3 Ways to Create Community Beyond Transactions in Experience-Driven Retail

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I am an unabashed admirer of the French omni-retailer Sephora and the professional beauty supplies giant Sally Beauty, not just because I am one of their customers — but for how they have positioned their brands through diversification and advanced technology solutions. As both a CMO and a consumer, I have a unique view of how these two industry leaders have used constant innovation as the basis of their success.

Sephora has a history as a trailblazer. This was the brand that pioneered the try-before-you-buy phenomenon with sample-sized beauty products like lipsticks. It was also one of the first brands to build a website back in 1999. After launching its own Innovation Lab in 2015, Sephora even led the use of augmented reality and AI in providing virtual makeup and hairstyling. By Sephora’s own definition, digital and innovation are part of its DNA.

Sephora figured out early that a physical retail store model is too easily disrupted, but an online-only focus is too narrow. By taking an omnichannel approach, they were not just selling products anymore but experiences. Sally Beauty has taken a similar approach, bringing the salon experience in-store alongside virtual colorist consultations, live streaming events and user-generated content campaigns.

However, beauty businesses do not necessarily need either of these companies’ resources to keep up with the latest trends. A lot of the work on the back end to support growth can be addressed by agile technology platforms.

1. Use automation to diversify and scale

We learned through the disruptions to traditional retail during the pandemic that diversification is key. Brands cannot just be a one-show pony — they need other ways of driving revenue. As consumers increasingly look to brands to provide a one-stop shop where they live and play every day, Sephora is the place to get your lashes put on in-store, have your makeup applied, and get your hair done, all in one place.

Sally Beauty recognized the power of diversification when it decided to open DIY hair salons at many of its locations in 2023. Formerly the go-to place for professionals to buy their hair supplies, the company now targets new professionals and hair color DIYers.

But how far do you take diversification? It’s important to find the right balance between innovating and staying in your wheelhouse. Businesses wanting to offer different in-store experiences should look to software with in-built functionalities that allow them to scale quickly, such as:

Inventory management
Appointment scheduling/booking
Marketing/promotions
Client notes/customizations
Payment processing/tipping
Loyalty/membership programs

There is no need to reinvent the wheel — tech companies already provide customizable options that will optimize evolving business models without creating additional strenuous workloads.

2. Leverage consumer data to drive growth

Automation allows brands to focus on customer experience while their chosen platform works in the background managing growth. This includes monitoring the consumer behavior behind emerging trends daily. For example, if the latest craze is botox or body-shaping, the solution should have all the features and functionality to support those services.

Platforms also need to be integrated with membership reward programs so they can use that customer data to acquire new marketing. In my experience, educating our businesses on how to target consumers and measuring that data on a consistent basis is crucial. We take the insights generated on our platform to provide infographics that make targeted recommendations alongside case studies of businesses that have been successful.

When looking for your own solution, consider platforms that can provide:

A marketplace and app geared towards how and where consumers are searching.
Detailed reports that break down which online channels customers are using to make bookings, such as search engines like Google Maps and the platform’s app.
Trending data that tracks the popularity of specific services, such as hair coloring or nail design, over time.
Alignment between new offerings and your existing culture and branding.

Ideally, you want to leverage SEO to ensure your business shows up before competitors on platforms such as Yelp, Apple and Google Maps. Providing data-rich insights will help businesses make better decisions and learn how to better use their chosen platform to maximize growth.

3. Focus on customer retention and recurring revenue

The oft-cited Gartner stat that 80% of future revenue will come from 20% of existing customers shows the importance of retention to viability and growth. Consumers are simply more willing to spend with companies with whom they already have a good relationship. People are also willing to spend more when they feel part of an experience. In any customer-facing interaction, a streamlined journey can enhance retention rates.

One of the big issues for businesses to solve along that journey is the expectation of maximum convenience. For example, fast food has historically been popular due to its convenience — but people expect to get even healthy food fast today. Sephora and Sally Beauty have done a great job turning that shift into an opportunity. By allowing customers to get multiple things done in one place, they have managed to expand but without downgrading their branding.

Stay in your wheelhouse

I have a rewards card from both Sephora and Sally Beauty, and I know I’m not alone. We love the free offers, stacking our rewards and plotting what we are going to purchase during their next sale. But if you are seeking to diversify your own beauty offerings, understand that for all their advanced technology solutions, these companies stayed in their wheelhouse. The difference is they have done this extremely well. Similarly, when businesses allow tech to happen in the background, they will be free to focus on building their own beauty empires.

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