What makes Ulta Beauty more attractive than its rivals?
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What makes Ulta Beauty more attractive than its rivals?

Ulta Beauty is the largest beauty retailer in the United States. It sells cosmetics, fragrances, skin-care products, hair care products, and an in-store salon service. And while other companies are questioning their brick-and-mortar retail operations, Ulta is going from strength to strength: in the last 12 months, the company’s sales have increased 23.7%. What are the secrets to its success?

Ulta’s share price is up almost 10% so far this year

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SOURCE: Yahoo Finance

There are three things that really stand out about Ulta Beauty. The first, and perhaps most obvious, is that its one of very, very, few companies that actually managed to get omnichannel right. Omnichannel is a term that has begun to fall out of vogue due to its promises not being realised. It described the interweaving of online and offline business channels into a seamless customer experience. Analysts saw it as the next stage of retail and speculated that it could deliver new routes of growth beyond the Ecommerce explosion. The only problem is: it doesn’t. Well, for most people it hasn’t, anyway. Ulta is an exception to that, and it may provide the blueprint other retailers were looking for.

Ulta’s business is simple: it’s a shop-slash-salon that has a fantastic app attached to it. These three elements – the shop, salon, and app – all work well together. But more than that, they don’t replace each other. They compliment each other.

What that means is, if you want to browse cosmetics and fragrances, you can go into store and try things out in the traditional manner. And while you’re there, you can get some professional beauty treatments – it’s an experience, not a chore, and it has an obvious theme: beauty. Meanwhile, if you just want to order your favourite product with the convenience that’s become standard in the Ecommerce age, well (to paraphrase another company) “they’ve got an app for that”.

Addie Lalier, writing at the Motley Fool, also draws attention to two areas: store layout, and the company’s loyalty program. Both of these, she claims, set the company apart:

“Whether you're looking for one thing, you end up finding other things. It's really the layout of the store. And I think that other stores don't really have that as strong as Ulta does. Another huge thing is the loyalty rewards program. It's called the Ultamate Rewards program. It's pretty much one point for every $1 you spend. The more points you get, you get a monetary reward. So the next time you buy something, you get X amount of dollars off the more you accumulate. I really think that drives people and is an incentive to buy more.“

Disclosure

Dominion holds Ulta Beauty in its Global Trends Luxury Fund.


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