product.

Secondly, Sephora’s very own product should be acknowledged to the new markets. Developing an aggressive marketing strategy would be advisable in order to be more well-known in the new markets. Examples are getting influencers to try on Sephora’s product so that they can understand and help promote and share with their audience about the pros and cons of the product. Also, Sephora can create attractive and fascinating advertisements to catch the eyes of the audience and give them a great temptation to get Sephora’s product. These examples would help reach more people and allow them to understand the goods of Sephora’s product as well. Thirdly, Sephora could provide affordable beauty and make-up products for buyers. Products ranging from low-end to high-end products can provide buyers with different needs of emerging markets and developing countries. There should still be quality in Sephora product even if these products are made affordable. This would leave good impression and keep Sephora’s loyalty to customers. Besides, packaging of product with different sizes and quantities could also be taken into consideration which would be made more affordable for customers.

The ideal way to showcase your product is to benefit buyers with goods, quality and a low-cost. This would tempt and attract more people to try your products or indeed shop with you in near future. Lastly, Sephora can work on their response to consumers who give feedback. Providing consumers with quick respond to their feedbacks gives them an idea that the company takes their words seriously. This system would also help the management team to communicate better and also provide a stronger product position and direction. Additional ideas and quality discussion within the management team would then be reinforced as well.

Conclusion

It is substantial to have constant improvement on your company, develop loyalty with customers and not forgetting to maintain a long-term relationship with customers. These will benefit the management with constant or more revenue with regular and new customers. Also,it has shown in porter’s five forces that Sephora’s industry has high competition, high entry barriers, low bargaining power of suppliers, high bargaining power of customer and a large number of substitutes or services. In order for the company to continue being successful in the future, it is necessary to have various strategies so if one don’t work you will have another as a backup strategy which will keep the company going. These includes focus on emerging markets and developing countries, implementing research and development and applying aggressive marketing campaigns. These strategies will guarantee that the company will develop customer loyalty and accomplish a successful future with long term profitability over the years.