How Ulta Beauty leverages digital innovation for customer connection and personalization

Episode transcript, edited for clarity.

Bill Thorne: Welcome to Retail Gets Real, where we hear from retail's most fascinating leaders about the industry that impacts everyone, everywhere, every day. I'm Bill Thorne from the National Retail Federation, and on today's episode, we're going to be talking with Prama Bhatt, Ulta Beauty's Chief Digital Officer.

We're going to talk to Prama about her career journey, how Ulta Beauty has used digital tools to continue to innovate and personalize the customer experience, and what's next in experiential shopping.

For today's episode, I'm going to hand the mic over to my colleague, Susan Reda. Susan, take it away.

Susan Reda: Thanks, Bill. Prama, it's great to welcome you to Retail Gets Real. How are you today?

Prama Bhatt: Thanks so much for having me. I'm excited to be here.

Reda: Great. Great. You know what? I thought we would just start off with the simplest things, just tell us a little bit about your background and, and how you came to be in retail.

Bhatt: Yeah. You know what I was thinking about this, and I started like, I think, many, many retail employees do. I was a teenager looking for ways to make money and I started working at a Kmart or a fast-food restaurant. I actually don't eat beef, but somehow working started working at Arby's. So go figure that that's,

Reda: Outside your comfort zone.

Bhatt: Hey, it was all good. I worked at Express and held a host of retail jobs as I was going through school. And I think that's why many of us love this industry, the economic impact and the accessibility to jobs and careers is so meaningful and so critical. My career journey, after school, didn't start out in retail. I became an engineer. I spent nine years in the auto industry at Ford Motor Company. I worked on trucks and powertrain and product development and manufacturing strategies. I joke about my career journey going from truck engines to bold lips and I'm grateful for the career foundation that I had at Ford Motor Company.

I was getting my MBA while I was there at Ford, and I was working on a strategy for a Mercury Marauder. It was a vehicle that was coming back after a 33-year hiatus, and it was coming revived as a niche muscle car, and this was in the early 2000s. And I remember thinking when we were working on that strategy with the target segment — by the time it comes out, it's going to be three to five years from now and who knows if we're making the right choices and the product's life cycles are so long. And that started the spark of wanting to get really close to the customer. I didn't exactly know how it would take shape at the time. I'm so far from the customer, even though I love the industry that I'm in so much.

So, I left Ford. I spent a couple of years in strategy consulting, exploring different industries, trying to figure out how to get closer to the customer. And then that transition helped me make the move and I joined Toys “R” Us in 2002, and that really started my retail journey over the last 21 years.

Interestingly enough, when I look back my quest to get closer to the customer, my interest in getting close to the customer, I, when I joined retail in 2002, I realized right away that we were really close to the POS transaction, but we really weren't close to the customer. And I didn't realize it at that time, but now I can look back and say that whole interest in getting closer to the customer actually got fueled really nicely with my journey, because to do that well in a scalable way, in 2023 and beyond, it comes with all things data and digital. I don't know that I could have mapped out that starting out as working in retail as a teenager, going through the industries that I did and landing here. I couldn't have mapped that or planned that out, but it all seems to make sense now looking back.

Reda: That is an incredible story. Thank you so much for sharing that. When you came into retail, you came in on the tech side?

Bhatt: I didn't. I came in on the planning and inventory and allocation side. I had a mentor that I got to work with that came in and brought me in from Booz Allen. Quite frankly, at that time, retail wasn't really interested in somebody from the auto industry coming in. If you didn't grow up in retail, it wasn't necessarily, you know, I was definitely an outsider.

That was actually really a critical part of, I think, the retail journey. Retail’s opened up so much over the last 20 years in terms of how much it kind of “adores its core” and its history and how open-minded it’s become to all the other things that are happening across in a macro way and how those can influence retail.

