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Perhaps you’ve walked into the main level of a J.C. Penney recently and noticed something in the middle of the store that seems a bit off brand: the signature black and white stripes of another shopping mall staple, Sephora. As it turns out, J.C. Penney was missing a critical hook for its target demographic: fashion-forward cosmetics and fragrance, which happens to be what Sephora specializes in. From here, a strategic alliance was born.
The pitch: introduce a “store within stores” concept in which Sephora can sell its product line inside each J.C. Penney department store. There were benefits for both sides. Sephora gains new stores without having to lease a full retail space and is the exclusive brand at all J.C. Penney stores. And J.C. Penney earns a fresh image as well as access to a new customer base that enters the store primarily to shop at the Sephora space. At the start of this alliance, Sephora had 500 stores across the nation, while J.C. Penney operated almost 1,000.
A Successful Strategic Alliance
When the alliance was struck, J.C. Penney was fighting back against an image that did not resonate with younger consumers. Having Sephora as its sole purveyor for beauty products was a huge step in the opposite direction. Sephora consumers were cool and trend-forward. Naturally, if the only beauty products that were sold within J.C. Penney’s walls went to these consumers, the image of the store would transform as well. These customers came to J.C. Penney stores for Sephora’s beauty products, useful knowledge on application tips and other beauty recommendations from the knowledgeable Sephora staff. But as shopping goes, these shoppers found interest in, and purchased items from J.C. Penney as well and, thus, began a perpetual cycle of a renewed retail image.
While Sephora is “doing the work” of changing the image J.C. Penney, it’s getting a sales boost in exchange. Because they are the only beauty products being sold at J.C. Penney stores, any shopper looking to get a quick solution for a specific beauty item is going to be purchasing a Sephora product. The store within a store is situated in a prominent location, normally near the center of the main floor, which is eye-catching and draws consumers in to both of the stores.
Next, there is the online sales benefit. Sephora is also the exclusive beauty seller on Penney’s website. Customers access Sephora.com through a link on on the JCP.com website. This cross-linking helped boost J.C. Penney’s revenue over the $1 billion mark during the first full fiscal year that the strategic alliance was in place.
Additionally, loyal customers were rewarded by purchases at the stores within a store. Purchases at the Sephora space yielded both J.C. Penney coupons as well as loyalty points for Sephora. That made the decision for customers who were looking for a beauty product while at a J.C. Penney store easy to make their purchase there; and Sephora gained customers who might not have taken the time to go out of their way to go to a standalone Sephora.
Takeaways for B2B Players
Without any bargaining chips such as retail space to consider, B2B is a bit of a different animal. However, there are many takeaways that we can gain from successful strategic alliances in the B2C space.
Gain a New Image
One of the major benefits to J.C. Penney was the image refresh from having Sephora in-house. Case in point: J.C. Penney broke the $1 billion revenue barrier for the first time after beginning this strategic alliance. If you want your brand to move in a different direction to attract a specific type of customer, what better way to get there faster than to pair with a company that already reflects the new image you’re striving for? You may have a loyal customer base that could be attractive to your ally, and at the same time you’ll be able to break into new markets with a new image of your own.
Exclusive Co-Marketing Arrangement
One major benefit for Sephora was the exclusive access to all of J.C. Penney’s customers. No other cosmetics or beauty supplier was available in the J.C. Penney stores, so any customer looking to purchase beauty products was buying from Sephora or shopping elsewhere. As consumers ourselves, it’s hard to justify making trips to multiple stores when the necessary items are easy to find in one location.
Expand into New Markets
Sephora had 500 retail spaces before the alliance. Even if they set up the store within a store at only half of the J.C. Penney locations, that was still doubling its existing availability. Granted, some of these stores were in the same retail vicinity as a standalone Sephora store, but it made things simpler for a one-stop shop. If stock was low at one Sephora, or the customer couldn’t make an appointment there, they could easily check the Sephora space within J.C. Penney.
If you have a channel partner that is interested in forming a strategic alliance, assess whether its customer base fits with your company’s buyer personas. In the case of Sephora and J.C. Penney, they shared a mutual target audience of young female consumers.
Regardless of whether your solution is incredibly specific or widespread, you can learn from J.C. Penney and Sephora to build your own successful strategic alliances. Whatever aspect of your channel sales and marketing strategy needs a boost, an alliance can give you an extra nudge in the right direction.