Hundreds of employees are being laid off by Sephora in China to help improve its operations.
According to sources familiar with the situation, the company is cutting approximately 10% of its workforce, which totals over 4,000 employees, affecting both office and store staff. Some employees have also been encouraged to resign.
Leadership Changes and Market Challenges
The restructuring comes after Sephora appointed Ding Xia, the former head of e-commerce for Nike Asia, as its new Greater China leader. This move aims to improve the brand’s performance in a market that is crucial for LVMH’s broader sales goals, which target €20 billion ($21.3 billion) globally.
A spokesperson for Sephora stated,
“In response to the challenging market environment and to ensure our future growth in China, Sephora China is currently streamlining our organizational structure in our head office to ensure we have the right capabilities for long-term sustainable growth.”
Sephora’s operations in China serve as a critical foothold for LVMH, especially as the retailer has pulled back from other parts of the region, closing its operations in Taiwan and South Korea over the past year. Despite its success in the U.S., Europe, and the Middle East—where it became LVMH’s second-largest revenue contributor after Louis Vuitton in 2022—Sephora has faced significant challenges in China.
The brand reported combined losses of about 330 million yuan ($46 million) in 2022 and 2023, according to annual reports from Shanghai Jahwa United, which owns 19% of Sephora’s mainland business. Although Sephora has expanded to around 300 stores since its entry into China in 2005, the market has become increasingly difficult for high-end retailers as consumers turn to more affordable options amid an economic slowdown.
Sephora’s products, primarily Western cosmetics and personal care items, are often priced higher than local Chinese brands that are gaining popularity for being more aligned with domestic preferences. On social media platforms like Xiaohongshu, users claiming to be former employees have shared posts alleging they were pressured to leave. Some were accused of misusing Sephora’s membership program to offer discounts, a practice that has been tolerated in the industry for years.
While some employees who were let go faced allegations of misconduct and were denied severance, the exact number of such cases remains unclear. A Sephora spokesperson mentioned that “severance packages, compensation, and career support services” are being provided to those affected.
In Western markets, Sephora has successfully leveraged high-quality in-store sales service and positioned itself as a platform for discovering niche brands. However, this strategy has proven less effective in China, where online shopping dominates. Platforms like Alibaba’s Taobao and Tmall host millions of brands, increasing competition from local cosmetics makers, which captured about 50% of the market last year, surpassing overseas brands for the first time, according to state media.
