In the past two years, Ulta Beauty, a salon chain and retailer carrying more than 500 cosmetics brands, has surpassed Sephora to become the nation’s largest beauty merchant, opening more than 200 new stores, breaking ground on its first location in Manhattan, and upping its online sales by more than 50%. That’s all good news for CEO Mary Dillon, but one of her biggest accomplishments isn’t as quantifiable. Dillon, a veteran of McDonald’s and Gatorade, summarizes the sorry state of Ulta’s brand awareness when she took the helm in 2013 with a friendly impression of her target customer: “Ultra? What’s that?” Though sales were satisfactory, a long association with tired strip malls and budget shopping had taken its toll. Dillon repositioned the brand, putting new stores closer to urban centers (she expects to open 300 more by 2019) and investing in technology to deliver online orders more efficiently. “We’re a 27-year-old brand that I feel is just getting started,” she says. Here are some of the strategies in her corporate-makeover playbook.
Though Dillon is an Ulta shopper herself, she still leans on tactics she honed at other companies, when understanding the consumer didn’t come as easily (she recalls her dogless days marketing for Kibbles ’n Bits). Members of her team go on shop-alongs with customers, asking them about what they like and how they use the products as they move through the store. Dillon couples that intel with data from Ulta’s robust loyalty program, Ultamate Rewards, to complete her picture of the customer. That understanding informs her decisions about how to market Ulta’s more than 20,000 products for maximum impact.
Before Dillon’s arrival, Ulta was known for its abundance of discounts and coupons. She has edged away from that blunt-force strategy, instead incentivizing customers to join the loyalty program, which allows her to tailor benefits to the shopper. The theory: Thoughtful freebies (some members recently received Urban Decay eye-shadow kits; others, a custom color-matched Clinique foundation) do more to deepen the customer’s emotional connection to the store than a generic 15% off mailer. The strategy appears to be working. The program’s 21.7 million active members now generate more than 90% of Ulta’s overall sales.
About 20 times a year, Dillon makes trips to several stores around the country specifically to talk to associates, listening for what bubbles up. “I kind of collect these ‘ahas,’ ” she says, remembering the time she heard staff members mention how long it took to unpack the boxes that came from distribution centers. She instructed the centers to reorganize the boxes, aligning them with store layout. The move enabled employees to spend more time with shoppers. “That’s the kind of insight within the seams that’s important,” Dillon says.
Dillon believes building physical stores is critical to growth, but she’s equally committed to improving Ulta’s online shopping experience. One of her early triumphs was investing in a pair of distribution centers that dramatically improved Ulta’s e-commerce processing times. “People want to buy online, and they want to come into the store and try things,” she says. But she can also guide them toward new experiences. Last year Ulta debuted Glam Lab, a virtual try-on experience that allows users to upload a selfie and test products against their skin tones.
Ulta generates 2,500 new jobs annually, but Dillon isn’t content to just create positions—they have to be fulfilling. During a management meeting early in her tenure, Dillon noticed that no one seemed comfortable asking questions—and the ones that were voiced were often shut down. Today, she encourages open feedback through a quantitative survey that goes out to the company’s 30,000 associates, measuring how engaged they are, how much they trust management, and whether they believe their managers support their career development. The results help Dillon ensure Ulta’s team members continue to uphold a culture of openness. “At the end of the day, especially in retail, you’ve got humans serving humans,” she says. “And really, the more engaged and happier the associates are, the happier our guests are. It’s not complicated.”
Ulta’s engaging in-store experience helped boost company revenue by more than 20% last year. Here are four ways the company changed its retail formula.
Salons: Ulta distinguishes itself by offering in-store services, including haircuts and facials. Recognizing that salon guests spend almost three times as much as other customers, Dillon moved the Benefit Brow Bar, a station for eyebrow shaping, to the front of some stores so that shoppers see services when they enter. Salon sales were up 15% in the first nine months of 2016.
Samples: Most beauty retailers provide products for customers to test, but usually only for higher-end brands. In a bid to lure shoppers into stores, Ulta offers samples for a wide range of products, inviting people to try on not just prestige makeup lines such as Estée Lauder and Nars, but also drugstore brands including Maybelline and CoverGirl.
Tools: Walk into an Ulta store and you’ll hear the whir of hair dryers, and not just because of the salons. Many of the electronics the store sells, such as the new Dyson Supersonic hair dryer, are plugged in to encourage play. Even the low-tech tools, like makeup and hair brushes, typically have samples on display for customers to see and feel.
Reviews: As they browse the store’s seemingly unlimited supply of eye shadows, lotions, and nail polishes, shoppers can use the Ulta app to scan any product’s bar code. From there, they can read customer reviews, see similar merchandise, and save items as favorites. The app also tracks loyalty points and displays products and services in an appealing Pinterest-style interface.