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Business Model Generation Report on Sephora

Marcella Olivia (2024393)
Ducere Business School – UWTSD
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Table of Contents

Chapter 1 Executive Summary 3

Chapter 2 SWOT Analysis 4
Chapter 3 Contents 5
2.1 Key Resources 6
2.2 Key Partner 8
2.3 Cost Structure 9
2.4 Customer Relationship 10
Chapter 4 Implementation and Considerations 11
Chapter 5 Conclusion 12
Chapter 6 References 13
Chapter 7 Appendix 17
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Chapter 1
Executive Summary (300 words)

- Johnson & Johnson

- Products, give examples
-
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Chapter 2
Marketing Environment (500 words)

Referring to Assignment I, Sephora’s Business Model Canvas (BMC) was

reviewed through the use of SWOT analysis. In the analysis, it is stated a couple of
weaknesses that concludes a poor online customer service, in which has been the main
issue. Therefore, Sephora should consider acquiring intense training specifically on their
IT team; equally as makeup artists, cashier, and other divisions for training to guarantee
customer loyalty and brand image.
SWOT Analysis

Strength Weaknesses

- Massive and continuous ability to - Poor online customer service

develop in new regions
- Strong brand identity
- Suitable for niche market
- High consumer involvement
- Focusing highly on consumer
experience, where consumers
often exit without purchase
- Impractical market in third world
countries

Opportunities Threats

- Consumers are willing to pay high - Retail competitors

prices - Consumer selective demands
- Attracting partnerships
- Growth opportunities

Fig I. SWOT analysis on the BMC of Sephora

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Chapter 3
BMC Elements Affected

The Business Model Canvas (BMC) of Sephora

Fig II. The Business Model Canvas (BMC) of Sephora

Strategizing sales in online platforms includes a different approach. In result, the
changes made in Figure I should focus likely on Key Resources and other elements
affected, including Key Partner, Customer Relationships, Cost Structure. The cruciality
of implementing importance of consumers as the main business objective essentially
derived within Sephora. Therefore, there should be an in depth training Sephora
requires for its employees.
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The Newly Generated Business Model Canvas (BMC) of Sephora

Fig III. The Newly Generated Business Model Canvas (BMC) of Sephora

2.1 Key Resources

As the main asset of Sephora, the company must consider a training academy
for employees who engage with consumers online equally as those who are positioned
in-store.
● Human Resources (Set a training academy on particular job divisions)
According to Oliver (2014), consumers delight functions in three components and
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it includes:
1. Unexpectedly high levels of performance
2. Arousal
3. Positive Affect
Sephora must understand that consumers' satisfaction mostly derives from the
excellent services retained in-store. Thus, they are likely to have expectations of this
trademark to be applied equally online. Solomon et al. (1985) suggested when
discussing the importance role of performance, effective management of the service
encounter involves understanding the complex behaviors of employees. Hence, it is the
key for constructing functional company systems, and this outcome is to be achieved
through stringent training. Sephora should consider offering an ongoing mandatory
training every three or six months (McGuran, Holly. (n.d.). Rather than weekly training,
exams ought-to be conducted periodically on knowledge tests and task or skill-based
tests (Dalto, J. (2015). On average, it takes more than 2 months a new behavior
becomes automatic - 66 days to be exact (Clear, James. (n.d.). Ultimately, setting a
corporate expectation allows a clear view where employees are forced to meet to then
become a behavior.
“Sephora has lost any common sense of customer service as well as no
desire to help its customer who just wanted to order for herself. In this time
of crisis, you would expect that Sephora would rather go out of its way to
help and accommodate. (sh H)” (“Sephora Reviews - 3.7 Stars.” (n.d))
As quoted above, an online shopper faced payment issues and was
inappropriately treated. This informs the important value of responsiveness and
assertiveness that should be provided by the customer service. As a result, a second
approach into training is to consider training in teams. Rather than individually, being in
a team can cover a certain employee’s inability, replacing it with the desirable outcome
that will prevent additional consumer’s frustration. Working with other employees allows
a skill of managing various personalities, grasping to understand what action should be
taken when facing such issues (Barber, N. and Goodman, Raymon J. (2011).
Furthermore, an option to consider is possessing a supervisor in this division. Sephora
embedded the concept of “learning by doing”, it is to be applied to the customer service
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team due to circumstances happening at all times; having a supervisor in hand

increases the learning process whilst decreasing occurring mistakes.
With training applied, Sephora should dispense a reward for employees; such as
discounts and free products, for individuals who are interested in the beauty aspect, and
certificates and bonus for others, incurring motivation in portraying great performances.

● Tech Infrastructure
Sephora has inquired about a high level of tech infrastructure and seen their
innovation of merging online and offline systems. To enhance the fixed cost, Sephora
should consider multi channel communications to improve the online sales
performance. Other than email services nor a hotline, a virtual assistant that can be
accessed specifically in dealing with consumer’s objections; a chatting platform easily
manageable through Sephora’s medium, providing the same in store services for
consumers to experience (Leggett, Kate. (2013)). In the end, Consumers will not only
feel respected, it will allow a good review to Sephora’s brand image rather than intense
frustrations (Rebord, Michael. (n.d.).

