One year into his post as chief executive officer of the beauty emporium Ulta, Chuck Rubin is thinking big, as in really big.
The ceo plans to more than double Ulta’s door count to 1,000, adopting the lofty goal set by his predecessor Lyn Kirby prior to the Great Recession.
Ulta — the retailer known for cracking the code for selling mass market, prestige and salon products under one roof — continues to open new doors, in some cases scouting out real estate left vacant by big-box stores.
Referring to Ulta’s current 400-store base, Rubin said, “We have a lot of runway ahead of us.” As for when he expects to cut the ribbon on Ulta’s 1,000th door, Rubin is mum, except to say, “I’d like to get to 1,000 stores faster rather than slower.” The retailer is currently growing its square-footage at a rate of 15 to 20 percent a year.
Ulta is on track to open a total of 61 stores in 2011 and end the year with 450 stores.
“We have the capability and the financial strength to go even faster, but the real estate market is different today than it was five years ago. There’s not as much new development,” said Rubin. “A lot of what we are doing now is harvesting through other retail sites that have become available due to a business model that may have failed, like Borders.”
And there’s plenty more filling in to do. “There is literally not a market in the U.S. that we are fully penetrated in. Even in the markets where we have more stores, like Chicago or Phoenix, there are still opportunities,” said Rubin. “The opportunity to fill in big cities [and regions] like South Florida, San Francisco, Seattle and Los Angeles, as well as smaller cities, is just enormous.”
The beauty retailer also has its sights set on New York City, with plans to open a store in the area this fall. An Ulta spokeswoman would not say where exactly, but she did rule out Manhattan, meaning a store could open in one of the outlying boroughs.
At this stage of Ulta’s life cycle, Rubin’s role is akin to a chief architect charged with building a foundation for a much larger retail chain.
“As we get bigger, it becomes the challenge of trying to scale the retailer to be larger, which I’ve done a number of times, to try to create that DNA in the store and then multiply it by x number of stores,” said Rubin. “It sounds easy but it’s not. There’s a certain secret sauce to doing that.”
Rubin’s past experience in ambitiously building door count comes, in part, from his time at Office Depot, where he served as President of the North American Retail Division prior to joining Ulta in May 2010 as president and chief operating officer and a board member. He assumed the top spot at Ulta four months later in September. He recalled, “When I got to Office Depot, we were running 700 stores. When I left, there were 1,200....There’s a whole different management style to running a 200-store chain than a 500- or 1,000-store chain.”
He added, “Ulta, we clearly believe, can scale to be much larger.”
His predecessor Kirby succeeded in transforming Ulta from a mass market beauty superstore into an experience-driven specialty store that attracts department stores brands into its offering. For his part, Rubin plans to build on that legacy.
“When I came to the company, everybody wanted to know how I was going to change [the business]. Our own people wanted to know, Wall Street wanted to know. But this is an evolution, not a revolution,” said Rubin. “Ulta was a very healthy company with a good customer proposition. There is a very good team of people who contributed to what I stepped into. It’s a business that is strong. We make good money. We are growing sales nicely.”
His vision is to continue to enhance the shopping environment to leverage all components of its offering, and to highlight the Ulta brand at the same time. To amplify its credibility as a purveyor of prestige products, Ulta began outfitting its current format with in-store boutiques. To date, Ulta has applied the boutique strategy to brands like Bare Escentuals, Benefit Cosmetics, Philosophy, Dermalogica and Clinique, the latter of which is found in 13 of its doors. The prevalence of higher-end brands carrying premium price points has yet to meaningfully push up the average cash register ring.
“Our average ticket has stayed relatively flat,” said Rubin. “What we’ve seen is the traffic improve. Our improving [comparable store sales] over the last year is driven primarily through traffic. We are clearly gaining new customers, but we are also gaining more trips from existing customers. We are gaining share of wallet from that woman who is shopping with us.”
In fact, during its most recent quarter, total sales gained 20.6 percent to $386 million, and comparable store sales rose 11.1 percent, outpacing Ulta’s guidance of 5 to 7 percent.
When Dermalogica first entered Ulta’s doors in late 2007, the no-nonsense skin care brand began offering 20-minute MicroZone services for $20, including Flash Exfoliation, Eye Rescue, Blackhead Relief and Lip Renewal. Dermalogica is now sold in all Ulta doors, and the brand plans to expand with the retailer.
Referring to the MicroZone pod within Ulta doors, Dermalogica ceo Dan Ginsberg said, “It allows consumers to experience the products firsthand. We decided to bring skin [care] services out of the back room and demystify them by having a trained therapist who could explain what she was doing.”
Ginsberg, who has met with Rubin on a number of occasions, said of Ulta’s ceo, “He’s a strategic thinker, and he has a very good feel for this category. He understands development, which is why Ulta continues to open more stores....Ulta is being very responsive to what the consumer is asking for, and making slight turns” accordingly. An example, said Ginsberg, is Ulta’s concept called The Men’s Shop.
