CHAPTER ONE
THE EARLY YEARS
When Dominique Mandonnaud opened his small single perfume store in Limoges, France, it was nearly impossible for a customer to get up close and personal with the product. Up until then, the French perfume and cosmetics market relied on a commission- and service-based retail model. In other words, the sales staff received a percentage of each product sold. They typically operated out of department stores, where each sales person was assigned one particular brand. Though the self-service model was pervasive in grocery stores and pharmacies by then, high-end perfume and cosmetics required a sales person. Mandonnaud hoped to change all that.
By 1979, he changed his perfume shopâs name to Shop 8, and he reconfigured and designed it so that there was a large open selling floor, and products were all within reach of the customers. He also expanded his product offerings from perfume to include cosmetics as well. What was truly innovative was that rather than dividing products up by brand, he divided by product. In other words, if you needed a night cream, you would go to the night cream section and see Elizabeth Ardenâs night cream next to EstĂŠe Lauderâs and Chanelâs. Customers could compare products and make their own decision on what was best for them. It was a wholly revolutionary approach to selling cosmetics and perfumeâand his customers loved it. Over the next several years, Mandonnaud honed and perfected the Shop 8 âassisted self-serviceâ format, while expanding his organization. By 1984, Mandonnaud had four Shop 8 stores.
Later that same year, the distribution group Promodès, which was looking to expand, purchased Mandonnaudâs Shop 8. Though there are no details anywhere in the public domain about what happened, the relationship, according to the history of Sephora on Cenageâs Encyclopedia.com website was said to have âsoured.â1 Interestingly enough, when searching for Dominque Mandonnaudâs version of the story there is virtually zero digital footprint, which makes a person wonder: what are they trying to cover up? Wild conspiracy theories aside, weâll stick to the facts: There are no interviews, no reports, or detailed articles explaining the separation. All that is known, according to this one source, is that in 1987 âPromodès had separated itself from Shop 8.â2
Interestingly enough, when searching for Dominque Mandonnaudâs version of the story there is virtually zero digital footprint, which makes a person wonder: what are they trying to cover up?
However, at some point while working with Promodès, Mandonnaud borrowed capital from them to expand. This meant that when Promodès separated from Shop 8, Mandonnaud still owed Promodès a considerable amount, so much so that Promodès was still considered to have the majority of voting rights. This proved to be quite the impediment for Mandonnaud. Mandonnaud hoped to expand in Paris. If he was going to sell perfumes and cosmetics, the best market to do that was in the fashion and perfume capital of the world. He hoped to purchase a chain of eight Parisian perfume stores, and hoped to convert them into his Shop 8 format. However, citing his debts, Promodès denied Mandonnaud the necessary funds to infuse the perfume chain.
Upset by this refusal but not undeterred, Mandonnaud hoped to simply buy back his shares of the company to regain full control. Promodès, however, set a high asking price for the company. Though we donât know what the price was, we do know that Mandonnaud didnât have the capital to buy back his Shop 8 because he reached out to a private equity firm, Apax Partners. He also reached out to another private equity group, Astorg. By getting backing of two private equity firms together, Mandonnaud was finally able to buy out Promodès. In addition to helping him buy out the chain, the two equity firms were in full agreement with Mandonnaudâs plan to expand the company. They also approved Mandonnaudâs conditions for their own exit: All would exit the agreement, including Mandonnaud, on Mandonnaudâs fiftieth birthday, September 5, 1997, the date which he planned on retiring.
How Shop 8 Became Sephora
By 1991, the buyout was complete and on paper Apax was the majority stakeholder, but it seemed more like an equitable partnership. Though Apax held the majority of the shares, it was in full support of Mandonnaudâs plan to expand his company from three to five stores per year.
However, once again Mandonnaud was met with another unforeseen obstacleâthe recession of 1991. It wasnât just France that was feeling the economic pinch; The entire global economy was shrinking.3 Not exactly the time, one would think, to expand a luxury item goods chain.
However, before the word pivot was shouted by Ross on Friends or used ad nauseum by entrepreneurs and startups to describe quick about-faces in strategy, Mandonnaud and his partners pivoted. Instead of expanding their own line of stores by three or four stores at a time, they thought to take advantage of the economic downturn, specifically the lower valuations of companies, and purchased an already existing perfume chain in order to expand.
Meanwhile, Mandonnaud hadnât forgotten about his own stores. Still committed to his vision of creating what he dubbed âassisted self-serviceâ stores, where customers could interact with products while still asking for help if need be, Mandonnaud launched a new store called, Mille et un Parfums in the Belle-Ăpine shopping mall in Val-de-Marne (near Paris). In addition to the âassisted self-serviceâ model, he established a large selling space that was more upscale than mall-like or even pharmacy-likeârelying on luxurious details like backlit display cases and refined graphic design elements throughout the store.
This Is Where It Gets Complicated
Not all companiesâ stories are linear or even straightforward. While itâs easy to say Dominique Mandonnaud âfoundedâ Sephora, itâs not entirely true. What he founded was the company that ultimately bought Sephora. Say what now?
Not all companiesâ stories are linear or even straightforward. While itâs easy to say Dominique Mandonnaud âfoundedâ Sephora, itâs not entirely true. What he founded was the company that ultimately bought Sephora.
