“We 1,000 percent believe in the power of physical retail and the importance of having a destination in beauty,” said Ulta Beauty chief executive officer Dave Kimbell at WWD’s Beauty CEO Summit. “Our guests want to shop in a physical environment.”
In addition to planning 50 net new stores per year in the coming years, the beauty retailer is testing small-format retail locations, a strategy he elaborated on in a talk about harnessing consumer insights from Ulta’s Culture Studio, 10,000 enthusiasts-strong Beauty Board and Gen Z Matters Group.
“What we’re going to be testing is in smaller markets that maybe weren’t right for the full Ulta experience because of the number of people living there. We’ll be creating a curated destination reflective of what we stand for.…This will be a new way for us to expand our physical presence, which we know elevates our digital presence in those markets. And it’s a testament to our belief is the future of beauty retail,” he said.
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Ulta executives said during an earnings call in October that there is an opportunity to operate 1,500 to 1,700 stores in the U.S. The beauty retailer started expanding its footprint through a partnership with Target launched in August, and expects to have 100 shops-in-shop open by the end of the year.
“We worked hard on this, over 50 brands participated and we think we created something new to the world. It wasn’t created as a lift of Ulta to put in Target, it was created to connect with that environment,” said Kimbell of how the partnership is working thus far. “Their stores have 30 million people who walk through the doors every week and more through the holidays. It’s not everything we deliver, you get a unique customized, personalized experience.
“We’re still just a few months in, but we’re pleased with the reaction. We’re excited about the combination of the brands.…We’re reaching guests who have maybe heard of Ulta, or shopped there before but not shopped for a while…and they will join our loyalty program and we will get them connected to everything we do.” (Ulta loyalty members receive rewards for shopping at the Target locations, which they can redeem at Ulta stores.)
Kimbell also talked extensively about the shopping patterns that are helping to guide Ulta’s strategy. “During the pandemic, we all adapted to new behaviors. But now, old behaviors are starting to come back,” he said. “Restaurants, as we went through pandemic adapted to how they served — offering takeout and curbside, and that was cool. Now you are seeing people flood back into restaurants, but they are still taking advantage of other services.…In beauty, we’re seeing this idea of physical and digital, growth in e-commerce but physical stores coming back as well.”
The retailer reports a similar dynamic when it comes to categories, particularly makeup, which is seeing a resurgence. “We just did a survey among our beauty enthusiasts, and 90 percent said they’re wearing natural makeup looks and 60 percent said they were wearing bold makeup looks,” said Kimbell. “So it’s not either-or, it’s the tale of both.”
While wellness, hair care and skin care have been dominant growth categories, Kimbell believes the industry is in the midst of a makeup renaissance.
“Makeup is one of many reasons I’m excited about the path ahead. It was struggling as a total category before the pandemic after years of explosive growth in 2016 and 2017. Then it hit a wall and it didn’t help during the pandemic that people were not going out.…But what we saw throughout from insights through our Beauty Board is even if guests weren’t wearing makeup as much, there was a huge group still passionate about it,” he said.
“If you look at social media, it became something for people to play around with. Even if they weren’t going out, it’s fun to do with friends virtually. That gave us some confidence. Now that we’re coming out of it, we are seeing strength in mass, prestige and luxury.…We’re seeing a blend of bold looks and natural looks. And if we get more engagement with makeup, which we’re seeing in a lot of our stores, it’s really good for the total category.”