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Post-M&A, Staying on Brand Is Key for Beauty Companies

Ulta’s Mary Dillon said newly acquired brands should “be who they are.”

For small, recently acquired brands, the most important thing is to stay true to themselves, according to Ulta Beauty chief executive officer Mary Dillon.

“I know Estée Lauder just bought Becca, L’Oréal has bought many brands, and I’d say that as long as the brands are left to sort of be who they are, and yet get the leverage of being part of the big company, that’s what it’s all about,” Dillon said. “Our guests don’t really know who owns what as long as the brand offers them what they want when they need it.”

Dillon, who has headed Ulta for more than three years, detailed the retailer’s strategy. “When I looked at the company initially…I had many other things in my background that were not in beauty,” Dillon said. “Ulta Beauty was a really great concept…[but] unless you had one by you, you’d never heard of us, and nobody understood what we were about.”

What Ulta is about is serving the beauty enthusiast. The customer who shops for beauty for fun, and doesn’t wait until her palette is empty to go out and buy the newest one. The business provides salon services in store, plus mass and prestige beauty products, according to Dillon.

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“Our salon guests are the best guests because some come in frequently, she gets services and she buys product,” Dillon said. “But there’s a whole group of folks who’ve never tried our salons and we’re constantly working with stlyists to either bring their own guests to Ulta Beauty or convert on the floor and with quick service — updos, braids, things like that.”

The business also focuses on training store associates. “Part of this is making sure that our associates are set up to give our guests what she wants — we’re not a department store model, so it’s different, she doesn’t expect to get a lot of help but when she wants the help she can get it,” Dillon said.

“We just had a big analyst day a couple weeks ago, but most of the folks…in those roles aren’t beauty enthusiasts — I’ll just go out on a limb and say that,” Dillon continued. “Recently, there’s this debate about how can this continue to work, won’t people just buy everything online, or why do women need so many? Somebody asked me once, ‘Well doesn’t somebody just buy a palette and then use it all up and when it’s done buy another palette?’ I was like, ‘OK, no, it doesn’t work that way.’ We love to open up the drawers or the closets of any beauty enthusiast, there’s a lot of product because we love to try and explore and feel and look our best.”

Aside from focusing on that enthusiast customer, Dillon has also shifted the way Ulta is organized — something she said she drew in from her consumer packaged goods background. Instead of separate verticals all reporting to the ceo, Ulta has merchandising, marketing and e-commerce reporting to chief merchandising and marketing officer Dave Kimbell. “It just made more sense,” Dillon said.

“Our organization has taken to this model really well because the teams really collaborate from the very start. So rather than how it was…which was the merchants made the decisions and then it went to marketing and then maybe e-commerce at the end, these guys are sitting around the table from the start figuring out how we’re going to take brands and really create and launch them, and I think that’s a big part of our success.”

Looking forward, Ulta is planning on doubling its market share, from 4 to 8 percent, and continuing its 100-new-stores-per-year strategy, with the idea of opening between 1,400 and 1,700 stores in the U.S. Brand awareness is a key part of that strategy, Dillon said. “We have 20.6 million people in our loyalty program, but our numbers tell us [there are] over 70 million women of [the beauty enthusiast] mind-set in the U.S.,” Dillon said, adding that getting more of those shoppers is one way to gain market share. “How do you do that? More brand awareness, more folks into our loyalty program and certainly more stores, but secondly, we know we can just gain more of her share of wallet…it’s a fragmented market. You can buy beauty in a lot of places and we always will, that’s great, but we can also help her to learn more about other categories and brands that we offer.”