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ULTA PUTS A FRESH FACE ON COSMETICS RETAILING

By Edmund Mander

There’s nothing stripped down about Ulta anymore: Customers expect to be pampered.

Deptford (N.J.) Crossing, anchored by Marshalls, PetsMart and TJ Maxx, is not exactly the kind of place you would expect to find an elegant day spa, or shop for products by the likes of Yves St. Laurent and Paul Mitchell.

For that matter, neither would you expect to find these and other products — Givenchy Number Two lipstick at more than $20 a tube and the richly priced scents of Guerlain, for example — in a store offering $8 bottles of L’Oréal hair coloring for men and $5 Maybelline Tassled Taupe lipstick.

But Ulta shoppers have come to expect all those things. Today, the woman who previously picked up her inexpensive lipstick at the drugstore and her pricier cosmetics at the department stores has discovered one-stop beauty shopping. Romeo, Ill.-based Ulta is the store that is unashamed to be everything to everyone, and its success has cost department stores and drugstore chains a chunk of their cosmetics commerce.

“They have really created a new approach to beauty shopping,” said Wendy Liebmann, president of WSL Strategic Retail, the New York City-based consulting firm, explaining that Ulta cannily sensed an opportunity in the shopping habits of cosmetics consumers.

“They really understood that the American female customer wanted something different in beauty shopping,” she said. Women, many of whom buy both premium and low-priced cosmetics, were tired of having to go to separate places for them. Moreover, they were only too happy to devote an entire shopping outing to beauty needs, rather than treating cosmetics as a digression from other department store and drugstore errands.

“Women no longer have time to spend hours shuttling from the salon to the department store to the drugstore to take care of their beauty needs,” said Doug Walrod, Ulta’s senior vice president of real estate, responding in a statement to inquiries about the chain and its strategy. “They have so little time to devote to themselves that they want to be able to meet their personal care and beauty needs in one place, such as Ulta.”

For this reason, Ulta makes it as easy as possible for its customers to visit, locating stores in strip centers with easy access and plenty of parking. Product range and accessibility are not its only virtues, however. Ulta has turned cosmetics shopping into a form of entertainment, with its brightly lit stores inviting shoppers to sample makeup, drink coffee and indulge themselves with massage, manicures, pedicures, makeovers and haircuts. Shoppers are even treated to a variety of presentations, some of which — how to decorate a home, for instance — are not directly related to beauty. Little wonder they have become destinations in themselves.

The stores are richly appointed, with wide aisles, wooden cabinetry, luxurious bathrooms and soothing music. Cosmetics are not locked behind counters, and Ulta’s shoppers don’t find themselves ambushed and squirted by atomizer-brandishing product promoters.

“The atmosphere in an Ulta store is one of relaxed elegance and indulgence; we want customers to feel instantly that they have escaped,” the company’s statement continued. “Samples are plentiful and accessible to encourage customers to entertain themselves by sampling different products. Flower displays, bubbling Zen rock garden fountains and the prominently displayed vibrant Ulta private-label color library accentuate the store’s uplifting ambience.”

In short, the chain provides a “total beauty experience,” Liebmann said.

Ulta is not the only company changing the way people shop for cosmetics, of course. Sephora, a division of Moët Hennessy Louis Vuitton, with more than 215 stores in Europe and in excess of 77 in the United States, also sells a range of products, and has altered the face of cosmetics retail since opening its first location in Paris in 1993. Its stores are attractive, offering a mixture of brand-name cosmetics and perfumes, and private-label products. Sephora is opening about 20 stores a year in the United States, in both freestanding and mall locations.

Meanwhile, there is a steady exodus of customers from drug chains, according to a survey by WSL. While 19% of women in a 1998 survey listed drugstores as their first choice for cosmetics, only 16% did so last year.

Like Sephora, the privately owned Ulta is expanding quite rapidly. The company, which is owned by five major investors, including Fourcar BV, a division of French hypermarket giant Carrefour SA, has more than 90 stores in more than a dozen states, has opened about 20 stores this year and plans approximately 30 next year.

“After 2002 my guess is that the number [of annual openings] will increase,” said Walrod. He also noted that “at some point in time the company will go public,” a step that often precedes aggressive expansion.

But there are some distinctions between Sephora and Ulta. Notably, Ulta isn’t going near malls or freestanding locations in urban locations like the ones Sephora has established in Manhattan; the retailer mostly locates in strip and lifestyle centers.

“It’s just a matter of right now doing what we know best,” Walrod said. “Storefront locations in Manhattan can be very risky as well as very lucrative.”

But he declined to say why the company is staying out of malls.

Others offer various explanations for this real estate strategy, though.

“They may feel that they have more control over their environment by not taking a mall,” suggested Cynthia Cohen, president of Strategic Mindshare, a retail strategy consulting firm in Menlo Park, Calif., noting, for instance, that a store can more easily set its own hours of operation outside a mall. Moreover, it can get more space for its money in a strip center, something that is of some importance for a retailer keen on keeping its prices low, she said. Locations such as Deptford have provided inexpensive testing grounds for Ulta’s stores, Cohen added. “Deptford is the off-Broadway road show.”

In addition, malls do not provide the same easy and quick access offered by strip centers, Liebmann said. And, a retailer that sees itself as the exclusive destination for a shopping trip might question the need to be near other tenants, let alone share a mall entrance with them.

Ulta has tinkered with its format over time. When in 1990 it opened its first store in suburban Chicago, the discount chain had the look of a stripped-down drugstore, underscoring a message to customers that the retailer was focusing on keeping its overhead, and, therefore, its prices down. But higher-end manufacturers initially were reluctant to supply stores like Ulta, afraid their cachet would be diluted by the discount store environment.

“They [Ulta] had to show those companies that they were not about taking their products and discounting them drastically,” Liebmann said, adding that some manufacturers still haven’t gotten the message and restrict their product distribution. But, with retailers such as Target and Kmart taking more and more shoppers away from department stores, suppliers are feeling the pressure, observers say.

Ulta has done away with its stripped-down format, but not to appease its suppliers. While the spartan look works for factory outlet centers, it didn’t satisfy women looking for some pampering and self-indulgence. In 1999 Ulta began rolling out a new look, with 10,000-square-foot to 11,000-square-foot stores featuring hardwood floors, sleek fixtures, wide aisles and soft lighting, with everything except the prices designed to evoke the ambience of a fancy store. It also expanded its offerings to include spa services, full-service salons, manicure stations, facial treatment rooms and a pro hair care section.

Today, the target Ulta customer is about 40 years old, college educated, enjoys a family income exceeding $75,000 a year, and uses four facial and three hair care products daily. Consequently, anyone answering that description in the parking lot of a center anchored by Marshalls isn’t necessarily lost.

 

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