Ulta Beauty CEO Dave Kimbell was at a dinner recently, seated between two entrepreneurs with strikingly different offerings. On one side was a nail artist who had created an elaborate and unique press-on nail brand that had seen viral social media success. On the other was the founder of an indigenous plant-based skin care line featuring sustainably harvested and sourced botanicals.
“These two couldn’t be any more different in what they’re delivering, but they both have an equal opportunity in the marketplace right now,” he said during a keynote session at NRF 2024: Retail’s Big Show. There’s a demand for different ways to engage in the category, an inherent diversity in beauty and a strong desire to discover something “new.”
“I love that about our business,” he said in the conversation with CNBC retail and consumer reporter Melissa Repko. “And it’s something that I think it will continue to fuel the category for a long time to come.”
As for that dinner, it was part of Ulta Beauty’s MUSE Accelerator program, an initiative that identifies cohorts of emerging BIPOC founders creating fresh and exciting things. They receive funds and mentoring to help them become successful in the retail market.
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Ulta Beauty sees 2,000 brands that approach the company each year, bringing less than 5% of them into the business. “And they are across all dynamics, and all elements of the category,” Kimbell said.
Kimbell recognizes how fortunate the company is to be in a category with such a high level of engagement. Listening to customers helps keep things fresh, and Ulta Beauty’s recently revamped loyalty program makes that easier than ever. There are more than 42 million members, and more than 95% of sales go through the loyalty program.
“Almost everything we sell, we can connect back to an individual,” he said. “We understand our guests’ behavior.” The goal is to make the program “the rewardiest program” not only in beauty, but in all of retail. So far, so good: In the third quarter, he said, the program grew 9%.
Leaning into experiences
Ulta Beauty continues to innovate in products, services and experiences. That means leaning into AI and other tech, exploring things like smart vending machines for samples, robotic eyelash extensions and robotic manicures.
Kimbell does note that the human experience is most important; the 50,000 associates across the country deliver a “one-on-one experience to help our guests discover beauty on their own terms, to find solutions that meet their needs, and to create connections with our guests, both in the store and in our salons.”
That said, the company has seen “explosive growth” in its app due to innovations and opportunities; it now represents over 50% of ecommerce sales and is increasingly becoming the way consumers navigate Ulta Beauty both in and out of the store. The app includes, for example, virtual try-on opportunities and skin diagnosis, and serves as the hub for the loyalty program.
AI has been a big area of focus, too, in areas such as personalization and virtual chat. “Beauty tech is a space that is moving really fast,” he said; Ulta Beauty has a specific fund for investments in small companies that “we think are creating the future of the beauty category, and we’re excited about the possibilities of what that could bring.”
Ulta Beauty has 1,400 stores plus 500 locations in partnership with Target; it actively competes in all price points of the category, including makeup, skincare, hair care, fragrance, bath and wellness, in addition to its services.
The company doesn’t look at guests through a demographic lens, but rather the psychographic lens, understanding the “beauty enthusiast.” At its core, those are customers who are simply “passionate about beauty,” regardless of age or anything else.
Beauty enthusiasts don’t see shopping for beauty as a chore to check off a list, he said; it’s something they look forward to because it’s important to who they are, something they really enjoy.
“We feel at Ulta Beauty that we’re here to help them discover beauty,” he said. “We have a saying: ‘You don’t come to Ulta Beauty to get beautiful. You come because you already are.’”
Ulta Beauty’s purpose, he said, is about discovering “the possibilities that lie within each and every individual, however they choose to express themselves. Inherently, we feel like we have to have a diverse experience and a connection to all our guests. And that leads our thinking about how we reach different groups.”