Ulta Beauty (NASDAQ:ULTA) is one of the largest beauty retailers in the country, but it’s far from the flashiest. Tucked into the back corners of strip malls and nestled into small town shopping centers around the country, the retailer has built a 1,500-store, $11 billion empire by being the unassuming workhorse of the beauty industry.
Which is exactly how founders Richard George and Terry Hanson designed it, Bloomberg says.
The Ulta Story
George and Hanson met while working in the corporate offices of the pharmacy chain Osco Drug. It was during their tenure here that they noticed a hole in the industry– there was no one-stop shop for consumers who used both high-end and low-end products in their beauty routines.
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So they set out to build it themselves, opening their first five stores, then called Ulta3, in 1990.
While the concept may not seem that radical today, three decades ago the decision to carry such a wide variety of brands was something of a gamble.
"The toughest part was convincing the prestige product companies to take a chance on us,” Hanson told the suburban Chicago Daily Herald newspaper back in 2017.
"The Destination of a Lifetime"
Dubbed the Home Depot of beauty, the retailer still stocks its shelves with makeup, hair, and skin products that run the gamut from drugstore affordable to ultra high-end. Customers can find their favorite $7 e.l.f. Cosmetics mascara two aisles over from a $550 Dyson hair dryer or a $110 Chanel fragrance.
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In total, the retailer carries more than 30,000 products from over 600 brands, Bloomberg reports. While not every product is available in-store, a large portion of them are ready for pick up in any one of the company's 10,000 square foot locations.
While other companies are niching down, focusing on singular categories or more limited brand ranges, that's not the direction Ulta is headed.
"It's really important to me that we carry everything across the entire spectrum so that we have something for everybody," Ulta CEO Kecia Steelman told Bloomberg. "I want to be the destination of a lifetime."
Results Built on Trust
In an age where consumers can buy directly from many of their favorite brands, many are surprised that Ulta remains a destination at all.
Oliver Chen, a managing director specializing in retail at investment bank TD Cowen, says that it comes down to the authority Ulta has built over the years and the loyalty that inspires in customers.
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"Beauty is a powerful industry with a lot of newness at one time, and you need a trusted authority," which ends up being the retailer, Chen told Bloomberg.
Ulta's loyalty program, which has 46 million members and accounts for 95% of all purchases made at the retailer, according to Bloomberg, is a perfect example of how much of a trusted authority the company has become.
Looking to the future
It's a trust that has tangible results. At the end of their last fiscal year, the company reported more than $11 billion in revenues. In November, it announced the opening of its 1,500th store.
Ulta also launched its third-party marketplace, UB Marketplace, in October to directly compete with Amazon (NASDAQ:AMZN) and Walmart's (NYSE:WMT) e-commerce platforms.
"UB Marketplace allows us to deliver more newness, faster entry into emerging subcategories and trends, and deeper category authority – while keeping the guest experience unmistakably Ulta Beauty," Ulta Beauty Chief Merchandising and Digital Officer Lauren Brindley said in the announcement.
In the announcement, Ulta said it plans to "quickly scale" the platform over the next 12-18 months, creating potential for an entirely new revenue stream for the company that could drive earnings for the unassuming beauty retailer even higher.
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