Ulta Beauty: Company Description

Ulta Beauty is a US-based retailer that operated 1,213 retail stores in all 50 states as of August 3, 2019. Ulta also distributes its products online, along with beauty tutorials, tips and social content. Ulta’s stores and website carry over 25,000 products from nearly 500 established and emerging beauty brands across various categories, including the company’s private label Ulta Beauty Collection. [caption id="attachment_100448" align="aligncenter" width="700"] Source: Company reports[/caption]  

Key Events Overview: 2012-2019

2017-2019: In the last two and a half years, Ulta Beauty has made several strategic alliances and focused on introducing new beauty brands and technological innovations. In October 2019, Ulta partnered with virtual reality (VR) content platform VirtualAPT to digitally recreate the in-store experience, including an interactive 360-degree video tour. The facility allows shoppers to control the viewpoint of the store and use navigation to go to a specific section of the store. “The virtual store tour offers a seamless omnichannel experience to Ulta’s shoppers that extends the benefit of shopping in physical stores to an online space,” said Prama Bhatt, Senior Vice President of Digital and eCommerce at Ulta Beauty. Ulta is also working to transform the customer experience across various channels. In August 2019, Ulta partnered with Samsung and beauty technology company Revieve to offer access to personalized skin diagnostics and product recommendations. Users submit a selfie through Samsung’s Virtual Assistant, Bixby Vision, and the system returns advice on skincare products. The company says the partnership with Samsung and Revieve will enable Ulta to create digital experiences to help shoppers to access the right skincare in a fun and interactive way. Bhatt said, “Ulta Beauty is on a never-ending mission to reinvent the beauty retail experience, which includes how we create and leverage digital innovation.” Ulta continued to enhance its omnichannel capabilities with the rollout of a buy online, pick up in store (BOPIS) service at all its locations during the second quarter of fiscal 2019. Ulta’s CEO Mary Dillon said the initial response to its pilot BOPIS offering in 47 stores in late 2018 exceeded the company’s expectations, but the company did enhance its mobile app and site with an improved product detail page to give better visibility of in-store inventory. Ulta is paying attention to more than just its products and customer service: The company is optimizing its supply chain to better manage inventory and improve margins. In July 2018, the company opened a new omnichannel distribution center (DC) in Fresno, California. The Fresno DC has ramped up more quickly than Ulta’s other DCs, serving 235 stores and supporting 21% of online orders by March 2019. Ulta has also invested in fast fulfillment centers, which serve online orders only and can fulfill up to 30,000 orders per day. In August 2019, the company converted its Romeoville, Illinois DC into an e-commerce fast-fulfillment center. The facility now fulfills about 10% of the company’s total e-commerce volume. Ulta plans to open a second fast-fulfillment center in Jacksonville, Florida, by the summer of 2020. Ulta aims to be able to offer two-day delivery for online orders by 2021. Ulta is also investing in technology to build an innovation ecosystem. In November 2018, the company acquired GlamST, an augmented reality (AR) startup that uses machine learning to offer virtual makeovers and virtual haircuts online, via mobile device or in-store. Ulta partnered with GlamST before to develop the GLAM LAB virtual try-on experience. In the second quarter of fiscal 2019, Ulta updated GLAM LAB to extend the live try-on to Android devices. The company also started testing a virtual beauty adviser online, powered by AR and artificial intelligence (AI), that offers skincare advice. In September 2018, Ulta acquired QM Scientific, an AI platform with capabilities in computer vision, recommendations, natural language processing and visual search. In 2018, Ulta invested in technology startup Spruce to develop a services system to facilitate booking salon appointments. Ulta also made foundational investments in Iterate, a digital workflow platform that tracks trends, provides research and curates technology partnership opportunities. Facing competition from rivals, Ulta revamped its customer loyalty rewards program in early 2018. Ulta added a third-tier, Diamond, to its Ultamate Rewards program. Diamond members must spend a minimum of $1,200 annually at Ulta. Previously, the program had only two tiers, with the higher Platinum level requiring a minimum of $450 in annual spending. At the company’s 2018 analyst and investor day, David C. Kimbell, Ulta’s President and Chief Merchandising and Marketing Officer, said that Diamond and Platinum members combined represent more than 40% of beauty spending with the company. In the second quarter of fiscal 2019, the Ultamate Rewards program grew 13% year over year to 33.2 million active members, with its members accounting for over 95% of the company’s sales. Ulta leverages the member data to create more personalized recommendations, unique offers and replenishment reminders to drive engagement and increase spend per member. Ulta has plans to expand internationally, starting with Canada. In the company’s first-quarter fiscal 2019 earnings call in May, CEO Dillon said Ulta will launch physical and online stores in Canada on a small scale and expand based on the success of those offerings. The Launch of Emerging and Digital Native Brands is Driving Store Traffic Since 2016, Ulta has added more than 250 brands and gained more than 560 basis points of market share in prestige brands alone. Launching digitally native brands in the past couple of years has increased store traffic and sales by attracting a younger customer base. In October 2017, Ulta launched Morphe, a social media influencer brand focused on eyeshadow palettes and brushes, at all stores and online. Morphe has since expanded to a larger footprint in most stores and has enjoyed success through collaborations with beauty YouTubers and makeup artists James Charles and Jaclyn Hill. In March 2019, Ulta launched a new collaboration between Morphe and Jeffree Star, another influencer with 11.5 million Instagram followers. In November 2018, Ulta exclusively launched 28 lip products from celebrity Kylie Jenner’s makeup brand, Kylie Cosmetics, at its stores—which were so popular they were out-of-stock for a few weeks at the end of the fourth quarter of fiscal 2018. In September 2019, Ulta extended its exclusive partnership with Kylie Cosmetics with the launch of the full line of Kylie Skin. Dillon said Morphe and Kylie Cosmetics drive store traffic and boost customer acquisition, particularly among younger shoppers. To find small or emerging beauty brands, in 2018, Ulta created a dedicated team within its merchandising organization. In the first half of fiscal 2019, this team launched over 30 unique new brands. In March 2019, Ulta launched its first-ever CBD-based skincare brand, Cannuka, in store and online (except 15 stores in three states of Nebraska, South Dakota and Idaho, where CBD oil remain illegal). Dillon said Cannuka is contributing to the strong overall growth in Ulta’s prestige skincare segment. In October 2019, Ulta launched Kim Kardashian’s KKW Beauty. Dillon remarked that Kim Kardashian is one of the strongest influencers, pointing to her 146 million Instagram followers, and said Ulta is excited by the partnership. [wpdatatable id=39]

Source: Company reports/S&P Capital IQ/Coresight Research