I guess I’ve got to be lucky in the early part of that journey, but yeah, I started in the stores. I started working. I got to — there was a period of time I got to be a key partner in managing the flow to the Times Square flagship store when that lived there for Toys “R” Us.

But then a couple years later, my mentor and my boss at the time was like, “Hey, we're going to go put you over here on toysrus.com,” and I was like, “noooo.” And I say that not because I wasn't interested. It was just, it was so new, and I was so interested in learning about retail. I didn't know that her foresight in allowing that to be an opportunity for me would have led me to a career later that's now all grounded in digital.

Reda: Yeah, the whole digital explosion in retail is unbelievable. But yes, for anybody who remembers that Toys “R” Us in Times Square, there was Prama probably on the Ferris wheel thinking, “I can't believe they're doing this to me.” Ups and downs in retail.

Bhatt: Thank you for remembering. Those were fun times.

Reda: Yeah, they were. So, tell us a little bit about how you ended up at Ulta and in this sort of digital environment.

Bhatt: Yeah. So, I'll go a little quicker, but I had this opportunity at Toys “R” Us to join the ecommerce team and that was awesome, and at that time, Toys “R” Us was still a partner to Amazon. So, I had that really early experience of being with Amazon and really realizing that we — on our own as a retailer — didn't know much about retail.

And then I lived through the really interesting learning and journey where we went into litigation and separated from Amazon, and through that process, we were ready as a team to kind of own and build digital capabilities within Toys “R” Us. And that gave me the opportunity to start from the starting point, and worked with a really powerhouse team that was thinking about how we could build those capabilities — so everything from the front-end experience to fulfillment, to customer service, to product road mapping — were all things we started to kind of learn and build on our own.

And then that allowed me to build my own craft and practice around, around understanding the space. Then after being there and driving and growth at Toys “R” Us and Babies “R” Us, moved over to Kenneth Cole — did that in a much smaller capacity with a large brand but a small retail presence. And all of that led me to experiences like buy anywhere, fill anywhere capabilities, where we were some of the early days of launching pickup in store or marketplaces.

Then Ulta Beauty came around and it just seemed to be the perfect opportunity for an industry that was right strategically for how you build consumer connection, not just commerce and digital. As well as build, the strength of relationship building with the consumer through digital.

So, it really allowed me to take the learnings I had and apply it in a new strategic industry, really focused on digital more broadly, not only the commerce transaction and not only the omnichannel capabilities, but the consumer connection that comes with digital.

Reda: Talk about some of that digital innovation that you've brought to Ulta, because what we have seen the company do in digital has just really raised the bar for so many others. How would you describe your approach to digital innovation and as you look at what you've done at Ulta, what are you most proud of?

Bhatt: Yeah, thanks for that. Thanks for the compliment. It is definitely not me. There's a whole team of people that are really passionate. Team Ulta Beauty is innovative at its heart in small and big ways, and so our team is always interested, is always innovating. I would say our approach has been one of dreaming big and being action-oriented, so it is much more of a mindset than just we're looking for something that we're trying to deliver that's going to be an innovation, so it embeds itself in everything we do.

This week we just launched our next drop on our Ultaverse on Roblox in a partnership with NYX Professional Makeup and their Mon-Star [Bash] Halloween campaign. So, we're doing things like that and we're always excited about partnering and experimenting, especially with our brand partners. But we have a range of innovation.

One of the things we're really proud of was the way we really stepped into personal try-on and augmented reality by acquiring the partner we were working with and making them part of the Ulta beauty family, and that was back in 2018 when we acquired a company called Clam Street. And over the years, we now have GLAMlab, which is an augmented reality virtual try-on solution that helps you try on makeup and brow and lashes and nail, and so there's that kind of innovation where we're like, “We need to own the space. We are the leader in beauty.”

