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Ulta: A Force to be Reckoned With

Lila Margalit
November 23, 2022
Ulta: A Force to be Reckoned With

Over the past few years, Ulta has established itself as one of the nation’s leading retailers. Despite the significant challenges facing discretionary retailers in the wake of COVID and ongoing inflation, the beauty chain continues to experience remarkable growth, with second-quarter net sales increasing 16.8% percent compared to last year. In May, the company launched its own retail media network – utilizing its diverse and expanding customer base to offer partners targeted advertising opportunities, both on and off its website. 

Foot traffic data for the past three months shows just how strong the brand’s position is, both relative to 2021 – a year which itself saw marked visit boosts as COVID restrictions eased – and relative to its pre-pandemic baseline. Between August 1st and November 13th, overall visits to Ulta were up 27.6% compared to 2019 and 11.0% compared to 2021, with weekly visit growth trending highest in August and picking up again in October. This is especially impressive for a retailer that showed strong monthly visits in 2021, as most retailers have seen either minimal gains or even declines.

The Retail Media Opportunity

Ulta is also one of the latest companies to jump on the retail media bandwagon, unveiling UB Media in May 2022 with the goal of leveraging its own consumer data to advertise more efficiently. The network draws on data points from Ulta’s rewards program, which boasts some 37 million members, to provide a personalized ad experience. 

While the network currently focuses on digital channels, Ulta has noted that it plans to expand to additional formats going forward. And given Ulta’s broad and growing retail footprint, it would come as no surprise if the chain were to offer advertisers in-store opportunities. 

When it comes to location-based advertising, unique physical visitors – the offline equivalent of unique ad impressions – are a key metric. And a glance at unique visitor growth to Ulta stores in several key states shows just how well-positioned the company is to harness the advertising potential of its physical fleet. In both New York and North Carolina, for example – two states with somewhat different consumer profiles – the chain attracted about 40% more unique visitors over the past three months than it did in 2019.  

The Widespread Ulta Appeal

Ulta’s broad appeal across different states may stem from the brand’s strategy of offering a wide range of beauty products, including both discounted and luxury merchandise, under one roof. Recently, the chain has decided to maximize the potential of its diverse offerings by merging displays of prestige and cheaper products, giving customers more opportunities to trade up, as well as down.

A look at the demographic make-up of Ulta’s True Trade Areas (TTAs) – based on a combination of foot traffic data and census figures – shows just how diverse a customer base it attracts. In New York and Illinois, for example, just over 10% of Ulta’s potential shoppers earn more than $200K a year – while close to 20% earn less than $25K. In other states, too, the chain has positioned its stores in communities with significant economic diversity.

Attracting Customers of All Ages

The age distribution of Ulta’s trade areas is also diverse, with GenZ adults, Millennials, GenXers, and Boomers all well-represented. 

The median age of Ulta’s TTAs throughout the country – 34, almost five years younger than the median age of the general US population – reflects the chain’s special draw for younger shoppers. And indeed, in recent months the company has ramped up efforts to lean into beauty trends likely to appeal to younger crowds. Since 2020, it has promoted the concept of clean beauty, certifying nearly half the brands it offers as cruelty-free, eco-friendly, or in line with other “Conscious Beauty” criteria. Ulta has also embraced body positivity, launching its Beauty& campaign to “move the industry forward, widen the lens of beauty and inspire all to reclaim beauty on their own terms.” 

At the same time, however, the chain continues to attract a significant share of older consumers. In New York, 15.1% of Ulta’s TTA population is over 65 – more than the statewide average of 12.8%. The brand is also popular among older consumers in Florida, where senior citizens make up no less than 17.6% of the overall community.

Key Takeaways

While some of Ulta’s continued growth can be attributed to positive trends affecting the beauty category as a whole, it also reflects the success of its strategy of appealing to a broad range of shoppers, from different income and age groups. As the company continues to solidify its role as a major retail player, it appears poised to maintain its upward trajectory.

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