3 Ways to Create Community Beyond Transactions in Experiential Retail

I’m an unabashed admirer of French retailer Sephora and skilled beauty giant Sally Beauty, not only because I’m a customer, but also because of the way they position their brands through diversification and advanced technological solutionsAs a CMO and consumer, I have a unique perspective on how these two industry leaders have used continuous innovation as the foundation of their success.

Sephora has a history of being a pioneer. It was the brand that began the “try before you buy” phenomenon with sample-based beauty products like lipsticks. It was also one of the first brands to create a website in 1999. After launching its own innovation lab in 2015, Sephora has even been a leader in the use of augmented reality and artificial intelligence in virtual makeup and hair styling. By Sephora’s definition, digitalization and innovation are a part of its DNA.

Sephora quickly realized that the physical retail model was too easy to disrupt, but that its sole focus on online sales was too narrow. With an omnichannel approach, they were not just selling products, but experiences. Sally Beauty took a similar approach, bringing the salon experience to the store virtual color consultationslive events and user-generated content campaigns.

But beauty firms don’t necessarily need the resources of either company to sustain with the latest trends. Much of the back-end work to support growth will be done with agile technology platforms.

1. Use automation to diversify and scale

As we’ve learned from the disruption of traditional retail during the pandemic, diversification is key. Brands can’t be one-trick ponies—they need other ways to generate revenue. As consumers increasingly expect brands to provide a one-stop shop for the experience they live and play in every day, Sephora is the place to go for lashes, makeup, and hair, all in one place.

Sally Beauty saw the potential for diversification when it decided to open DIY hair salons in many of its locations in 2023. Once a go-to place for professionals to replenish on hair care products, the company now caters to latest professionals and DIY colorists.

But how far must you go to diversify? It’s essential to find the right balance between innovation and staying in your wheelhouse. Companies looking to offer different in-store experiences should look to software with built-in features that allow them to scale quickly, equivalent to:

• Supplies management
• Appointment/Reservation
• Marketing/Promotions
• Customer Notes/Customizations
• Payment Processing/Tips
• Loyalty/Membership Programs

There’s no need to reinvent the wheel—tech firms are already offering configurable options that may optimize changing business models without creating additional, burdensome workloads.

2. Use consumer data to drive growth

Automation allows brands to focus on the customer experience while their chosen platform works in the background to manage growth. This includes day by day monitoring of consumer behavior in the face of emerging trends. For example, if the latest craze is Botox or body contouring, the solution should have all the features and functionality to support these services.

Platforms also need to be integrated with membership rewards programs so they’ll leverage customer data to drive latest marketing. In my experience, educating our businesses on how to goal consumer messages and measuring that data on an ongoing basis is key. We leverage the insights generated on our platform to deliver infographics that provide targeted recommendations along with case studies of successful businesses.

When looking for your individual solution, consider platforms that may provide:

• A marketplace and app tailored to how and where consumers seek information.
• Detailed reports showing which online channels customers use to make reservations, equivalent to search engines like google (e.g. Google Maps) and platform apps.
• Trend data that tracks the popularity of specific services, equivalent to hair coloring or nail styling, over time.
• Compatibility of the latest offering with the existing culture and brand.

Ideally, you must leverage website positioning to be sure that your corporation appears ahead of your competitors on platforms like Yelp, Apple, and Google Maps. Providing data-rich insights will help businesses make higher decisions and find out how to higher leverage their chosen platform to maximize growth.

3. Focus on customer retention and recurring revenue

Gartner’s often quoted statistic that 80% of future revenues will come from 20% of existing customers shows the importance of retention for profitability and growth. Consumers are simply more willing to spend money with firms they already have a good relationship with. People are also willing to spend more when (*3*)feel a part of the experienceIn every customer interaction, a streamlined journey can increase retention rates.

One of the principal issues that firms must address along this path is the expectation of maximum convenience. For example, fast food has historically been popular for its convenience—but people expect it to be much more healthy fast food today. Sephora and Sally Beauty have done a great job of turning this variation into an opportunity. By allowing customers to do a lot of things in one place, they have managed to expand without diminishing their brand.

Stay in your wheelhouse

I have a Sephora and Sally Beauty loyalty card and I know I’m not alone. We love freebies, arranging our prizes and planning what to buy during their next sale. But if you’re looking to diversify your beauty offerings, understand that despite all the technological advancements, these firms have stayed in their wheelhouse. The difference is, they’ve done it incredibly well. Similarly, when firms let technology run in the background, they’ll focus on building their very own beauty empires.