Ulta has carried men’s products for some time, but as Rubin explained, “Two things have changed. One, the offering is bigger and we’ve pulled what was spread throughout the store into one boutique.” But unlike many retailers trying to determine how best to approach the men’s category, Ulta’s concept is not geared toward the male shopper. “The intent is not to target a man as the shopper. We still believe the vast majority of the [men’s] products will be bought by a woman for the man in her life.”
Ulta also is working to retool its approach to the fragrance category, which Kirby once referred to as a “trouble spot” for the industry. “It’s in a more prominent location, and it highlights the brands and the equities of the brands better than it did before,” said Rubin. The idea is to utilize the brands’ advertising and celebrity alliances to match the imagery the consumer is captivated by on TV or in magazines to make the fragrances more recognizable in the store, he explained.
For the launch of Justin Bieber’s Someday fragrance, Ulta playfully placed a cardboard cutout of the teen pop star in the store; to Rubin’s amazement, throngs of shoppers snapped photos of themselves and their friends alongside the faux Bieber. In many cases, they then posted the photos on Ulta’s Facebook page, where the retailer has more than 185,000 fans.
If it seems that Ulta’s approach to merchandising is constantly in motion, it’s because that’s very much Rubin’s intention.
“As we continue to grow and drive forward, having a little bit of a looser atmosphere is a very healthy thing. When you have to test new things, you can’t have [people within an] organization fear that if a test fails their job is in jeopardy. This is a culture where you have to work fast, be aggressive, be very demanding, to try new things, but recognize it’s like baseball: No one bats a thousand.”
For instance, several years ago Ulta tried grouping mass market cosmetics by category, rather than by brand. So a lipstick display would house all brands and all colors. It has since abandoned the concept. “Academically, it sounds like a very good idea,” said Rubin. “The challenge is that on the mass side these brands are such big marketing vehicles. The shopper is intrigued by the brand and when you start to split up the brand and you had Revlon in a bunch of different places you are losing some of the value of the that brand....It was a good test. You have to stay very aggressive in testing new things, which means sometimes they won’t work. That is OK. If every test you try works, then you are not testing enough.”
The overarching goal of Ulta’s merchandising is to provide beauty solutions for the customer. Earlier this year, Ulta jumped on consumers’ interest in nail polish trends, including OPI Shatter (a textured effect) and Sally Hansen Crackle Overcoat. “We were able to get more inventory, give more advertising space to it and more store space to it. All of these things became a very unified effort. That’s when something really good turned into something great. We believe that no one in the industry did a better job than we did,” said Rubin. And events are common. For instance, the Laura Geller cosmetics brand, which first entered Ulta in May 2010, regularly dispatches makeup artists to Ulta stores. The line’s founder, Laura Geller, hopes to host a “master class” event this fall in a high-volume location in Delaware.
During a recent interview with WWD, Rubin’s demeanor is causal. He describes his management style similarly. “I’m not big on hierarchies. I am very visible within our business and in our stores, as our whole team is. It’s a hard-driving business. While my style is casual, it’s not passive. It’s a very aggressive style: Let’s talk about what we want to do and then let’s go out and do it.”
Piper Jaffray analyst Neely Tamminga said of Rubin, “He is a good listener. He cares deeply about taking the organization that’s already been built to even higher levels and is helping to put its ideas into action.” She sees ample opportunity to tap into Ulta’s base of 8 million loyalty customers. In a research note released earlier this year, Tamminga wrote of Ulta’s plans to shift its loyalty program from an earned certificate rewards program to loyalty points. “We believe the points-based program is not only more easily understood by consumers, but also can provide Ulta with flexibility in assigning weights to [incentivized] purchasing decisions as well as in the redemption of points. For example, a consumer can earn 1 point for each dollar increment purchased on product in the store. Let’s say a vendor would want to partner with Ulta on focusing a new product launch, then Ulta could possibly offer 2 or 5 points for every one dollar purchased on that new product launch. They are not at this point yet, but we believe this is one application to where they are heading,” she wrote.
Rubin’s arrival at Ulta also marked a return to beauty for the retail executive, who started his career nearly 30 years ago as a buyer for the Boston department store Jordan Marsh Co. He also held a number of senior merchandising and general management posts at various retailers, including Federated Department Stores, which is now Macy’s Inc.
He acknowledged much has changed since then. “Back then, department stores ruled supreme. In today’s day and age, what makes Ulta so interesting is that our business model is very different than a department store. It’s one that women are choosing, so we are gaining a lot of share and providing something that didn’t exist 30 years ago,” he said. “A lot of people are trying to duplicate what has made Ulta successful. They are duplicating certain pieces — the salon, salon products and prestige. They will nibble at the edges, but they can’t duplicate what we do.”
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