MAC Cosmetics is betting that it has found at least a partial solution to the sales slowdown it is suffering as traffic thins out in America’s malls and department stores.
The answer — as it has been for so many other brands — is Ulta Beauty, one of the hottest retailers in the U.S. and one that MAC is planning to enter at last, first via the beauty specialty store’s e-commerce platform ulta.com in May and then via about 25 stores in June.
By the end of the year, MAC is expected to be in more than 100 Ulta stores, according to Karen Buglisi Weiler, MAC global brand president. “By mid-June we should have the first one opened,” she said.
While MAC is initially going into only a fraction of Ulta stores, the move represents a dramatic departure for the makeup artist brand, which has confined its U.S. distribution mostly to department stores and its international chain of MAC stores, 200 of which are in North America. For example, the brand is not sold in Sephora in the U.S., according to executives.
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A key factor is Ulta’s real estate strategy. Typically measuring 10,000 square feet, the 975 Ulta stores — as of the end of its fiscal year — are generally located in lifestyle centers — or strip malls — and other off-mall locations. The resultant traffic pattern has been viewed as different from the malls, thus drawing fresh consumer interest. David Kimbell, chief merchandising and marketing officer at Ulta, noted, “Ninety percent of our stores are outside of malls and our guest really likes that; she finds it easy and convenient.”
“We continue to have positive traffic — different from a mall — not like a mall,” agreed Tara Simon, senior vice president of prestige merchandising at Ulta.
“This is a great opportunity to bring MAC on stream to a whole new audience,” said Buglisi Weiler. “In my mind, there’s maybe a customer who shops at Ulta, but has never walked into a MAC store. Maybe she’s never walked into a Nordstrom to purchase MAC or maybe she’s never walked into a Macy’s.”
Kimbell agreed, “MAC has consistently been one of the most requested brands by our guests, so we know when we bring it in as the number-one prestige makeup brand — a uniquely positioned strong brand proposition — our guests are going to respond very favorably to it. It’ll help us reach and better serve customer groups and audiences that are important to us, Millennials and ethnically diverse consumers.”
Simon observed, “We know there are people who are curious about MAC and might have wanted to try it, but haven’t done so yet. We think we are going to get new customers from MAC and new customers through the door. That just drives traffic for all the brands. We think it is a win-win.”
Simon concluded, “We are going to introduce new customers to MAC and MAC is going to bring new customers to us.”
Buglisi Weiler maintains that MAC is shifting in its philosophy from being “a destination brand” with only “one third of the distribution that most of the makeup brands in specialty have. We realize that with the changing behavior you really have be where they want to shop.”
On average, MAC will occupy 200 square feet per store and the product assortment will be limited to 600 stockkeeping units, Buglisi Weiler said. While that number is on a par with Ulta’s big makeup brands — Lancôme, Urban Decay and Clinique — it is a smaller total than the roughly 1,200 sku’s MAC has in departments stores and the 1,500 sku’s in its own brand boutiques. Simon said the Ulta curation represents about 45 percent of MAC’s product universe and the individual items were picked in close collaboration between brand and store, playing to MAC’s heritage and Ulta’s penchant for crisp editing.
“We worked very closely with Karen and her team to make sure we had the must-haves, the hero products and the pillar categories,” Simon added. “We are deep into foundation, primer and lipstick.”
At the heart of MAC’s assortment in Ulta will be the brand’s landmark Studio Fix Fluid and Powder foundation along with Studio Waterweight, Prolongwear Nourishing Waterproof foundation and Next to Nothing, which will be launched in April. The Studio Fix array of 53 shades has been edited for Ulta. The other pillar is lip color, led by the $17 lipstick, which is usually marketed in up to 140 shades, followed by the $16 Lipglass and $21 Liptensity, a new, high-pigment coloring that was launched in September. Retromatte, a liquid product, rounds out the lip assortment.
But the Ulta move isn’t the only more-populist shift MAC is making these days as it aims to get back on the growth track. The brand also is working on its price points, perhaps with an eye toward maintaining its number-one sales ranking in the U.S. prestige makeup market. The brand has been experimenting with a Little MAC assortment, consisting of trial or travel-sized product. The abbreviated lipstick is priced $10, instead of $17 for the full-size version. The same price applies to pigments and lipgloss. Little MAC mascara and skin care are priced at $12.
MAC will be entering Ulta with 12 of these sku’s, three skin-care items and nine lipsticks.
When asked if Little MAC was conceived as an answer to the competitive onslaught of often lower-price startup brands, like the L’Oréal-owned NYX, in the booming U.S. makeup market, Buglisi Weiler replied, “a different option. We thought about how do you create something that creates more trial for the brand?” Buglisi Weiler noted that Little MAC got its first tryout in the young consumer department of Nordstrom, and “it really did recruit a new customer.” As she turned to her objectives in Ulta, Buglisi Weiler said, “We would like to be the most-preferred brand.”
That goal apparently translates into an in-store, number-one sales ranking. While Buglisi Weiler declined to provide numbers, industry sources estimate MAC would have to generate an average of $50,000 in sales per Ulta door to achieve that rank. That would amount to more than $5 million for more than 100 doors. Both Buglisi Weiler and MAC had no comment.
Such questions generate more than a passing interest on Wall Street. According to a research note written in February by Stifel analyst Mark Astrachan, softness at MAC in the U.S. was a factor when the Estée Lauder Cos. Inc. reduced its overall financial guidance in February, he wrote. “While sales of MAC increased internationally…and increased double digits in most markets, the U.S. (approximately one-third of total brand sales) remains weak due to lower traffic in midtier department stores and fewer tourists in freestanding stores.”
Astrachan added that weakness in those areas, plus increased competition from “sub-premium brands including NYX” was likely to lead to Lauder selling the brand in Ulta Beauty or Sephora stores.
Kimbell pointed out that the deal will give access to the more than 23 million shoppers in Ulta’s loyalty program to “a brand that many of them are going to be excited about. It’ll allow us to attract new guests and members into our business that will benefit both us and MAC going forward.”