Customer’s new shopping criteria – desirability, requiring budget brands alongside luxury
With the global beauty market currently worth $465 billion globally (with the US trail blazing with nearly $61 billion of the industry’s current worth) and set to reach $750 billion by 2024, it is expected to be the fastest growing retail sector in the coming years, surpassing fashion and apparel, food and beverage, and automotive. This highly profitable, yet extremely overcrowded industry has become incredibly susceptible to consumer shifts, with the democratisation of beauty impacting the creation, marketing, and selling of products – both on and offline. Consumer behavior is shifting and forcing change in beauty retailing, with millennials and Gen Z driving a lot of the change we’re seeing globally. This new generation consumer is dictating to brands what beauty is, not the other way around. Customers are no longer merely trusting legacy brands at face value to tell them what is good for them - simply selling a quality beauty product is no longer enough for them. With a socially aware, price-conscious, and less brand-loyal consumer base on the rise, brands are now venturing beyond websites to engage with their audiences. Today, disruptive technologies are changing the way we discover, experience, and purchase health and beauty products. The customer journey has shifted from a traditional linear path to one that seamlessly intersects all brand touchpoints at all times, both on- and offline. The result: a personal, meaningful and engaging two-way conversation with customers that is informative, inspiring, and ‘instagramable’.
This past week, I visited Ulta Beauty, the largest U.S. beauty retailer and premier beauty destination. I popped into a branch located on the Upper East Side of New York and was met by a highly energetic and buzzing atmosphere. Whilst many other retailers in this hyper-competitive landscape are closing stores down, Ulta Beauty is among the fastest-growing retailers in the U.S, now boasting over 1200 stores. Launched in 1990, the company reinvented the beauty retail experience by offering a new way to shop for beauty - bringing together all thing’s beauty, all in one place. Stocking more than 25,000 products both on-and offline, from approximately 500 well-established and emerging beauty brands (across all categories and price points), including their own private label, the store allows consumers to buy a low value item alongside a luxury product. Carrying both luxury and drugstore brands has been instrumental in Ulta’s success, appealing to all shoppers on a variety of budgets. With a limitless assortment offering and personalised beauty services, Ulta Beauty is committed to bringing customers the complete beauty experience. In a battle for a piece of the ‘beauty pie’, the key reason Ulta is flourishing might be less about ‘what it sells’, and more about ‘how it sells’. Unlike Sephora, who lean towards prestige lines, Ulta Beauty offers an immensely broad assortment of products that appeals to an expansive audience covering a wide spectrum of customer needs, at all price points.
With most brands focusing more on online, Ulta Beauty is standing steadfast with has made them stand out from the start - their strong in-store customer experience offering. With a very welcoming, accessible and friendly nature, they ensure they connect with every customer in a very open and personalised manner. Although the business also of course sells on its e-commerce website, the physical store is ultimately where the personalised magic truly happens, person-to-person. The nature of health and beauty products often means customers want to physically try products before buying, and this personalised buying experience is what many of their consumers crave, especially with the many new-on-the-scene, digitally native brands that are showcased in the store. It is in this way that their shoppers build an emotional connection and brand loyalty, reinforced with each visit.
THE FACTORS THAT MAKE ULTA BEAUTY RELEVANT AND SUCCESSFUL:
Customer-centricity
Limitless broad offering
Answers the needs across all generations
Answers the needs across all price-points
Personalisation - selling experiences that resonate on a personal level
Forward thinking
Brand ethics, culture and integrity
For the Second Quarter of Fiscal 2019
Net sales increased 12.0% to $1,666.6 million compared to $1,488.2 million in the second quarter of fiscal 2018.
Comparable sales (sales for stores open at least 14 months and e-commerce sales) increased 6.2% compared to an increase of 6.5% in the second quarter of fiscal 2018. The 6.2% comparable sales increase was driven by 5.4% transaction growth and 0.8% growth in average ticket.