J.C. Penney Gives Sephora Store-Within-Store Space
By George Anderson
J.C. Penney wants to become a destination for young female shoppers and its announcement that it will prominently feature a popular retail beauty brand at the center core of its stores is another indication the department store operator can do the talk and walk at the same time.
Yesterday, Penney announced Sephora will open stores-within-stores at all the chain’s locations beginning as early as next fall. The same products carried in Sephora’s stores in the U.S. will be sold in Penney locations as well as through the company’s web site.
Myron (Mike) Ullman, chairman and chief executive officer for J.C. Penney, said in a released statement, “Our initiative with Sephora is a clear reflection of the transformation underway at JCPenney as we seek to build an emotional connection with our current customers and bring new customers into our stores and onto www.jcp.com. Our customer has been telling us that she wants a beauty and cosmetics selection that is new, exciting, and within her reach. There is simply no better partner to allow us to achieve that than Sephora, the most revolutionary, innovative retailer in the beauty industry.”
David Suliteanu, president and chief executive officer of Sephora U.S.A., said, “JCPenney’s focus on providing relevant merchandise to its broad customer base is consistent with our objectives. This includes America’s youngest women, a market in which JCPenney is a significant and rapidly growing factor.”
Sephora is owned by LVMH Moet Hennessy Louis Vuitton. It operates more than 500 standalone stores worldwide (120 in the U.S.) selling high-end branded cosmetics, perfume and other beauty items.
Moderator’s Comment: What is your reaction to the announcement that Sephora will open store-within-stores in J.C. Penneys as well as its web site? What
benefits do you see for Penney and Sephora in this deal? – George
Anderson – Moderator
According to the Associated Press, Sephora will “be the exclusive seller of beauty products in J.C. Penney,” so presumably this will have a big impact and the placement of the “store-within-a-store” will be prominent. This partnership will serve to upgrade JCP’s image and to provide access to a much larger market for Sephora.
Great for J.C. Penney. This is not an innovative, earth-shattering or new retail thrust. Major retailers have been doing this for over a hundred years. Is this to be considered major because Sephora is considered upscale? Is this major because J.C. Penney is trying to change their image and attract young women? Or is it major because their plan was to make changes and they are showing that they can? I don’t get the hullabaloo. What am I missing?
You own a department store. You want new customers. You approach a highly-valued brand you don’t have in your stores already. The brand attracts exactly the shoppers you want and don’t have. You have lots of extra low-quality space in places like the back of the store, the top floor, the basement. You have a shortage of high-quality sales space on the main floor in front of the entrance. The new brand doesn’t want to pay the true value of the high-quality space and balks at paying anything for the low-quality space. So what do you do? Well, many department stores compromise by giving the new brand high-quality space, but so little of it that the impact is minimized. Or they give the new brand huge space buried in a low-quality area which also destroys the impact. Let’s see what choice is made.
This IS revolutionary because Sephora is a brand with its own free-standing stores that offers the full turn-key gamut of cosmetics and fragrance, and in good, better, best assortments (they are not strictly “upscale”). Finally, if they are able to replicate the experiential Sephora dynamic at J.C. Penney, they will have young females AND males getting ready for dates on some evenings and nights on the town on others, right there in the store. This will generate a nice uptick with their already-successful and hip proprietary brands (Nickit, Bisou Bisou, a.n.a., et al.). Cosmetics at Penneys? Weakness no more.
Sephora depends not only on their products, but on well-trained sales people to set the hook. Of course, JCP has those by the boatload, right?
My question would be, who stands to gain the most value for their Sephora stock? Make this deal, roll out mega-cases of product to fill the store locations, and divest. That would be my plan. I wonder if it’s theirs.
I find it interesting to note the difference in opinions between the males and the females who are responding.
The men don’t get it; the women understand that this is a huge win for JCP. Sephora came into the market I live in about a year ago and immediately became a huge draw. As long as the financial agreement make sense, I can’t think of a more efficient way for JCP to get their new target audience into the door!
This is powerful both ways; increasing distribution for Sephora and brand presence for JCP with the demographics they are trying to entice.
The other revolutionary thing this is doing is establishing national distribution for high priced brands (Nars, Cargo, Armani, Fekkai, Blandi, etc.) that previously had limited distribution only at top-tier department stores or in Sephora stores in large cities.
What will retailers like Neiman Marcus do now that, perhaps, best selling items from their makeup department (e.g. Armani) will be available at Penneys?
Depending on the mix of products that Sephora will allow into JCP stores, a second or third-tier market might have these products available to them now, changing the landscape in the makeup, hair and skincare categories. Good strategy if they can execute it well.
Managing the store’s retail space as a ‘mall concept’ has been a fast-developing trend. Rare is the retailer that’s capable of appealing to all consumer segments and category trends with their central brand. Here Penney goes upscale with a brand and in-store execution that they must judge they can’t match. Makes sense; and puts Penney on the same path as others.
Seems like the Sephora folks have inhaled too much of their fragrances. Really don’t see how this helps the brand image they’ve been building. On the other side of the coin Sephora is relatively high priced so, if JCP is trying to wiggle up the food chain, it may make some sense for them. But how is that going to play across their existing customer base?
The key question is what brands will the “In Store” Sephora’s carry and who will be training the “Saphora staff” as to the knowledge and expertise of those brands? I understand these “In Stores” will be 1/4 the size of Saphora’s independent stores. So out of the 400-500 brands, who exactly, will be available at Sephora/J.C. Penney.
I believe the brand selection plays a vital role in determining the outcome of success as well as the quality of service expected when shopping at a Sephora store.
It is important to remember the focus “to bring in a younger, more high fashion customer,” and not to compete with the same brands available at the same location. It is also very risky not to hurt the image or integrity an existing brand. I would think it smart to stick with the lines owned by MHLV. Outside brands may enjoy the higher numbers of the new distribution but they must also look at the long term impact of the “J.C. Penney” image that goes with it.