To: Mary Dillon, CEO of Ulta Beauty

Dear Mary,

In the past few years, Ulta has flourished as a beauty retailer of both high- and low-end brands, with plans to add another 100 stores to its network of 1,000 pre-existing brick-and-mortar locations. Your customers show up again and again for the more than 500 brands Ulta offers, including your own private label, as well as exclusive, made-for-Ulta products and private labels from other brands.

Ulta continues to expand its brand selection, often testing new brands online or at a small number of brick-and-mortar locations first, before scaling the offering. This worked wonders for MAC Cosmetics—Ulta’s most successful ecommerce launch ever—which you later introduced to retail stores.

But as beauty continues to boom and Ulta expands its square footage, how will you continue to distinguish your stores both among competitors and throughout Ulta’s fleet? There’s a way to exercise this muscle differently—one that helps you localize your sprawling big box stores as community hubs that cultivate up-and-coming young brands while simultaneously acquiring new customers.  

Here’s one idea about how to do it.

Launch Ulta Local sections inside your stores.

The MAC launch shows that starting online is an efficient way to test drive a new brand offering. While many emerging brands exist online, figuring out their offline footprint is their next quest—and somewhere they need trusted partners.

What if you reversed the digital-first strategy on a local level, debuting smaller, neighborhood beauty brands in special sections in nearby Ulta stores? For example, Ulta Santa Barbara could include a section for hometown brands, giving them a platform in the short-term to interact with customers, which derisks the partnership for you, but also has the potential to blossom into a longer-term relationship.

This would accomplish a number of objectives:

  • It would further distinguish the importance of wholesale for brands that initially rejected it. In the partnership, Ulta would serve as a retail incubator, selling the local brand’s products while both earning incremental revenue and insights about the brand on its potential role in Ulta’s long-term trajectory.
  • It would turn Ulta stores into an outpost for localized luxury—the concept of selling specific products available only in specific stores, rather than repeating the same merchandising strategy across many stores. This would enhance Ulta’s brand equity, reeling in new customers and giving existing ones a reason to visit their neighborhood store. This would bolster Ulta’s reputation as a brand that offers exclusive products from indie beauty brands, much like West Elm does with artisanal home goods and experiences.  
  • Finally, it invigorate your retail strategy in your large-format stores, aside from your salons and brow bars. While Sephora expands its smaller-format Studio concept that rely more on experiences and technology, Ulta could avoid downsizing its storefronts by incorporating a fresh feature to each 10,000 square footage. With 1,000 square feet set aside for Ulta salons, you could even introduce local stylists to host beauty-related events in your stores down the line.

This is just one idea that could keep Ulta ahead of its competitors in the beauty space, both online and offline. Let me know if you’d like to hear more.

Richie Siegel
Founder and Lead Analyst
Loose Threads