We love the fact that our guests can come into our physical stores and try on makeup and try on everything, and we want to have a digital alternative and a digital capability for that as well. But then at the same time, we are innovative in ways like during the pandemic when our stores closed, and we moved to curbside in four weeks. And I think innovation takes all of that range when we think about innovation. I think … I'm not going to pick a favorite child. I don't think that's going to be fair. But I would say what I'm most proud of, I think, is the innovative spirit and mindset that our team has, applying it to everyday problems, as well as thinking big about how fast consumers are moving in the beauty space and how we can leverage emerging technologies to meet those future needs.

Reda: I love that in the store, it is that playground that you talk about, that you can just go from one area to the next and touch and feel. But online, you've made so many strides there as well. Talk a little bit about the personalization that you can do using the, in the digital realm.

Bhatt: The cool thing about the personalization — and I appreciate you bringing the two together, the store and the digital experience — because our hope is that your digital experiences you can do on the go, but you can also actually do in the store.

And we saw that, actually, during the pandemic. We had our testers kind of off-limits for a while, and that took some of the animation and excitement of being in the store out of it. That they were able to pull out their phones and try on 11 lipsticks, and see if that purple shade that they wouldn't have normally put on their lips, would have worked or not. So we do think these digital experiences support both.

But some of the ways we've done that — one great example is our skin analysis tool. It takes image recognition. It maps out your face. It tells you about redness and wrinkles or dry spots, and then it provides, not only information about your assessment, but it leverages AI and data and personal and your personalized information to provide a personalized set of recommendations and even a step-by-step routine.

So that's one example, and you can use that in the comfort of your home and shop online, or you can do that with one of our advisors in the store and have them help assist in finding the products for you. So that is one example of how we think about personalized experiences and bridging both the digital and physical experience.

Reda: And both the digital and the physical are both kind. They don't say, “Oh, wow, you've got a real problem. No, not sure we can help you, but let's move you over here.”

Bhatt: Oh, thank you for that. Our store associates are amazing.

Reda: They absolutely are.

I want to ask you about some of what's coming next. We've seen so many things happen already. And I thought the whole idea of being able to find the right foundation, again, digitally. I mean, in the store, when you're creating all the lines on your hands, or your inner arm or whatever, you're getting, I can see it. But digitally to get to the point where it's right. That's amazing. What’s next?

Bhatt: We continue to evolve on that journey. I think the Foundation Finder is a great example of — we've got a plethora of ways to help you find foundation. We've got a way to help you find foundation that's related to the type of foundation, whether it's a liquid or powder or cream, and the right brand of foundation. We've got a Shade Matcher. You can use our GLAMlab tool to help you get the right shade. We also have a Foundation Finder that helps you take — when you already have a foundation you love, but you're ready to try another brand, or you want to have portfolio foundation.

We have so many different ways when we think about evolving that, we'd love to have a one-stop shop where you can use our tools and help you connect all those dots and really bring you a holistic answer to something like, “What's the right foundation for me?” So those are incremental improvements we will see.

But then we're excited about thinking about things fundamentally different — whether it's thinking about the space around how we build loyalty, and we're looking forward to experimenting and loyalty this fall with kind of more Web3-type loyalty rewards.

Or we're also really excited about the ways we're continuing to test and learn live shopping and how video and two-way connection digitally play a role in building relationships and engagement. Leveraging video as the key digital area. I would say everything from continuous improvement to taking something like our foundation tools and bringing them together as a holistic solution. All the way through to innovative ways we're going to be using emerging technologies, like video shopping and how it links to the beauty experience. Or like Web3 rewards and things that we have on the horizon.

Reda: You said two-way digital. I'm familiar with chatbots. I'm sure so many people listening are. But now it would be one-to-one with … ?

Bhatt: You can. We've tested the opportunity for you to have a one-on-one consultation with an advisor. Right now, we're partnering with a company called Buywith, and we have, we're doing events on our site where you can, not only have an advisor walk a group of people through the site, an app, but then also recommend products and then shop right at that moment, as opposed to having a video experience and then shopping later somewhere else.

