Beauty Battles: Sephora And JCPenney Deepen Partnership

Rows of lipstick

With revenue expected to exceed $62 Billion in 2016, the US cosmetics industry is a retail powerhouse. While $17B of that amount generated online in 2013 suggests this brick-and-mortar retail segment is susceptible to online pressures just like most retail sectors are, the growth in the overall market segment — plus the product discoveries customers need to make — seem to ensure that foot traffic and customer time spent with new product offerings will remain a key factor driving space needs going forward.

In fact, one struggling anchor retailer is doubling down on the power of the makeup counter to help address its own foot traffic declines. This November, JCPenney’s flagship store in Salinas, CA’s Northridge Mall will open 3,000SF of its space for a new Sephora store-inside-a-store. 3KSF comes in at double the usual space outlay for Sephora stores within JCPs. As Donna Mitchell at NREI writes:

Larger than the typical 1,500-sq.-ft. location, the store is one of 60 new Sephora inside JCPenney locations that are set to open this year. The move is big because it marks 10 years since the Plano, Texas-based fashion retailer began opening Sephora units inside JCPenney stores in 2006. It means expansion in one of the few retail categories that post consistent sales increases through bricks-and-mortar locations, and it exploits an important competitive advantage over Amazon.com, according to industry observers.

“Take companies like Ulta Beauty or Sephora. They are insulated from Amazon.com,” says Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment-banking firm headquartered in New York City. “Amazon can’t put makeup on you. They are doing something Amazon can’t do. That is a very big deal.”

Both Ulta, which plans to open 100 stores in fiscal year 2016, and Sephora pamper shoppers with complimentary consultations and mini-makeovers. Those services are not just tertiary in the battle to stay competitive. Ulta Beauty, for instance, posted a same-store sales increase of 15.2 percent for stores and e-commerce, along with a 23.7 percent increase in net sales.

Beautiful Numbers

The U.S. make-up market is expected to maintain positive growth through 2018, with an anticipated compound annual growth rate of 3.8% for the five-year period of 2013-2018, reaching $8.4 billion. Similarly, the global fragrances and perfumes market is expected to experience positive growth through 2019, with a compound annual growth rate of 2%.

The largest category in the cosmetics industry is skin care, accounting for nearly 35.3% of the global market in 2014. The products in the global skincare segment create a $121 billion industry. Hair care products represent a large segment of the beauty market too, with sales reaching $11.6 billion in the U.S. in 2014.

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