Retail Can Not Only Survive, It Can Thrive

sephora store front

The Role of Digitalisation and the Age of Hyper-Personalisation in Attracting Brick-and-Mortar Consumers 

By Alia Gogi, President Asia, Sephora

From Beijing to Bangkok, the combination of a growing middle class — and a young population that is increasingly aspirational in its consumer choices — has resulted in the Asia Pacific region driving the global retail industry forward. This is a trend that is only accelerating, with a recent report by Bain & Company The Future of Retail in Asia-Pacific: How to Thrive at High Speed noting that the region has been generating approximately three-quarters of global growth in the industry.[1]

In an era defined by e-commerce, online sales figures often dominate the headlines. This is particularly true for the Asia-Pacific region, where mobile adoption levels are some of the highest in the world, as reflected in the fact that the region accounts for nearly 60% of online retail sales internationally.

Unsurprisingly, China is the single largest market with more than 50% of the company’s retail sales coming from e-commerce in 2021, with the country’s Ministry of Commerce expecting the value of these sales to amount to $2.6 trillion by 2025. At the same time, countries such as the Philippines, Malaysia, and South Korea are playing a major role too, driving the region’s e-commerce retail growth with increases of 25%, 23% and 19.5% per year respectively.[2]

Although e-commerce had long been embraced by the region, the pace at which it has been growing only accelerated over the course of the pandemic and shows no signs of slowing down, even as most cities and countries reopen their borders, and we return to business as usual.

Many have used these trends to suggest, time and time again, that the era of traditional brick and mortar stores is going to come to an end. While it’s certainly true that some long-standing retailers have found themselves out of business, those that have adapted to these changing times have seen different results.

Sephora, the beauty retailer owned by LVMH, presents an interesting case study when it comes to the latter.

Allowing consumers to try beauty products before making a purchase may seem common today but the concept, first introduced by the company’s Founder Dominique Mandonnaud in 1969, was revolutionary at the time, when most products were locked away behind cases in old fashioned department stores.

Today, it is doubling down on its efforts to personalise the consumer experience, taking the view that its stores should be playgrounds for exploration. From the moment you walk onto the sales floor of a store, regardless of whether it’s on the Champs-Élysées in Paris or East Nanjing Road in Shanghai, everything from product placement to the beauty advisors there to serve a customer’s needs is intended to offer a unique experience.

Digitalisation, and the personalisation it allows, has a critical role to play here. According to McKinsey, the global consulting firm, successful personalisation programs can not only see a 10-15% uplift in sales-conversion ratios but equally boost customer satisfaction and employee engagement rates.[3]

Forward-thinking retailers are making significant investments towards technology that allows them to deliver an omnichannel, customer centric, approach — one that encourages customers to learn, play, try, and engage with products seamlessly across digital and physical platforms.

At Sephora’s stores in Asia, for example, consumers can today benefit from:

  • In-store workstations comprising digital screens where customers can take beauty lessons and tutorials by themselves or with the help of our in-store beauty advisors, artists, and ambassadors;
  • Cutting edge algorithms that provide customers with personalised product recommendations based on their unique skin tone, particularly relevant in Asia which is home to a diverse population with diverse skin tones;
  • Virtual reality platforms that can be used at home or in-store allowing customers to try on makeup virtually using facial recognition features, simplifying the testing process and taking the guesswork out of purchases;
  • The integration of physical stores with its website, mobile app, and third-party platforms so online and offline data about consumers is in sync. This allows, for example, a consumer that may have purchased certain products online over the Winter, to walk into a store months later, and the team there would know which products she’s likely to be looking for and provide guidance accordingly.

In essence, the retail experience has been transformed from an impersonal one where generalised products are presented to a customer, to a hyper-personal one where the customer is first engaged with and then products are presented to them based on their unique interests and characteristics. Instead of the short-term goal of closing a sale, priority is instead placed on building a long-term relationship, so the customer is helped and engaged again and again.

Employed to good effect, these efforts are likely to bear fruit. A global survey, by Accenture, of over 20,000 consumers across 19 countries revealed that, on average, 47% of consumers would be willing to spend more for a shopping experience that exceeded their expectations. Interestingly, this number was far greater in China, where 81% of consumers said they would be willing to spend more for an improved shopping experience.[4]

All of this shows that far from the doomsday scenario that is often portrayed with regards to traditional retail, brick-and-mortar stores can not only survive but thrive, provided they embrace digitalisation and the hyper-personalisation of the consumer experience.