We're not sure. We're not exactly sure. We know in Asia, video — and using that medium as a form of relationship building, answering questions, solutioning — is definitely something that's a much larger channel there. But we're going to keep experimenting here — with our Beauty Enthusiasts here — and seeing what is working. Is it one-to-one? Is it one-to-many? Is it about education? It's about guided experiences through our site and app? And see where that takes us.

Reda: Prama, I know that the loyalty program at Ulta is just tremendous. In what way can you use digital to grow that program? Or you already have, but what's the next step there?

Bhatt: Yeah. We're so proud of our loyalty program. Forty million members plus. Over 95 percent of our sales coming from loyalty members that when we think about, even our mobile app, just the amount of engagement that we have in our mobile app from a loyalty perspective, we're just really proud of that, those relationships that we're building, and the sustainability of those relationships.

We're excited about tapping into the insights that we have through that data, which our guests willingly provide us. They are giving us feedback all the time on their expectations, on what they're looking for, and they're doing that in very literal ways by —

We've got an Ultra Beauty Collective that's like a lead user group that gives us feedback on any kind of key question we have. And our consumer insights team has done an awesome job really building relationships and bringing our customers and our guests and our members into our solutioning by understanding their needs.

But we also do it in implicit ways by digging into and mining our data, and understanding trends and understanding behaviors, and leveraging predictive capabilities to connect dots that we might not have on our own. And so that breadth of everything — from research and direct relationship-building with our members and really asking them and listening to them, all the way through to mining data with the latest algorithms, and understanding what we can learn, and how we could provide guidance through their shopping journey. And all that can happen because of the foundation of having our loyalty base.

Reda: Everybody in retail is talking about AI in some form or another. How does AI manifest itself at Ulta and how does it touch the customer?

Bhatt: I think for us, we want it to be seamless and transparent, That's the goal. The customer needs to feel great about the experiences they're having with us. Not that, “Oh, I had an AI experience.”

Reda: They don't care it's AI.

Bhatt: And they don't actually. They want it. They will love us no differently than they love an experience in our stores where an associate helps them — if we're able to help them solve their problem.

And so, when we think about AI, we want it to be behind the scenes, but we want it to be powering the way we're thinking about every decision that we make. And balanced with human understanding because it's not just about letting the machines run on their own. It's about that balance of our insights and our knowledge in concert with what we're learning from the intelligence.

I think, everything from the journey and connecting the journey — both outside of Ulta Beauty, within Ulta Beauty, on a return to Ulta Beauty — making sure that journey is fully connected, sounds like an easy. But all of us are still trying to connect all those dots, and we're excited about being able to do that. And every year, we get closer and closer to connecting all those dots across our journey. So that's still top of our list.

All the decisioning that happens with traditional AI is absolutely there. Meaning we have an amazing platform we built called Quazi, and it is at the heart of our brains and our decisioning engine. It helps us understand consumers, and their relationship to product, and in that helps us make appropriate recommendations. So having a really important decisioning engine and connecting the journey is absolutely continue to be on our roadmap.

At the same time, within the AI umbrella, everyone's talking about generative AI and ChatGPT and all of those tools that are coming through that. And the difference with that one is it's accessible to everybody. It's not an enterprise solution behind the firewalls of the company. It's accessible to everyone. And so being really thoughtful and smart about how to leverage all of these capabilities that are broadly open, but create differentiated experiences with our own capabilities.

When we think about generative AI, we think about ways we can improve everything — from our internal operations of the company — but what I'm most excited about are ways that we can really help our team. The irony of generative AI is, my hope is, that actually becomes the most human thing that we do together because it allows people to really leverage tools in a way that help them do what they do even better and drive even more human connection.

I'd say when we think about AI, we think about traditional AI and all the ways we can leverage data to deliver the best experience as a guided shopping journey.