Letâs back up. Sephora was actually the name of a company of chain stores owned and operated by the United Kingdomâs Boots PLC. Boots, the parent company, was founded by John Boots in 1849 as an herbal medicine shop and expanded over the years to be a full-service pharmaceutical company. In fact, in the 1960s, Boots chemists John Nicholson and Stewart Adams developed ibuprofen in its labs. (A moment of silence for these intrepid heroes: All hail ibuprofen.) Over the years through several different transactions it became The Boots Pure Drug Company, and eventually, in 1971, The Boots Company Limited. Over the past 165 years they have expanded their market from drugs and remedies to pharmacies, opticians, dentistry, cosmetics, beauty supplies and what they call âwell-being services.â4
During one of their expansion periods they purchased a chain of cosmetic stores, which they named Sephora in 1970. There is absolutely no mention of it on the Boots website and there is no history of an owner of this chain prior to 1970. (Interesting to note: When reading about the history of Sephora, depending on which website you happen to be perusing, some say the company was founded in 1969 and others say 1970.) If youâre a Francophile, chances are youâre going with the 1969 timeline. It was, after all, Mandonnaudâs idea to purchase the Sephora chain, and it was his unique approach to the cosmetic retail experience that made the company what it is today. But if youâre an Anglophile, chances are youâre going with 1970 as the founding date, when the UK Boots bought the chain and named it Sephora. Sephora, the company today, plays the part of Switzerland here. They split the difference, citing on their websiteâs About Us page, âSephora was found in France by Dominique Mandonnaudâ (nod to France and Mandonnaud) âin 1970â (nod to Boots and the UK). From one writer to another: As Bridget Jones would say, Well done you, Sephora copywriter.
In 1993, Shop 8 (Mandonnaud) through his investor, purchased Sephora from Boots for the equivalent of sixty-one million dollars. At the time, Boots PLC owned a total of thirty-eight Sephora-branded chain stores in the Paris area, the oldest one being the one on Parisâs Rue de Passy, which opened in 1970. During this time Sephora was the largest perfume specialist in France. The Sephora chains under Boots control in France ran their stores like they did in their Boots UK stores. There were both high-end luxury items alongside mass market goods.
This acquisition ultimately expanded Shop 8âs total network to nearly fifty stores. It also gave Shop 8 prime locations. Sephora was already in popular Parisian shopping areas and had an established brand recognition. Immediately after the purchase, Mandonnaud made a major two-fold announcement. First, he intended for all of his new stores to follow his Mille et un Parfumsâ formatâassisted self-service with a focus on luxurious details in a wide open selling floor plan. Second, all of his stores, including Shop 8, would now be rebranded as Sephora.
Over the next four years, Mandonnaud continued to expand. By 1997âhis fiftieth year and intended retirement dateâMandonnaud operated fifty-four stores throughout all of France. Sephora also controlled 8 percent of the total French perfume market.5 In some ways, Sephora was making its name as somewhat of a travel destination. People from all over the world flocked to his famed flagship store on Champs-ĂlysĂŠes in Paris. It was there the iconic black and white stripes, reminiscent of Siena Cathedralâs black-and-white striped façade, first appeared.
By 1997âhis fiftieth year and intended retirement dateâMandonnaud operated fifty-four stores throughout all of France.
Today, no matter where you are, what mall youâre in, what country you happen to find yourself in, youâll see the faux stone black and white horizontal stripes as a beacon, luring you in to try just one shade of lipstick, one serum (okay, maybe seven, but whoâs counting). The store on Champs-ĂlysĂŠes was three-times the average store size, roughly, thirteen hundred square meters and was the template for all future stores. Mandonnaud had finally seen his dream incarnateâfrom a small boutique in Limogoes to the preeminent shopping avenue in Paris. Mandonnaud had plenty of reason to both celebrate and even, stick around. It was clear, Sephora was here to stay.
Mandonnaudâs Retirement and a New Parent Company
However, Mandonnaud was very clear about creating his company with the endâparticularly his own roleâin mind. He knew his company would grow and succeed, even without him, and so as originally planned he set out to retire in 1997. His partners, too, were fully prepared to exit their investments as well, as stipulated in their original agreement. Instead of opting for a public offering, Mandonnaud and his partners began looking for interested (and worthy) buyers. There was a none more worthy luxury beauty retailer than LVMH. Coincidentally, LVMH was also actively looking for ways to expand, especially by adding a retail component to complement their designer label products. With time to spare (two monthsâ shy of his September birthday), Mandonnaud sold his beloved company to LVMH in July 1997 for 344 million dollarsâthus making Mandonnaud and his two investors a handsome profit. Quite the fiftieth birthday present for Mandonnaud. It was also the dawn of a new era for Sephora.
Sephora Becomes Part of LVMH
Once part of the LVMH family, Sephora was infused with available capital and was able to expand even further. In 1998, it doubled its existing number of stores after it acquired French perfume chain, Marie Jeanne-Godard.6 All seventy-five of its stores were rebranded under the Sephora name, and the purchase quickly resulted in added revenue. It also meant that now Sephora controlled 18 percent of the French perfume market. And within a year of being owned by LVMH, Sephoraâs sales reached FRF two billion.7 Sephora was ready to expand beyond France. It was ready to go global.