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Ulta overview
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The Buzz on Beauty: Behemoths Ulta, Target, Sephora and Walmart Race to Win Sales

Throughout uncertain times in 2022, the beauty industry has demonstrated resilience, and beauty retailers and mass players alike have taken note. The continued strength of the beauty category can be attributed to a myriad of factors, including the return to physical offices and in-person events as well as the effects of historic inflation influencing consumers to favor small splurges. The pandemic also cemented beauty as a part of a daily wellness routine, elevating these purchases to critical self-care items that consumers seem unwilling to cut. In 2022, social media has also played an expanding role in driving trends and fueling brand and product discovery, whether it’s a Dior lip oil that went viral on TikTok, or Hailey Bieber’s chrome nail look that she launched on Instagram. Whatever the specific reason, the beauty industry continues to be in high demand. We highlight some of the exciting new developments in the beauty aisle we’re watching.

@pamelapedrozaa

Tiktok made me buy it 🤷🏻‍♀️ Who’s tried it? #diorbeauty #dior #lipoil

♬ Princess Bubblegum – haroinfather

Ulta’s New Merchandising Strategy Blends Mass with Prestige

Ulta, the nation’s largest beauty retailer, has cited double-digit comparable growth across all major categories for the second quarter. Compared to the same period last year, overall sales increased by almost 17 percent. Launching this fall, Ulta will be testing a renewed merchandising strategy mixing mass and prestige brands together. Currently, stores are organized around price point, with mass on one side and prestige on the other. While only select stores will have this new layout, it will reflect the way Ulta believes its consumers shop.

McMillanDoolittle Take

  • Ulta’s forward thinking is centered on the consumer’s shopping experience and patterns. The front of the store will feature editorial storytelling around trends and newness while the rest of the store will have a unifying presentation of beauty products across categories.
  • Ulta’s move is both mindful of the way customers currently interact with products and is also a source of inspiration and discovery. For example, Ulta customers can discover similar products and brands that fit their current needs and lifestyle simply because of the reorganization of the store’s inventory.
  • This innovative merchandising solution has the potential to reach over 1,300 operating stores providing customers a fresh shopping experience, driving traffic and customer engagement.

Target’s Remodeled Beauty Section Elevates the Shopping Experience

Big-box retailer Target reported that their profit dropped 90% in the second quarter due to cuts in nonessential spending. However, this spring Target pointed out the strength of its beauty sales even as the company twice cut its profit outlook for the year. Over the years Target has invested in remodeling and renovating its beauty departments to have a look and feel similar to an Ulta or Sephora. About a hundred stores now have an Ulta shop-in-shop complementing Target’s already robust beauty department. Target consistently features new and innovative products, such as celebrity Ashley Tisdale’s Frenshe, which launched in July. Target and Ulta are planning on expanding their shop-in-shop partnership to 250 locations by the end of 2022, with the eventual goal of 800 total. For additional insight from our team on Ulta’s collaboration with Target, including fully linked loyalty programs, access our blog post here.  And, for a video overview of the store experience, click here.

Target's beauty department

Photo Credit: Forbes

McMillanDoolittle Take

  • Target’s investment in their beauty section makes shopping there a more luxurious, experiential place for consumers to shop for mass beauty products. Plus, it acts as a centralized location for discovery.
  • Target often features black-owned or founded brands as well as clean beauty, with clear merchandising and storytelling.
  • The expansion of their product offerings and partnerships along with the visual refresh enhances the consumer experience in the beauty section.

Sephora Innovates with Digitized and Gamified Activations

As a prestige beauty-focused retailer, Sephora continues to demonstrate growth even as consumers cut back on nonessential spending due to inflation. According to LMVH’s First Half 2022 Results, Sephora had a “strong recovery,” due to an increase in store traffic, the expansion of their partnership with Kohl’s, and continued investments in industry-leading omnichannel strategies. For example, Sephora’s leading “Virtual Artist” feature on their app allows customers to scan and match their skin tone to a variety of products, minimizing the trial-and-error that often comes with shopping online for beauty. Next weekend (on September 18th), Sephora is bringing back Sephoria, a free gamified event that allows Beauty Insider members to earn loyalty points by playing games throughout a 3D virtual space hosted on their website. Previously a live ticketed event pre-pandemic, Sephoria will continue its third year as a virtual event. The event includes games, first looks, exclusive brand content, and other surprises. The virtual house has themed rooms featuring different brands where attendees can interact with brands and beauty icons via live-chat.

Photo Credit: Sephora

 

Photo Credit: Eventmarketer.com

McMillanDoolittle Take

  • We are inspired by Sephora’s creative promotional strategy that likely costs less than their yearly Beauty Insider Sale and rewards their customers in a unique way.
  • This digital integration allows Sephora to reach over 25 million Beauty Insider members compared to an in-person event, and therefore they can increase their outreach and brand loyalty.
  • The points that attendees earn are a part of Sephora’s best-in-class loyalty program. Attendees can redeem their points at the Rewards Bazaar for anything from a luxury sized sample to an exclusive in-person event with a brand.

Walmart Drives Engagement through Beauty Accelerator Program

Walmart, the nation’s largest retailer lowered their profit outlook for Q2 but at the same time cited an increased momentum in several pillars of their beauty business, including cosmetics, hair care, and skin care. This past February, Walmart launched Walmart Start, a new accelerator program to discover up-and-coming beauty brands spanning hair care, skin care, color cosmetics, nail care, fragrance, and beauty accessories. The program requires a detailed application process where candidates must meet specific goal posts, such as a high potential for growth, readiness to scale, and a set of Walmart supplier criteria. Walmart selected five nascent beauty companies for their first cohort, including The Hair Lab By Strands, which will be launching hair analysis technology in-store for consumers to buy products based on their hair type. Walmart favored the ease and innovation of this technology in-store (versus an at-home kit).  The company was also a standout for championing inclusivity by providing solutions that cater to diverse hair types. In addition to Walmart Start, the company recently announced plans to launch a beauty recycling program in collaboration with Procter & Gamble and TerraCycle that allows customers to recycle their used beauty product packaging in store.

Photo Credit: Walmart

McMillanDoolittle Take

  • We commend Walmart’s initiative to seek emerging beauty brands, which not only drives new traffic into their stores but also delights Walmart’s frequent customers.
  • Walmart’s technology, scale, and fulfillment capabilities make the retail giant a great partner for small brands. Additionally, this feature evolves Walmart’s beauty space into an engagement and interaction-based experience.
  • This move by a big player such as Walmart is timely due to the general consumer sentiment of wanting to support small businesses in a time of economic uncertainty as well as the move towards more sustainable consumerism.

McMillanDoolittle Knows the Buzz on Beauty

Understanding consumer trends and how macro pressures affect daily spending habits can make or break a retailer’s success. If you enjoyed this article on recent developments in the beauty industry, please reach out to us to discuss how your company can leverage leading trends in retail to innovate and grow. You can also follow along with our coverage of the retail industry on our LinkedIn and IG feed and stories.

Lucy Everett

leverett@mdretail.com

Lucy provides research, planning and analysis support for McMillanDoolittle retail consulting projects. She also assists with consumer research planning, preparing presentations, and project administration.

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