This story appears in the Septemper 4, 2017 issue of Forbes. Subscribe
Since Mary Dillon became CEO of Ulta Beauty four years ago, she has given the once dowdy makeup retailer a much-needed makeover.
Ulta Beauty’s stock has climbed 150% since Dillon took charge of what is now the United States’ biggest beauty retailer with nearly 1,000 stores and more than 20,000 products. The secret to Dillon’s success? “First and foremost, it was about getting Ulta Beauty on the radar screen,” says Dillon, who joined Ulta from U.S. Cellular in 2013.
She took a budget beauty retailer with a lagging digital presence and turned it into a media-savvy brand offering a range of price points to a following that includes 24.5 million loyalty program members, who make up 90% of Ulta’s sales. “In the past four years, we’ve really established Ulta Beauty as 'All things beauty all in one place,'” says Dillon. “We’re in all the places that a shopper is engaged digitally to learn about beauty."
That change was visible in May, when Ulta Beauty launched its partnership with high-end makeup brand M.A.C. with an Instagram flash sale promoted by a beauty vlogger, selling the collection online before stocking it in stores. Mobile shoppers could try out M.A.C. virtually on a selfie with Ulta’s new app feature, “Glamlab.” The approach is working: The percentage of revenue from e-commerce has doubled since 2013. It accounted for 7% of Ulta's $4.9 billion in revenue in 2016, and the percentage rose to 8% in the first quarter of 2017.
While Dillon has rapidly grown Ulta’s e-commerce chops, the physical shopping experience at Ulta's retail stores is also crucial to the company's strategy. “We’ve continued to expand the overall footprint of Ulta Beauty both physically and digitally in so many ways," Dillon says.
Every Ulta store has a full-service salon so shoppers can get haircuts and brow waxes, in addition to browsing Ulta's extensive makeup selection. Ulta's "beauty enthusiasts," who are responsible for 75% of sales, are always looking for something new and trendy, Dillon says. "It's about an in-store experience that's fun. It's about going in and trying the scents and the colors -- and buying online." Ulta reports that enthusiasts who shop both in-store and online generate 2.5 times the sales as shoppers who only use one platform.
With a customer base focused on novel experiences, Dillon knows that Ulta, which ranked 34th on Forbes' 2017 Innovative Companies List, will have to continue to adapt to an ever-changing beauty landscape to succeed. “One thing I love about the beauty category is that innovation happens in all different ways--from big companies to people in their bedroom showing, ‘Here’s the haul of Ulta Beauty products I bought.’”