2.2 Key Partner

Factually, Sephora relies on partnerships for the company. Recently Sephora
faces issues on delivery (“Sephora Reviews - 3.7 Stars.” (n.d)) , the company is likely to
improve this aspect by partnering with a new delivery service as the new Key Partner.
● Delivering company (Sufficient inventory)
Sephora entrusted en-Vista to assess the excessive inventory levels and supply
chain. Unfortunately, the company still faces objections stating a no-delivery update and
late shipping to consumers purchasing online. A big retailing company will consists of
immense monthly purchasing, overflowing storage locations; hence, en-Vista suggested
that Sephora should require an advance ship notice (ASN) and eliminate monthly OTB
to bi-weekly schedule (A Supply Chain Makeover for Sephora: How the Beauty Retailer
Reduced Inventory Levels, While Improving Customer Service. (n.d)). However, the
recent online shipment issue informs a malfunction that hasn’t yet improved. Sephora
should suggest using RFID inventory system; implanting chips on products in order to
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track inventory in real-time, resulting in reduced processing time and labor (Bagchi, U.
Guiffrida, A. O’Neill, L. Zeng, A. and Hayya, J (n.d.). This way, it can host data
management and improve supply chain operation as this automation would be effective
in the long-run. Other than that, an inchoate strand of technology to design a software is
needed to trace received products for data warehousing.
Additionally, Sephora recently partnered with Insta-cart; a North-American
delivery service which has been the fastest growing delivery in US e-commerce. A
practical reach for consumers towards Sephora providing a same-day delivery across
US and Canada (Becky, B. (2020). This partnership is a given benefit to retain back
customer’s loyalty and attention, allowing potential sales during a time of pandemic.
Even so, Sephora should provide enough staff executing this particular work; enough
customer service personnel will improve their performance to consumers, specifically on
instant delivery. Therefore, using the RFID Inventory system will guide Sephora in
improving their customer service potentially through this new media delivery of
products.

2.3 Cost Structure

An additional altered element of the Business Model Canvas (BMC) is the cost
structure.
● Human Resources (Training academy for in store & E-commerce employees)
Sephora has conducted a system of training where employees are to attend
Sephora University, while having weekly training for a period of time as a work
qualification. This training should also be applied for the E-commerce division. Adapting
numerous training will affect the Cost Structure, however, it is a beneficial investment to
acquire a leading customer service (KB, R. (n.d.). Sephora has used modern CRM
(customer relationship management) solutions which offer eCommerce insight groups,
using highly sophisticated segmentation to create customized newsletter content (P,
Rachel. (2018); it also uses external web pages on their reach through Beauty insider,
hence the ultimate tech infrastructure to withhold these programs. Relating to the
element of Key Resources, separate training potentially increases variable costs for
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Sephora; hiring the new employees specifically with technical and customer service
skills and using sufficient people in this job division, likewise guarantees a better
performance.

2.4 Customer Relationship

● Virtual Artist & Beauty Insider & Pocket Classes
Sephora is bringing technology into a wider audience via mobile application. Virtual
Artist allows consumers to have personalized makeovers, helping in choosing the
perfect “shade” of their skin tone including other modifications consumers intend to
purchase. As for Beauty Insider, it is a loyalty program that offers rewards, discounts,
and memberships guarantee. Other than that, Pocket Classes offers step-by-step
classes to understand makeup applications deeply as a free guidance to access (Tode,
C. (n,d.). These platforms should be focused on as consumers will experience in-store
services, meaning moving forward consumers would rather purchase online.
Henceforth, Sephora should consider ideas for the applications to be improved to
promote convenience that consumer desires.
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Chapter 4
Implementation and Considerations

Implementing changes to the Business Model Canvas (BMC) relates to the effect
on other elements. The use of Human Resources as a Key Resource plays an integral
role on Sephora, mainly relying on these individuals to conduct the retail unequivocally;
surely, through stringent training it will strengthen Customer Relationships. As Sephora
has implied the merge of offline and online platforms, effective customer service will
increase the use of their Virtual Artist strategy and Beauty Inside media. On one hand,
training proves that Sephora attempts to improve the system which will shift consumer’s
perspectives; it proves that Sephora must receive negative feedback, becoming a
motivation to change the services entirely. On the other hand, Key Resources
influences the change in Cost Structure; conducting separate training academies, while
managing a new tech-infrastructure, on its IT and customer service team (Barber, N.
and Goodman, Raymon J. (2011). Even so, changes in the Cost Structure could be a
main concern for Sephora on its financial, systematic, and human resources accounts.
A former Sephora worker concludes that investing in new hires will not only give a
sense of respect, it allows a motivated behavior to work with the company (KB, R. (n.d.).
In conclusion, the changes made in the Business Model Canvas (BMC) will be effective
that potentially retain new hires.
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Chapter 5
Conclusion

In conclusion, Sephora is recommended to alter their system in order to improve

customer service. Ultimately in the midst of a pandemic, consumers will engage more
online rather than in-store. As a result, an expectation is set by consumers to be treated
equally with Sephora’s exquisite in-store services. In order to reduce consumer’s
complaints, upgrading Sephora’s training specifically on customer service allows even
more satisfaction. Sephora has adjusted touchless experience for consumers who
prefer to purchase online, where self-personalization is still implied. With the adapting
qualities, it proves the necessity of considering to conduct this proposed training as
online customer service is beyond needed in the midst of a pandemic. Other than that,
partnering with new delivery channel Sephora has increased consumer’s satisfaction; a
same day delivery throughout the US and Canada, more consumers are likely to be
interested in purchasing the product having it as a great approach in boosting the
market. Therefore, the analysis states the necessity of shifting employee’s behavior
knowing the existing daily interaction with consumers; training should become the main
objective of Sephora, in both online and in-store as it is the company’s trademark in
acquiring the beauty industry as it is an investment that provides long-term company
assurance.
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Chapter 6
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Chapter 7
Appendix

The Newly Generated Business Model Canvas

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Fig IV. The Newly Generated Business Model Canvas (BMC)