Even while physical stores are closed, Ulta Beauty executives are running scenarios of how to best service customers when doors eventually open
“People are going to be desperate for a haircut, professional color, brows and facials. We’re putting our inventive hats on with experts to say, ‘How do we get back in the business and lead the way?’ Consumer demand will be out there,” said Mary Dillon, Ulta Beauty’s Chief Executive Officer during a J.P. Morgan Retail Round-Up Virtual Conference on Thursday, April 2.
Joining Mary to talk about how beauty is changing during America’s shelter in place environment were Ulta Beauty’s President Dave Kimbell and Chief Financial Officer Scott Settersten. “The current environment is fluid and changing quickly,” admitted Mary. “We feel we have the right assortment, the right flexibility and nimbleness to manage through this, but it is clearly an unprecedented operating environment.”
As Americans stay home, many are wearing less makeup, which could dampen sales, but Mary sees alternate scenarios, too.
“We continue to believe our target audience, the beauty enthusiast, has a deep emotional connection with beauty and despite the economic environment, we don’t see that changing,” Mary said, noting beauty, while not immune, outperforms other categories when times are tough.
She referenced anecdotes of people adhering to makeup routines to look good on Zoom and other virtual meetings. Also, with more down time, consumers are engaging in multi-step skin care regimens prompting sales of toners, moisturizers, scrubs and facial masks, as well as experimenting with makeup applications they had always wanted to attempt. “I don’t want to make light of it, but a winged eyeliner is not the easiest thing to pull off,” she said.
She also gave a nod to social platforms, such as Tik Tok, showing off the expression and creativity people are demonstrating when engaging with digital.
Ulta Beauty also benefits from its assortment of essentials and self-care products such as shampoos, conditioners, soap and self-care categories, like bath. Without access to professional services, she also sees DIY product sales picking up, such as root-touchups and nail care.
“When we all go back to a new sense of normalcy the passion and fun of beauty will continue to be ignited. It’s a core of self expression. We are making sure we are staying engaged with people in digital. Digital engagement is very high. You need to be there, and we feel we are striking all the right tones with self-care and fun. We want to stay top of mind as the beauty retailer that our guest loves the most. That will allow us to come back strong.”
The emphasis Ulta Beauty has put on its digital presence, its fastest growing business, over the past few years prepared the retailer for closing stores. One of its digital tools is Glam Lab, which allows for virtual try-on of beauty products. “We saw very significant use [of Glam Lab], a way to discover beauty that can create new behaviors that can benefit the makeup category, as well as skin care and others,” said Dave who believes consumers will return to cosmetics which had been trending down.
Although Ulta altered its free shipping to $15, then to $35, online sales have even exceeded what the retailer anticipated. Surprisingly, gains have been consistent across the country rather than pushed when states closed stores, Mary said.
What is promising is that Ulta is seeing many of its customers who previously only shopped in store—about 80 percent of customers—shift to shopping online. When customers shop omnichannel, Ulta said shoppers spend three times more than those who shop physical stores only.
Store closings came during one of Ulta’s biggest promotions, 21 Days of Beauty (March 15-April 4). Interestingly, the timing was actually fortuitous. “Twenty-one days has always been a strong online promotion for us,” said Mary. The nature of the program is to feature a new item daily, thus encouraging frequent visits to the website. “What we like about 21 Days of Beauty is it isn’t a standard percentage off. It plays a strategic role in our overall mix by moving guests up from mass to prestige,” said Dave, explaining it fosters brand discovery.
When stores do open, Mary acknowledged there will be new ways to address the physical one-on-one touch crucial to Ulta’s success. “We are running many scenarios. We are consulting with health experts and consultants to get the lay of land and have a ready stance.”
The additional ecommerce orders have resulted in distribution centers “working differently,” said Mary. “They are exceeding expectations every day. She explains they had to gear up to be “in holiday mode” without time to ramp up. There are also new cleansing rituals and the constraints of social distancing. On the plus side, employees want to come to work. “We had people from stores who wanted to work in [distribution centers] and we are training them to do so,” Mary said. Additionally, Ulta’s strategy of mixing in-store and ecommerce inventory has paid off.
While pick up in store isn’t off the table going forward as restrictions ease, Mary said it wasn’t the first move. “The health of our employees was a priority,” she said, noting it was too early to put people in stores.
Ulta Beauty is in a cost containment mode. Entry in Canada will be delayed into 2021 and store openings will be pulled back. “Clearly, preserving liquidity, preserving cash is the top item on our agenda right now,” Mary said.