Sephora sales forces and channel distribution audit – firm’s existing sales and distribution channel(s) Harvard Case Solution & Analysis

"Sephora sales forces and channel distribution audit - firm’s existing sales and distribution channel(s)”

1.      INTRODUCTION

Sephora is a beauty brand, founded in 1970 by Dominique Mandonnaud in France. Sephora is a unique brand with a diversified product range including skin care, fragrances, body care, hair care, colors and smile care. At present Sephora is thriving in the chain of perfume and cosmetic stores in France and is sustaining strong presence around the globe in the beauty sector. Owned by Louis Vuitton Moet Hennessy, Sephora is the world’s leading luxury goods group and holds a remarkable position in the industry as a beauty vanguard, due to its classy product range, true expert opinion, online shopping forums and product innovation & creativity (Goldstein, 2005).

Sephora has 1300 stores in 27 countries where it carries its operations. In addition to this, Sephora has new plans for expanding its operations in their countries due to its expanding customer base. Sephora’s stores are headquartered in New York (U.S.A.), Toronto (Canada) and San Francisco (North America), and corporate offices in Montreal and New York both. Along with online distribution, it also manages indirect distribution and online distribution through its online web portal Sephora.com (Kotler, 2009).

2.      CURRENT STATE OF THE CHANNEL

a.      Structure

The distribution network of Sephora is wide and multi-faceted. It does not only use direct online distribution channels for its products but it also uses indirect distribution channels. The distribution structure is three layered. Firstly, Sephora as a manufacturer uses online shopping distribution channel through its website, Sephora.com so as to manage it sales. Secondly, Sephora has its own outlets where a consumer can directly buy the product. And lastly, Sephora uses mass-market channels to distribute its products. The third and last distribution structure is as follows. The manufacturer of Sephora’s cosmetics sends the inventory to the warehouses, which is distributed by distributors in each region. After that the distributor sends the inventory to the retailers such as JCPenney stores for shelving where the end user can buy them out. Sephora has more than 500 stores, along with 150 Sephora inside JCPenney locations in 14 countries in Europe and 30 locations in China.

b.     Members

The members of Sephora supply chain is inclusive of Sephora (manufacturer), Sephora warehouses, Sephora distributors, Sephora.com online website, JCPenney Stores, Sephora owned outlets, and Sephora’s retailers. In addition to this, Sephora has maintained lower inventory levels through enterprise resource planning solutions outsourced by enVista’s Solution. This has also helped it to improve its service delivery and reduce its working capital.

c.      Allocation of channel functions and flows

As a retailer, Sephora operates 1300 stores worldwide through its distribution channels that are spread across regions. At a given point, each store carries 9000+ items in all product categories and more than 14000 products online. In addition to this, Sephora operates 24/7 on a yearly basis. Sephora has an expanding customer base and it is the number one priority of its customers. In order to give its customers personalized services, it trains its supply chain about efficient delivery and active product availability mechanism. Sephora initially faced a lot of problems with higher lead times and excessive inventory stocks until enVista’s helped it to achieve lower inventory levels, higher quantity levels and lead times through the use of Llama soft’s supply chain Guru and Product Flow solution (Goldstein, 2005).

Moreover, there were operational bottlenecks at their distribution centers and above all there were high cost associated to replenishment. After the ERP installation at Sephora, the supply chain tend to move in a smooth manner by reducing inventory levels and improved match between quantity demand and supply. Additionally, the adoption of new Merchandise Planning and Forecasting solution from another vendor JustEnough helped Sephora in delivering quality service to its customers. It opened opportunities for Sephora to capitalize on sales and helped it to sustain a competitive advantage in this industry due to its efficient supply chain management (Petersen, 2008)

In this area, the marketing channel is an intermediary that links the distribution network from the purchase to the sale of products through the wholesalers, retailers, brokers and agents. The advantages for Sephora to use the distribution network as an intermediary include savings on the financial resources to carry out direct marketing. The functions of all channels are important for the efficient flow of resources to the end consumer. These include: inventory management, negotiation, risk taking, payments, receipts, information gathering and distribution, and creating utility of time, place and possession (Kotler, 2009).

d.     Ability to meet target customers’ demand for service outputs

·         Bulk Breaking (HIGH)

Bulk breaking for Sephora is high. Due to a variety of products in its portfolio, the customer doesn’t need to buy in bulk and rather has an option to choose his or her desired product. This enables customers to buy in their desired quantities......................

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