While beauty companies Laneige and Charlotte Tilbury have sought to enter the virtual realm with virtual storefronts to connect and transact with consumers, Ulta Beauty’s customers are demonstrating that the essence of the beauty experience remains rooted in sensory engagement as final transactions are happening in-store.
During the beauty retailer’s second quarter earnings call on Thursday (Aug 24), Ulta Beauty’s Chief Executive Officer Dave Kimbell said, “Our consumer insights and member data confirm the importance of physical shopping in beauty. More than 75% of our members choose to transact with us only in stores, and yet we know many of these members use our digital platforms for discovery, try-on and inspiration.”
With that, Kimbell notes that converting these customers into omnichannel members presents a significant opportunity for Ulta Beauty to enhance both engagement and per-member spending — statistics indicate that omnichannel shoppers tend to spend 2.5 to 3 times more than those who stick to a single channel.
How brands and retailers leverage virtual media to facilitate consumer confidence
Ulta’s observations come in the wake of brands and retailers having employed solutions like virtual try-on (VTO) to boost consumer confidence in their buying choices and minimize returns.
Read more: Retailers Pin Hopes on AI to Increase Sales, Decrease Returns
In fact, in March PYMNTS profiled Snap’s initiative to spearhead the augmented reality frontier: the launch of AR Enterprise Services (ARES). Snap, the parent company of Snapchat, initiated a broader integration of AR by allowing businesses to incorporate Snap’s AR technology into their applications, websites and physical spaces.
Read more: Snap Helps Businesses Integrate Augmented Reality into Stores
Snap collaborated with various companies, including eyewear vendor Goodr, fashion brand Princess Polly, and Mongolian producer Gobi Cashmere, and has claimed that these retailers experienced higher conversion rates, increased product engagement and reduced return rates.
Other brands such as Cartier, Prada and Nike partnered with Snapchat to enhance the retail experience with augmented reality technology. For instance, at Nike by Williamsburg, Snapchat’s AR Mirror enabled customers to virtually try on products and unlock exclusive back-to-school discounts.
Customized offers and recommendations, coupled with chatbots to tackle common queries and provide aid to shoppers, also cultivate consumer confidence via virtual technology.
Ulta Beauty’s retail expansion
As more customers choose to discover products online and transact in-store, the beauty retailer has looked to its partnership with Target to meet customer demand.
“As the partnership scales, we are learning more about the Ulta Beauty at Target guests and the role this touchpoint plays in their beauty journey, and we will continue to leverage our expertise to develop unique assortments that reflect the preferences of the Ulta Beauty at Target guests,” said Kimbell during the call with analysts.
Throughout the quarter, a total of 62 Ulta Beauty at Target stores were inaugurated, resulting in a cumulative count of 421 shops by the end of the period. Furthermore, Kimbell highlighted the close collaboration between Ulta Beauty’s marketing teams and their Target counterparts to enhance recognition of emerging brands like Billie Eilish and Ariana Grande Fragrances, Glamnetic and Living Proof. Additionally, they strategically spotlighted summer prestige items and compact versions to appeal to a broader demographic.
Ulta Beauty by the numbers
In Q2 of fiscal 2022, net sales rose by 10.1% to $2.5 billion from $2.3 billion. This increase was driven by higher comparable sales, strong new store performance, and expanded other revenue.
Comparable sales, including stores open for 14+ months and eCommerce, grew by 8.0%, compared to 14.4% in the prior year’s Q2. The rise resulted from a 9.0% increase in transactions, partially offset by a 1.0% decrease in average ticket.
Gross profit increased by 7.1% to $993.6 million but declined as a percentage of net sales to 39.3% from 40.4% in the same period last year. This decrease was due to lower merchandise margin, higher inventory shrink and increased supply chain costs, offset in part by strong other revenue growth and leveraging of store fixed costs.
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