September 16, 2022
Big changes are coming for Ulta Beauty. Q2 earnings revealed strong momentum with no signs of consumer slowdown for the specialty beauty retailer. Ulta has been paving the way for retailers within the beauty industry, exemplifying resiliency. The beauty industry is an anomaly when discussing the unstable macro as it has not been as easily affected as other industries. The company has seen gains across categories and increased market share in prestige beauty, reporting 14.4% growth in comparable-store sales.
In an interview with Beauty Independent Ulta Beauty COO, Kecia Steelman, revealed the retailer's plan to restructure the store’s layout, reinforcing its position as an industry disruptor. Steelman explained the retailer’s focus on consumer trends and awareness of the shift, since the COVID-19, to wellness and self-care regimens. Despite the decrease in consumer spending in other industries, she describes beauty as an “affordable luxury” and an essential piece to self-expression.
Changes to Come
Ulta Beauty’s is known for bringing prestige and mass beauty together under one roof. The new store layout will now also bring them together within categories. Currently, the retailer organizes its products by price point where prestige and mass makeup and skincare are located on opposing sides of the store. Fragrance is in the center of the store and haircare in the back. With a primary focus on consumer experience, Steelman says the changes are a result of extensive research in consumer insights from their loyalty program. Understanding how the consumer shops and guest feedback has led the company to try and close the gap between mass and prestige beauty through their new layout plan.
The largest change to emerge from the new layout plans to display prestige and mass beauty products together in the front of the store while still showing brand delineation. In the prominent entry displays they will launch a new section, called the “Newness zone.” This area of the store will be focused on marketing through editorial storytelling surrounding newness, events, and recent trends.
The middle of the store will now be the “beauty-tainment” area and will be a center of activity. Ulta will offer brow, makeup, and skincare services in this interactive space. The beauty retailer also plans to make more use of vertical space through its fragrance section which will feature an elevated wall presentation.
Ulta plans to implement this updated layout in all new stores this fall as well as all remodeled stores in their current remodel agenda. By 2023, the company plans to have the new format in 100% of new stores. Steelman, when asked about the implementation timeline, described it as “full-experience store”. She says the “test-and-learn” phase has already been completed through the analyzing of consumer insights.
What We Think
Ulta beauty’s implementation timeline seems to have an aggressive execution plan. This is a serious investment with potential store downtime in a short period of time that could pose a significant risk. Although, the refresh plan does indicate that Ulta is confident in the expected sales productivity gains.
An advantage to the new layout appears to be the better use of vertical display space. This could be beneficial as the next frontier of sales productivity is shifting from linear and square foot measures to cubic productivity, as noted by emerging retail software company MerchLogix CEO Nick Downey. The planned move to a single location for each product category, regardless of being mass or prestige, will yield a more efficient shopping experience. The consumer will be able to shop good / better / best without traversing the entire store. In addition, customers will be able to make side-by-side comparisons of products at various price points.
As skincare and clean beauty have become more important to consumers, relocating these products to a more prominent location will also improve shopper experience. The creation of the “Newness Zone” is great for brand discovery and will offer more opportunities for emerging brands. To remain competitive, national brands must continue to innovate.
In the past, Ulta has done well recognizing gaps within the market and adjusting to consumer trends. But leveraging insights to create a completely new layout for the store is something we have not seen before. Going forward it will be interesting to see how Ulta continue to gain market feedback and react to these insights. Ultimately, the consumer counts on Ulta for accessibility; it will be critical for them to maintain convenience for the consumer without overwhelming them.
By Shannon Doyle, Shannon Coyne, and Jennifer Merritt