DMBGMI --
First a brief introduction to the two companies:
Sephora.com
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Sephora's one of the specialty retailers in LVMH Group, best known for
its Luis Vuitton/Moët Champagne/Hennessey brands. But its retail
group includes a large number of retail Sephora stores (mostly in
Europe, but 76 in upscale U.S. shopping areas); the Bon Marché in
France (not related to Macy's U.S. department store by the same name);
and 11 different perfume and cosmetics companies.
LVMH has FY2003 sales of $12.7 billion Euros and operating cash flow
of $1.4 billion Euros, though the company reported a narrow loss of
400,000 Euros.
The LVMH pages are framed, meaning that there aren't direct links to
key information, but you can find key investor information under:
Investor Relations/Documentation
The annual report notes that Sephora.com had a strong increase in
FY2003 and predicts that it will reach breakeven in FY2004.
Beauty.com
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Beauty.com is one of several websites owned and managed by
Drugstore.com (NASDAQ: DSCM), a young company with sales of about $225
million in 2003. Drugstore.com has close affiliate relationships with
Amazon.com (in an agreement that runs through March, 2004); Rite Aid
(a drugstore chain with which the company has a supply relationship
and e-commerce agreement); and General Nutrition Corp. (GNC), which
consigns inventory to Drugstore.com.
Beauty.com was acquired in February, 2000 by Drugstore.com. The
parent company says that it has 3.2 million customers total.
The company is active in web commerce, buying Vision Direct, an
Internet supplier of contact lenses, in December. However, the
company continues to lose money at the rate of about $4.7 million per
quarter and its most-recent annual report notes that "We believe that
we will continue to incur net losses for at least the next year (and
possibly longer)."
The management discussion pages (starting on page 38) of
Drugstore.com's 2002 Annual Report are extremely valuable in
understanding its operating model and data on customer activity. It
also includes detailed information about its payments to Amazon, Rite
Aid, Wellpoint, CIGNA and GNC:
Drugstore.com
SEC Filings
http://www.shareholder.com/drugstore/edgar.cfm?Page=2
WEBSITE COMPARISONS
=======================
A typical marketing analysis of two companies considers product,
pricing, promotion, and positioning.
The two sites are very similar in product offerings, with the following categories:
Makeup
Skin care
Bath & body
Hair care
Gifts
Sephora has two additional categories -- Tools and Men. Beauty.com is
tightly linked to parent Drugstore.com, so product offerings
continually pop up on-screen from Drugstore.com's larger offerings,
such as books, magazines, toiletries, drugs and contact lenses.
In terms of product offerings in the health and beauty category,
Beauty.com has fewer lines (about 70) -- and the Sephora offerings
include more high-fashion, high-priced items, such as Alexander
McQueen perfumes of Ahava skin care products. Sephora also offers
the complete line (all sizes) of many of the brands, while Beauty.com
might have only one Dior or Anna Sui perfume.
However, Beauty.com cross-lists so many products with Drugstore.com
that the site appears more like a bricks-and-mortar drugstore. For
example, searching for "Bath & Body" products, yields the company's
line of toothpastes, while Sephora offers only one dental care
product.
PRICING, PROMOTION
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Sephora's pricing is close to traditional retail pricing, while
Beauty.com is generally pursuing a "value pricing" model. On
Christian Dior's 'Addict' fragrance, the Beauty.com price is 5% lower.
Note that manufacturers control some retail pricing very closely to
discourage discounting -- so the differences are not there on all
products. Indeed, GNC sets the retail prices for products offered
through the Beauty.com website in order to protect its other
retailers.
In addition, Beauty.com does several things to make pricing more attractive:
? Customers get a 5% credit for purchases each quarter -- up to $10.
The credit needs be used in the first month of the next quarter --
which helps in customer re-purchases but also means the "drugstore.com
dollars" have lower redemption rates and cost the company less.
? No sales tax is charged on Beauty.com orders outside the state of
Washington, providing an advantage over Sephora
? Free shipping starts at $49 -- versus $75 for Sephora
Prices on shipping services are comparable for ground shipments, but
Sephora offers lower overnight shipping ($20 vs. $30).
And Sephora's not without other advantages:
? customers are able to return products at any of the 76 Sephora
stores in the U.S. within 60 days, while Beauty.com requires returns
to be shipped back at the customer's cost
? Sephora offers both free gift-wrapping and up to 3 product samples
with each order
Both companies ship from a single warehouse on the East Coast, meaning
delivery times should be similar for each company. Sephora ships to
the U.S. and Canada; Beauty.com provides international shipment of
non-prescription products through a third party -- making the process
a bit more cumbersome.
Both companies use very similar ordering and shopping cart
technologies on the Internet. Their merchandising and display of
products and sales is also very similar.
PROMOTION
---------------------
Beauty.com is more of a supermarket model, offering dozens of products
in a similar display format as Sephora. Advice columns and content on
the website is weaker than Sephora.
Sephora's website reflects the specialty position that its
bricks-and-mortar stores occupy:
? Sephora pushes hard to get visitors to register and has 5 different
newsletters that it offers via e-mail
? The company also provides "Expert Advice" about use of products,
which give it the chance to spotlight use of products. It also
provides co-promotion of products from leading fashion magazines.
? Sephora encourages website customers to attend promotion events at its stores.
? Sephora also has a print catalog.
? The Sephora website also provides an affiliate program for websites
that link to it, one which provides a 5-7% commission on sales
generated by third parties.
STRENGTHS & WEAKNESSES
---------------------------------------------
Beauty.com is a broad-line company with strong links to Rite-Aid,
Amazon.com and GNC. So far, it has given the company financing,
knowledge of Internet trends, and access to products for distribution.
It also generates a significant number of new customers -- according
to the 2002 annual report 45% of them came through Internet links to
Amazon.com's website and the Rite Aid site.
However, the company continues to lose money and its cash balance has
continued to deteriorate.
Sephora.com is associated with a large company that's well financed,
even though it experienced a small loss in FY 2002. It's pricing is
slightly higher on many items but it offers a wider array of
fashion-specific items, particularly specialty brands.
Google search strategy:
Use the two companies websites, including investor relations links, to
look at the business models.
Best regards,
Omnivorous-GA |
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