8 Ways Ulta Is Building the Store of the Future

Press enter to search
Close search
Open Menu

8 Ways Ulta Is Building the Store of the Future

By Jamie Grill-Goodman - 05/31/2019

Investment Plans

Ulta said it plans to spend between $380-400 million in CapEx. This includes approximately $190 million for new stores, remodels and merchandise fixtures, $140 million for supply chain and IT, including new fest fulfillment centers, and about $60 million for store maintenance and other. 

Ulta Beauty is expanding, and as it does the beauty retailer is making moves to build the store of the future.

The company announced it will expand internationally and its first step in becoming a global beauty retailer will be to prepare to launch operations in Canada.

“Canada is an attractive and logical place to start,” said CEO Mary Dillon. “We're planning to launch stores and e-commerce in Canada.

Ulta plans to open approximately 80 new stores in its fiscal 2019, all its traditional 10,000-square-foot prototype. It also plans to remodel 12 stores, relocate eight stores, and execute 270 store refreshes. During the first quarter of fiscal 2019, the company opened 22 stores bringing its total stores to 1,196.

As Ulta plans to move into the international market, the retailer is pushing hard into its digital experience and retail innovation. Here are eight ways Ulta is building its store of the future:

E-Commerce Growth

While Ulta does not break out e-commerce growth specifically, ulta.com growth was in line with expectations of 20% to 30% growth, driven by traffic. The company expects e-commerce to grow in the 20% to 30% range, contributing approximately 200 basis points to comparable sales.

Augmented Reality

Late last year Ulta acquired GlamStreet and QM Scientific to help it develop an innovation pipeline and move faster in developing its augmented reality offerings.

Dillon noted the acquisitions’ teams are integrated exceptionally well with Ulta’s team and digital innovation to drive Ulta’s top line and other efficiencies will be a key theme for Ulta "forever."

Currently, Ulta’s augmented reality innovation includes testing in-store Ulta digital stylists in six pilot stores.

This tool is intended for associates in the salon or brow bars to show possibilities to customers in the store and offers virtual try-on for hair color, makeup, and eyebrow shaping, explained Dillon.  

Artificial Intelligence (AI)

From an AI innovation perspective, Ulta launched the skincare virtual beauty advisor on ulta.com, enabling shoppers to explore skincare assortment by concern or by product.

“The virtual beauty advisor asks a series of dynamically generated questions and presents a set a personalized recommendations that can be further reviewed and then purchased,” said Dillon. “This user-friendly interactive experience is another great example of how last year’s strategic acquisitions are adding value.”

Additionally, Dave Kimbell, chief merchandising and marketing officer, noted that as Ulta advances its personalization and AI efforts, a big focus for it will be to help shoppers migrate into different categories, while still keep them engaged in safer stage cosmetics.

“That has been working, we're having a lot of success with that,” he said. “And that'll be a focus for us going forward.

Ulta’s Mobile App & Glam Street

Ulta has rolled out enhancements to its mobile app including an improved order history view to make reordering more efficient. It has also improved the usability of Glam Lab, Ulta’s live try-on function driven by its recently acquired Glam Street subsidiary. It launched the iPhone version in January and plans to launch the live try-on for Android in June.

Chatbots

Dillon said Ulta’s e-commerce team recently partnered with Guest Services and IT to deliver its “first production chatbot experience” on its customer conversation platform.

“These initial experiences automate our communication with guests in response to frequently asked questions about loyalty points or birthday emails,” she explained.

Save the Sale

Ulta calls its save the sale program “store to door,” in which store associates assist shoppers with ordering products online when they aren't available in the store. Store to door demand increased about 20% versus last year during Ulta’s first quarter 2019.

“It's improving guest satisfaction particularly as we expand our assortment of emerging and digitally native brands that are frequently offered in limited doors,” noted Dillon.

Buy-online-pickup-in-store (BOPIS)

BOPIS capabilities are beginning to become tablestakes for larger retailers and to this end Ulta has the service currently operating in 47 stores. The retailer expects the service will be deployed chain wide by this summer and has redesigned the find-in-store functionality on its website to support the upcoming rollout. It also will begin testing ship-from-store capabilities in five stores this fall.

Two-Day Shipping

While large retailers battle it out to provide one-day shipping, Ulta has set its sights on attaining two-day e-commerce shipping by 2021.

As part of Ulta's infrastructure plan to reach this, the retailer’s Fresno distribution center continues to ramp up and is now serving 245 stores and facilitating 22% of e-commerce orders. The conversion of its Romeoville distribution center into an e-commerce fast fulfillment center (FFC) is underway and on track to open this summer. The second FFC is planned to open in the summer of 2020 in Jacksonville, FL. FFCs serve e-commerce orders only and are designed to fill up to 30,000 orders per day during peak times.

Loyalty & CRM

Ulta’s Ultimate Rewards loyalty program grew to 32.6 million active members, representing member growth of 14% on a rolling 12-month basis. Its work with its loyalty and CRM platform is leading Ulta to be more able to deliver personalized offers, according to Dillon.

“Obviously, that's a kind of a Holy Grail,” she noted. “We continue to test and learn behind the scenes, there's a lot happening that is hard to track, but testing different circs and values and reminders and durations, all those within the spirit of optimizing return on that investment. So, I think we've got the right track, the tools to drive traffic and sales and deploy them in a balanced way and will continue to, as we do all the time, keep a very close eye on the competitive environment as well.

Kimbell noted Ulta has a high loyalty retention rate to begin with, but thinks it could be higher. He said the company is already seeing a positive response by exploring different communication techniques, programs, offers to new guests, and then leveraging its AI capabilities.

“We think over time, it will take a little time, but we'll just get smarter and smarter and smarter through the capabilities that we have,” he said. “It will take time, but it's an exciting frontier for us for sure.”