With prestige skin-care sales in the U.S. officially on the rebound — and growing faster than prestige makeup, according to The NPD Group — Ulta Beauty is beginning to broaden its reach in the category.
The retailer in recent years has been known for a prestige-makeup-heavy brand assortment in its roughly 1,107 stores. On a company earnings call in March, chief executive officer Mary Dillon announced the addition of Chanel makeup in a small number of doors, and earlier in 2017 MAC Cosmetics entered 25 doors, with plans for 100 by year’s end. When Ulta’s first Manhattan outpost opened in November, chief merchandising and marketing officer Dave Kimbell told WWD that the store’s layout — with nearly 50 percent of the space dedicated to prestige makeup — is reflective of the breakdown of the company’s business.
While an outsize emphasis on prestige makeup remains in the retailer’s doors, Ulta is edging toward placing increased focus on prestige skin. This month, it will unleash a slew of new brands in its doors, including Elemis, Tula, Skin Gym and Peach & Lily’s product lines — including five sku’s that were not included as part of the K-beauty platform’s July launch campaign. Brands such as Kopari, Crepe Erase and David Beckham’s House 99 have already rolled out to stores.
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Though prestige makeup has driven much of Ulta’s growth, Wall Street analysts see increased opportunity in skin as category sales grow. Skin care’s inherently higher margins are “a key consideration to drive profit dollar growth at the product mix level” for Ulta, said Jefferies analyst Stephanie Wissink in a recent report.
Tara Simon, Ulta’s senior vice president of merchandising for prestige beauty, is spearheading the augmentation of the retailer’s skin-care assortment, which she intends to keep balanced between trend items and classic products and a focus on hero sku’s and mixing and matching brands instead of regimens.
“Honestly in 2015, 2016, I was scared to death of the Millennial who was only using Neutrogena wipes to take their makeup off and not using eye creams or moisturizer,” said Simon. “We were selling so much makeup, it was staggering.”
Simon said Ulta’s skin-care business began to pick up in 2017, around the time overall category sales began to increase. “All of a sudden, people started saying, ‘My skin’s not acting right, it’s fussy and sensitive — you had a whole group of people realizing they had to pay more attention to skin care,” said Simon.
The company’s customer research showed a shopper who was open to experimentation — more than 70 percent of Ulta’s consumers are willing to experiment with or alternate between two or more brands within almost every category in skin care, from cleansers to moisturizers to masks. Thus, Ulta is evolving its skin-care marketing away from single-brand regimens — think Clinique’s classic three-step system — and instead, cherry-picking items to bring into the fold.
“[We wanted] to present brands in a less overwhelming way — up until this year, if we wanted to bring a brand into prestige, the smallest presentation we had was one-and-a-half feet in a gondola with four shelves — that’s a lot of space and shelves,” said Simon.
She noted the retailer is focused on bringing in smaller assortments from buzzy brands — such as five sku’s from Tula’s probiotic-based skin care and Peach & Lily Collection’s nine-sku skin-care line, which includes a Matcha Pudding Antioxidant Cream, $40, and the Glass Skin Refining Serum, $39 — as well as Instagram-driven trend items like glitter masks and Skin Gym jade rollers. “You don’t have to buy everything from Clinique or Shiseido [for example],” said Simon. “You can buy what you love from each brand.”
There are some exceptions. Warburg Pincus-backed, K-beauty-inspired brand Julep launched at Ulta on Aug. 1 with a $249 “Passport to K-beauty” box set consisting of its best-selling skin-care items. Julep’s skin care is merchandised alongside its makeup selection in Ulta stores — skin care accounts for about 40 percent of brand sales at Ulta.
On Aug. 12, L Catterton-backed British skin-care brand Elemis is rolling out 24 sku’s to 300 Ulta doors after launching on ulta.com in July. Ulta is the brand’s first major specialty retail partner in the U.S. The four-item Superfood collection, Pro-Collagen and Peptide collections are all launching in Ulta stores, said Elemis founder Noella Gabriel. Gabriel recently moved to the U.S. and shifted from a creative position to the role of company president. She’s focused on growing the brand’s U.S. customer base with Millennial-oriented lines like the Superfood collection, which is formulated with prebiotics and retails from $25 to $55, on the lower end of most Elemis ranges. Ulta will also carry an assortment of Elemis travel-sized items. In its native London, Elemis operates a quick-service menu at its flagship House of Elemis spa in Mayfair. Gabriel sees an opportunity to expand the brand’s quick services to the U.S. as well, potentially with Ulta.
Skin-care services are also something Ulta is looking to ramp up. The retailer is rolling out the Skin Bar at Ulta Beauty in stores that are either newly built or undergoing renovation. The Skin Bars will feature a full-time skin expert in charge of retail sales and a service menu consisting primarily of on-the-go treatments. The Skin Bars add 10 to 12 square feet of space to existing prestige skin-care sections in Ulta doors.
Placing skin services in the middle of the floor, rather than a private room, is something Simon is finding to be working, performing “stronger than what we’ve seen with our services [in the past].” “[The customer] likes the express part of it,” said Simon. “Part of the strategy is the product demonstration part of it — it’s less serious [than a hard sell] and you’re not sequestered off by yourself. It’s in a relaxed environment.”