Ulta Beauty's number of omnichannel shoppers "continues to steadily increase," said CEO Mary Dillon, as she noted that shoppers purchasing both in-store and online now represent 9.1% of Ulta's loyalty members, up from 7.5% a year ago. What's more, Ulta's omnichannel customers spend 21.7 times more than its in-store-only customers.
While the rate of omnichannel shopping has increased for the beauty retailer, online sales have soared. Ulta.com sales grew 62.9%, in its third quarter of 2017, representing nearly 9% of total company revenue. E-commerce sales were driven by transaction growth. Total traffic growth was up 57% and mobile traffic skyrocketed 92%, which Dillon said was driven by investments in digital marketing and a relaunch of the mobile site during the quarter.
Ulta said it redesigned the shopping cart in checkout experiences for its mobile site and improved the credit card application experience, implementing the ability to apply and buy in one transaction, which the beauty retailer said has more than doubled the number of credit card account sign ups online.
Traffic for Ulta's mobile app increased more than 300% during the quarter, thanks to new features.
"We gave the Ulta Beauty app a mini makeover," said Dillon. The retailer added the ability to buy e-mail gift cards from a phone, made it easier to check ultimate rewards accounts and point balance, and improved GLAMlab. App users can now receive push notifications to get alerts about the latest promotions and exclusive product launches and use voice search to find products.
The retailer also continued to build out its online assortment and noted online-only brands accounted for a significant portion of its e-commerce growth during the quarter.
Ulta also launched its shoppable Instagram in August and Dillon said it's seeing "growing interest and engagement" in this platform.
To support this speedy online growth Ulta has continued to develop capabilities in its distribution network, which is forecasted to ship nearly 20% more units this year compared to 2016, with almost 10% of units supporting the e-commerce business.
"Our improved operational capabilities are supporting this growth, while capturing significant savings," said Dillion.
E-commerce costs per order are down 10% year-over-year with a 4.4% reduction in retail replenishment costs over the same period and the supply chain team has achieved a 20% reduction in retail replenishment lead times with most e-commerce orders processed within 24 hours of an order being placed.
The DCs in Greenwood and Dallas are expected to process nearly 85% of Ulta's e-commerce volume during the peak 2017 holiday season. Its Fresno-area DC is expected to open in summer 2018, which will add another 670,000 square feet of capacity to service up to 400 stores and 45,000 e-commerce orders per day, according to the retailer.
"Fresno will also provide a platform to implement new technologies to increase productivity and significantly reduce transit time for our West Coast customers," said Dillion.
CFO Scott Settersten said CapEx will take a significant step down next year, below $400 million, as the company shifts "to more of an optimization kind of mode, making sure we’re getting the value out of those investments we’ve made the last few years."