Ulta Beauty, one of the top beauty retailers in the U.S., is battling heightened competition and shifting consumer behavior, which has caused it to drastically switch up its offerings for shoppers.
During the second quarter of this year, Ulta Beauty saw a healthy boost in its sales amid recent challenges.
- Ulta’s comparable sales increased 6.7% year over year.
- Customer transactions spiked by 3.7%.
- Also, the amount of money customers spent per purchase climbed by almost 3%.
However, despite the sales boost, recent data from Placer.ai found that Ulta’s foot traffic at same-store locations declined by 1.1% year over year during the quarter. Specifically, same-store visits dropped by 4.6% and 5.4% in June and July, respectively.
During an earnings call in August, Ulta Beauty CEO Kecia Steelman said that while beauty remains a top priority for customers, many are watching their spending as they grow concerned about the economy.
“Our insight suggests consumers continue to prudently manage their day-to-day spending and are watchful of pricing trends in response to tariffs,” said Steelman. “At the same time, beauty enthusiasts tell us that they’re prioritizing their beauty regimens and remain strongly engaged within the category.”
To attract and retain customers, she said Ulta will look for new ways to “maximize key growth opportunities in beauty and wellness.” This includes expanding the wellness section of its stores.
Image source: Jones/Bloomberg via Getty Images
Ulta Beauty hopes a new offer for customers will boost sales
Ulta also just launched its online third-party marketplace, UB Marketplace, which further expands its beauty, wellness, hair care, skin care, and fragrance offerings for customers.
The marketplace features over 100 new brands such as Apotheke, Ogee, Babe Lash, and K-beauty brand Saturday Skin.
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Ulta plans to quickly expand its UB Marketplace assortment over the next 12 to 18 months. The beauty retailer touts that customers who shop on the new online marketplace can enjoy easy in-store returns and Ulta Beauty Rewards on eligible purchases.
“UB Marketplace allows us to deliver more newness, faster entry into emerging subcategories and trends, and deeper category authority – while keeping the guest experience unmistakably Ulta Beauty,” said Lauren Brindley, chief merchandising and digital officer at Ulta Beauty, in a press release.
“This thoughtfully curated model scales discovery and brand building for our partners, and ensures guests enjoy the same benefits they love – Ulta Beauty Rewards, easy returns, and a unified, trusted shopping experience.”
Some Ulta Beauty customers aren’t impressed with the new marketplace
While some customers welcomed the new marketplace, others took to social media platform Reddit to criticize it for containing unwanted items.
“I pretty regularly wait up til 10 to look for anything new in the new arrivals section I’m interested in and ever since the introduction of the UB marketplace it’s just a disaster. It’s flooded with stuff none of us asked for,” wrote one Ulta shopper on Reddit.
“‘Marketplace’ sections of store websites never made sense to me. If I’m shopping at a store like Ulta, it’s because I want Ulta’s product/brand lineup with Ulta’s seal of approval and logistics chain. The product lineup, alternate sellers, and different return instructions cheapen Ulta’s brand,” wrote another shopper.
“I can’t believe what’s there! Items that belong in Temu or Ali Express. Barely makeup adjacent products that are incredibly overpriced,” claimed another Ulta customer.
Ulta Beauty is stepping up its game to compete with Amazon
Ulta’s UB Marketplace launch comes at a time when it faces increased competition from Amazon, which also sells beauty products from third-party sellers.
According to recent data from market research company Circana, which was unveiled in a recent report from Market Defense, Amazon is the No.1 beauty retailer in the U.S.
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Circana conducted a survey, finding that 59% of consumers prioritize convenience when shopping for beauty products, and 57% purchase prestige. These may be some reasons Amazon is winning with beauty shoppers.
Sephora, owned by LVMH and another competitor of Ulta, even saw its U.S. sales dip earlier this year as Amazon’s beauty offerings resonated more with consumers.
During an earnings call in April, LVMH Chief Financial Officer Cécile Cabanis said Amazon has been “very aggressive” about lowering prices, contributing to Sephora’s lower-than-expected U.S. sales.
“In the U.S., we have a bit less momentum when it comes to e-commerce, especially because Amazon is being very aggressive, and being aggressive is mostly regarding price, and we try to avoid this technique,” said Cabanis.
During Amazon’s weeklong Prime Day event in July, many beauty retailers offered significant deals and discounts to keep shoppers away from the online retail giant. According to the Market Defense report, beauty and cosmetics accounted for 25% of Amazon Prime Day purchases.
“Prime Day was the main event – but everyone else showed up ready to compete,” said Market Defense Chief Marketing Officer Vanessa Kuykendall in the report. “Ulta dropped a new K-Beauty lineup featuring Medicube and TirTir just before the sale, tapping into brands that had largely been exclusive to Amazon in the U.S. Sephora focused on foot traffic with Lyft credits and in-store coupons to get ahead of the Prime rush. Ulta came for the brands, Sephora came for the experience – but Amazon is still where discovery meets delivery. And the real winner? The beauty shopper, with more ways to shop, more perks to choose from, and loyalty rewards no matter where they click.”
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