Ulta Beauty senior management discussed the company’s experience of operating during the Covid-19 pandemic at the following two virtual events:

• On June 10, 2020, Diane Randolph, Chief Information Officer, participated in a Coresight Research & Blue Yonder Open for Business webinar, “Digital Transformation in Reaction to Covid-19– How Ulta Beauty Mobilized for Guests and Associates.” 
• On June 9, 2020, President David Kimbell was interviewed by Daniel Hofkin, Analyst, at the 40th Annual William Blair Virtual Growth Conference.

We summarize the insights from these two events, which covered updates on Ulta Beauty’s store reopenings, safety protocols, technology and try-on capabilities, beauty growth categories and expectations for the consumer’s beauty discovery experience post coronavirus.

Stores Reopen with Shop Safe Standards, Providing Safety and Efficiency to Customers

On May 11, 2020, Ulta Beauty began reopening its fleet of 1,264 stores across the US, which had been forced to temporarily close due to coronavirus lockdowns. The company is implementing “Shop Safe Standards” at the reopened stores—enhanced safety protocols that include the following:

1. Limiting the number of customers in the stores—Associates monitor store capacity, and customers must wait outside before entering. Management reported this measure is so far being managed well.
2. Demonstrating products—Restricting customers from testing products themselves, the company has set up in-store demonstration areas for associates to show consumers the products.
3. Requiring face coverings to be worn by associates and requesting the same from customers
4. Increasing cleanliness and enforcing social distancing—The stores with salons now offer services by appointment only, perform associate and guest wellness checks and require protective equipment to be worn. The salons are increasing the frequency and depth of cleaning between appointments and implementing social distancing between stations.

Over 75% of Ulta Beauty stores offer curbside pickup. The company reported that it is seeing stronger-than-expected sales in reopened stores. Furthermore, management stated that initial customer feedback has been positive—for example, customers like the curbside pickup option for convenience in addition to safety benefits.

All Ulta Beauty stores are expected to reopen by the end of June 2020.

GlamLab Virtual Try-on Capability Accelerated; Consumer Try-on Increases Fivefold

Consumer engagement for GlamLab, Ulta Beauty’s virtual reality beauty tool, has increased fivefold since the coronavirus outbreak. The company originally intended the tool to be an aid in online shopping, but the pandemic boosted the role of GlamLab as a direct replacement for the in-store experience amid widespread store closures. Ulta Beauty therefore accelerated its virtual try-on capability by adding millions of colors so that customers could experiment with more product categories and shades. The company activated a “swatch squad” that went into the physical stores to make sure that all product categories and shades were added virtually, speeding up the GlamLab expansion timeline from one year to seven weeks. Management reported that during the crisis, GlamLab has seen more than 19 million shade try-ons. Ulta Beauty also added capabilities to its Instagram page so that visitors can experiment with fun filters, further boosting engagement and sales for the company.

As stores reopen, GlamLab will be leveraged as an omnichannel shopping tool—providing a means for consumers to discover products online before finding them in store. Ulta Beauty is also using one-on-one beauty advisors to engage with shoppers online and in store.

Management Is Confident That Color Cosmetics Will Return to Being a Growth Category

While color cosmetics had previously been a driver of Ulta Beauty’s revenue growth, the category was challenged over the past two years. However, it had stabilized near the end of the fiscal year—and leading into the coronavirus pandemic, the company was optimistic about growth opportunities within color cosmetics.

Covid-19 altered shopping behaviors in beauty: Consumers were wearing less color makeup as they were staying inside for work and not socializing as much due to stay-at-home orders and home quarantines. Although this was offset slightly, with some consumers wearing makeup for video meetings and beauty enthusiasts sharing makeup trends on video, the net effect was a dampening of the overall color cosmetic trend.

Despite the overall downturn, Ulta Beauty management believes that makeup will return to being a growth category post crisis. The company will continue to study consumer behavior through the second half of 2020 but is preparing for trend recovery.

Interest Peaks in Skin Care, Hair Care and DIY; Emphasis on Clean and Natural Beauty

Skin care, which was already a strong category for Ulta Beauty going into the coronavirus, saw increased customer engagement during the crisis as consumers focused on self-care and their daily beauty routines. Clean beauty and natural beauty continued to see an upwards trend. Hair care, hair color and DIY were standout categories that strengthened during the pandemic. As they were unable to visit stylists, consumers started to create their own salon experiences through at-home manicures, hair masks and facials.

Ulta Beauty management provided examples of two brands—one newer and one established—that successfully leaned into skin care through consumer connections, before and during the crisis: The Ordinary and Clinique.

Physical Stores Are a Big Part of the Company’s Future

With more than 80% of Ulta Beauty’s revenue generated from its brick-and-mortar stores, management said that they will remain an important component of the overall shopping experience, even with the digital acceleration that occurred during the coronavirus pandemic. In addition, the company offers services through salons in over half of its stores, which management expects to drive traffic.

Currently, Ulta Beauty operates 1,264 stores. Prior to the crisis, the company had a target of between 1,500 and 1,700 stores, and management reported that it will continue to look at store opportunities going forward; there are only a handful of stores that are underperforming and “may not make it.”

Digital Customer Acquisition and the Importance of the Omnichannel Shopper

Ulta Beauty reported that during the Covid-19 lockdowns, it acquired new online customers that had previously only shopped in store. The silver lining from the pandemic will be if these guests continue to shop through both channels, as the company’s omnichannel shoppers are its most engaged: Ulta Beauty has over 33 million active members of its loyalty program, Ultamate Rewards, and omnichannel members spend three times more on average than a single-channel shopper. Emphasizing the importance of the omnichannel shopper, management reported that when they see a store-only guest shop online, that individual becomes one of their best customers.