Sephora Will Open Shops Inside Kohl's, Ending a Long Partnership With JCPenney

Mere weeks after Ulta Beauty and Target unveiled a partnership to create Ulta Beauty at Target shop-in-shops, rivals Sephora and Kohl’s announced they are forming their own alliance. Under the new agreement, Sephora will open 200 2,500-square-foot shops inside Kohl’s stores beginning next fall. In turn, Kohl’s online beauty selection will exclusively feature the prestige skincare retailer’s offerings. These spaces will replace Kohl’s existing beauty assortment and will get prime real estate inside Kohl's locations, right at the front of the store. “This is not a pop-up collaboration, but an investment our brand partners can rely on for the long-term; as a company with a history of sustained decades-long partnerships," said Jean-André Rougeot, CEO of Sephora Americas, in a statement. "Sephora has every confidence in the future of this collaboration and the unique experiences it will bring to consumers across the U.S." Michelle Gass, Kohl’s CEO, added that the partnership "will bring a transformational, elevated beauty experience to Kohl's from the top global name in beauty." In contrast with Ulta Beauty, for which shop-in-shops are new, Sephora is a grizzled veteran: It's had in-store concepts inside beleaguered department store operator JCPenney since 2006. However, JCPenney’s bankruptcy filing earlier this year complicated that relationship and ultimately led to a legal kerfuffle, with the mall-based banner filing a lawsuit against the beauty purveyor for attempting to walk out on their deal. That dispute was short-lived, as the two sides ultimately settled their differences, allowing Sephora to seek alternative partners, the beauty retailer told Adweek. “Both Sephora and JCPenney jointly agreed earlier this year to added flexibility in our partnership agreement to pursue other opportunities, while continuing to work together to operate our installations responsibly until our scheduled partnership wind down in early 2023,” said a Sephora spokesperson in an email. Ironically enough, 2023 is the same year by which the beauty retailer plans to have stores open within 850 Kohl’s locations. On the marketing front, Sephora said it will finalize its plans closer to the launch of the partnership in 2021. While the beauty retailer, a unit of luxury conglomerate LVMH, declined to specify when talks began with Kohl’s, it implied that the decision to team up was not made overnight. “Thoughtfully bringing our two companies together took time, but we believe that this deep understanding and collaboration will allow us to optimize both of our strengths to create something that will be industry changing,” the spokesperson said. Sephora said Kohl’s was a natural fit, given the two retailers’ shared emphasis on innovation, integrity, respect and “pioneering” customer experience. “Kohl’s ongoing transformation and best-in-class partnerships in categories that are most adjacent to beauty (fashion, wellness, active), give us great confidence in the relevance of this offering to consumers and the long-term success of this partnership,” the spokesperson elaborated. As to the effect the shop-in-shops Sephora is opening inside Kohl’s will have on the beauty retailer's standalone stores, it said it plans to open between 60 and 70 of such locations in 2021. Sephora will evaluate future openings in conjunction with the partnership. It also goes hand-in-hand with previously announced real estate plans on Sephora's part: Earlier this year, Sephora announced plans to prioritize off-mall store openings; the majority of Kohl's locations are situated outside of malls as well. “Sephora at Kohl’s is an extension of our standalone Sephora stores, and with Kohl’s expansive footprint and omnichannel convenience, we will be able to bring the signature Sephora experience closer to millions of customers previously unreached, as well as existing members of the Sephora beauty community, who may not live close to a Sephora location,” explained the spokesperson. Sephora's off-mall pursuit, similar to its chief competitor Ulta Beauty's tie-up with Target, distances itself from an all mall-based strategy that includes JCPenney, said Brian Yarbrough, a retail analyst at financial services firm Edward Jones. "Industry-wide, there is a lot of market share for both Ulta and Sephora to take from department stores," he said, regardless of the intensifying competition. That's given the fact that the problems of already struggling department stores, whose ground floors are largely dedicated to beauty, have been exacerbated by the pandemic, spurring them to close hundreds of locations this past year alone. More importantly, not only does Sephora reach a similar demographic to that of JCPenney by teaming with Kohl's though an off-mall environment, it ensures that the beauty retailer maintains the physical presence of its brand. While stores are a certainly a place where retailers and their customers transact sales, they are also an important tool to keep the brand in the minds of passersby. “'The adult candy store,' the area where people indulge themselves and gain exclusive access to luxurious brands [is] never normally available. This is a space that generates the highest revenue per square foot in the store. So of course, Kohl's has made the very smart move of jumping aboard the beautifully packaged, wonderfully scented Sephora train," said Alasdair Lennox, group executive creative director at Landor & Fitch. He said that pairing luxury products with in-house brands allows a mid-range department store to open its doors to a 'luxury' moment. "I'm sure [Kohl's] hopes it resonates across other categories," Lennox added. "It's a bold move, however in these challenging times, it's a way to buy yourselves a complete, luxurious beauty hall in the blink of an eye—exquisitely packaged, scented and affordable at various entry points," he said. But there is one caveat, Lennox said. "The partnership has been agreed for the next 10 years. However, unless they keep innovating, I would challenge the relevancy of the department store format ten years down the road," he posited.