Fewer Guards, More Black Brands: Sephora's Plan to Win Back Shoppers

(Bloomberg) -- In a bid to revive stagnant sales growth, Sephora is laying out a plan to rehab its image with shoppers of color who’d alleged racial bias in stores and a lack of products that cater to their needs.

The plan, unveiled on Wednesday, includes cracking down on discrimination among its staff, doubling its assortment of Black-owned brands by the end of the year and scaling back third-party security forces. It’s the boldest step taken yet by the LVMH-owned chain to try to re-establish its reputation with customers of color who haven’t always had a “fair and consistent” experience at its stores or in the broader retail industry, Jean-Andre Rougeot, Chief Executive Officer in the Americas, said Wednesday in a statement outlining the action plan.

“We’re seeing that there’s a tremendous commercial opportunity for us as a retailer to address the needs of all of our clients,” Deborah Yeh, Sephora’s chief marketing officer for the Americas, said in an interview. “All retailers, Sephora included, have a financial incentive to get this right.”

For Sephora, this pressure is particularly urgent. It’s rapidly falling behind its biggest direct competitor, Ulta Beauty Inc., in terms of sales. As recently as 2017, the two chains were neck-and-neck, with both bringing in around $5.9 billion in the U.S. sales, data from the National Retail Federation show. Just two years later, Ulta raked in $7.4 billion to Sephora’s $5.9 billion.

As part of Sephora’s multi-pronged approach to re-engage customers of color, it’s updating its zero-tolerance policy to make sure staff who exhibit bias are investigated consistently. Ensuring annual performance metrics for corporate staff are tied to diversity and inclusion goals will add accountability.

The question is whether it will be enough to convince people like Laquilla Coleman to try Sephora again. On her 21st birthday in May 2011, Coleman had an experience that she said shook her.

When she entered a Sephora in Dallas to get her makeup done, Coleman, who is Black, says the beautician asked if she brought her own foundation. She hadn’t; she’d expected Sephora to match a shade to her face, like it does for other customers. The associate said she didn’t know how to do “dark makeup,” according to Coleman. When Coleman suggested the employee only do her eyeshadow, a second associate stepped in and said they weren’t comfortable treating her skin tone, according to Coleman. She left the store with the $300 she planned to spend on products used during the beauty session still in her pocket.

Interviews with more than half a dozen current and former Sephora employees suggest Coleman’s experience wasn’t unique. At one freestanding Sephora inside a J.C. Penney located in a small city south of Minneapolis, the manager instructed employees to follow Somali customers around the store and went out of her way not to help Black customers who she said weren’t worth her time since they wouldn’t buy any merchandise, said former employee Rachael White, who quit her job as a beauty advisor there in July. At one store in Arizona, a manager made several comments about a Black employee’s fairer skin, according to an employee who asked not to be identified because she now works at another location.

The company declined to comment on these specific allegations. Racial bias “happens at all retail,” Yeh said. “It’s unfortunate that people feel like they need to cope in order to spend their hard-earned money in a store.”

Two in five U.S. retail shoppers say they have experienced unfair treatment based on the color of their skin, with Black consumers 2.5 times more likely than White ones to have that kind of interaction, according to an online survey of 3,034 U.S. shoppers and 1,703 retail employees commissioned by Sephora that was also released Wednesday. These situations have “permanent, economic consequences for a retailer,” Sephora wrote in its report, especially since 43% of shoppers who are Black, Indigenous or people of color say they’re unlikely to visit any store location again after such an incident. The survey was conducted in June 2020, shortly after the death of George Floyd at the hands of police.

Corporate America has been publicly reckoning with race in the months since, with various levels of success. Although hollow statements on social media backfired, companies’ targets to diversify suppliers and hire more people of color, including in top management roles, could move the needle. Some companies have gone so far as to unveil all of their data on the racial makeup of their employees. Sephora plans to share progress on employee diversity bi-annually on its website.

As of July, 6.5% of Sephora’s leadership in U.S. stores, distribution centers and corporate offices were Black. Ulta said in August its executive team is 13% Black.

“Retailers like metrics,” Yeh said of Sephora’s decision to commission the survey about retailers and bias. “Incidences of racial bias and unfair treatment need to start to get measured much like we’re looking at other aspects.”

Related: Target Is Reopening Its Looted Store With Black Shoppers in Mind

Sephora has been trying to turn it around for a while. In June 2019, it closed all its stores for a “one-hour inclusivity workshop” after musician SZA, who is Black, reported she’d been followed around by security inside a California Sephora. Some criticized the training as virtue signaling, rather than impactful change. That fall, Sephora commissioned the study released this week.

It went further in 2020, revamping its incubator program to emphasize support for minority-led beauty founders through improving their access to venture capital and grants. Sephora was also one of the first companies to sign the 15 Percent Pledge that calls on stores to increase the share of Black-owned brands they carry to roughly match the percentage of the U.S. population that is Black.

Today, Black-owned or Black-founded brands only account for eight of nearly 300 beauty brands sold by the company, according to executive vice president and global chief merchandising officer Artemis Patrick. Launching new brands too fast without proper support could sacrifice the success of the minority founders, she said.

“Anyone can go and just launch a whole bunch of new brands,” Patrick said in an interview. “But my ultimate goal is to build a system where brands thrive.”

An increased presence of Black brands will enhance shopping experiences for customers who’ve historically been underrepresented, but that step alone doesn’t mean much if the demographic is skeptical of the retailer’s practices overall, said Lauren Napier, founder of a company that sells makeup wipes.

“When Black brands get into retail, Black people — Black women — support those people,” said Napier, who doesn’t sell inside Sephora. “These same customers have to be treated well because if the product is in there, and somebody in the store acts like a jerk, then they’re not coming back, and that’s damaging to the brand.”

Coleman, the Dallas shopper who’d gone for her birthday makeup, said she visited a Sephora again in 2014 to buy a gift for a friend — this one located inside a J.C. Penney store. (When Sephora’s existing agreement with J.C. Penney ends, it will be relocating its in-store shops to Kohl’s Corp.) When Coleman went to checkout, she said that an employee suggested that she probably couldn’t afford the items she was buying. Coleman only shops at Ulta now as a result, where she estimates she spends at least $150 a month.

“I wouldn’t even give them a third chance,” Coleman said. “It’s a bummer because I’m missing out on Rihanna’s makeup that she sells exclusively to Sephora, but I refuse.”