And then we think about generative AI and ways we can ease and appropriately allow for our team members to thrive even more with this tool, that allow them to scale their capabilities, manage their jobs even better, and allow them to use their time in ways that are around critical thinking or helping our associates and things of that nature. So, making AI even more, driving more human connection, if that makes sense.

Reda: Absolutely. We just have a little bit of time left, but I've got so many more questions for you, but let me ask you this: How does the girl who was building muscle cars, has she become, has she become a beauty junkie? And what was the last thing you purchased at Ulta?

Bhatt: I will tell you, I think I was a beauty junkie before influencers were a thing because we know influencers weren't a thing when I started out in this. But I didn't know it at the time, but if I found something … like, I found the best round brush ever. I got, not only one for me, but I bought one for everyone. I think I was like a grassroots influencer in my own way. I don't know that I could have been a video influencer today though. I think I've always been a bit of a beauty junkie.

I think the most recent thing that I purchased is: I purchased a really nice primer. I know that does sound boring, but as I'm aging, I need something for these pores, and I need something to blur my skin. It was an Hourglass Veil Primer, and I'm just loving it.

Reda: Okay. You'll have to send that to me, because I'm a little shiny. What about the future? Let's talk about the future of retail. What excites you most about that?

Bhatt: I think I just hit it in the last question, and I should have been thoughtful about that. But I think what I'm most excited about is: I'm excited about the ways technology is definitely allowing us to move faster, scale more, engage more, build relationships, but I'm looking to maybe cross the hump where it not only does all that, but it's also added a lot more workload to everybody as well.

I'm still an optimist where I believe we will have a point where not only do we feel that technology is driving all those valuable outcomes, but it's also actually easing the burden on people and easing the burden on team members and associates and employees, and then allowing for that time to drive more human connection.

At the heart of it, retail is about serving a real personal consumer need, and doing that in store and doing that online, but it's grounded in that human connection, and the more technology can help amplify that human connection, the better.

If that's super-powering our associates in our stores with tools that are powered by AI and AR and gen AI, so that they can actually build deeper relationships with our customers in store — awesome.

Reda: I just saw the news about the Joy Project and that just made, it really touched a chord with me because I tend to be very self-effacing — but so many women are — and I just thought that the Joy Project, for those that don't know, has to do with embracing …

Bhatt: Your inner critic.

Reda: Yes. The inner critic that we all have, but turning it around and helping women to see that there's so much good there, and I just loved that. What’s the best piece of career advice you could offer to somebody who's just starting out in retail?

Bhatt: Yeah, I feel like I should say we all need to manage our inner critics. That's probably the best of advice, but …

Reda: We could succeed more if we did …

Bhatt: Kudos to our marketing team. I know that that's really striking a chord with all of us and glad to hear that it's striking a chord with you as well.

I would say, when I think about retail, and I would say, when I started working in retail or when many of us started working in retail, we're consumers and customers all the time, but we start to think about it as the lens of an employee because now we're working there. And I think the more we can continue to step into the shoes of the customer — whether it's in the physical store, whether it's on their site, in our app — and really shop and engage in a way that a regular customer would. Not as a retail employee. And then engage with customers, engage with store associates, engaging with our guest service, call center agents. Just engaging with team members and customers in a way that is at the heart of retail.

I would say for anyone starting out in retail, engage in retail from that lens, not the employee lens. And that those associates and those experiences and those touchpoints are at the front lines of retail every day. And that's where you learn. And that's where you get inspiration from.

Reda: That is just absolutely precious advice. I've heard that so many times from those who are at the CEO level, and they say if they don't get down on the floor and they don't listen, they don't succeed. So fabulous, fabulous advice. It has been a pleasure talking to you. Thank you so much for joining us today.

Bhatt: Thanks so much for having me.

Thorne: And thank you all for listening to another episode of Retail Gets Real. You can find more information about this episode at RetailGetsReal.com. I'm Bill Thorne. This is Retail Gets Real. Thanks again for listening. Until next time.