Lipstick Index: Is Ulta’s Growth a Good Sign for the Beauty Industry?

Not only is beauty retailer ULTA on track to add 100 stores this year, it’s merely a drop in the bucket compared to their overall plan to add 500 stores in 5 years, growing its chain of stores to 1200 locations, employing more than 20,000 people, by 2019.  In fact, ULTA is doing so well that it’s rated#94 on Forbes Most Innovative Growth Companies list and has performed very well so far this year, most recently showing a 19% sales increase in the second quarter of 2015.

But is ULTA’s 100 new stores and sales growth good for the beauty industry?  My answer to this question is this:  Yes, No, and It Depends; here’s why. 

Yes, ULTA’s growth plan is good for the beauty industry (hear me out).

If more consumers are interested than ever in beauty products including hair care, skin care, cosmetics and fragrances they consider to be better than those they can purchase at mass retail stores like Walmart and Target or drugstores like RiteAid, CVS and Walgreens, that is good for the beauty industry.  The very fact that consumers view ULTA’s competitors as mass retailers and drugstores is also good for the beauty industry, because you certainly don’t want consumers to see self-service beauty retailers as a substitute for the salon.

Salon owners  and stylists who regularly educate their clients about hair and skin care products sold only in the salon should view ULTA’s growth plan, which includes adding 100 stores each year until 2019 as a good sign. It means that an increasing number of consumers want what they perceive to be spa and salon quality retail products for home care.

It could be a sign that your job of prescribing true salon quality retail beauty, skin and hair care products for home use is going to get easier, because consumers are more interested in higher quality products. It could also be a sign that consumers have more disposable income to spend on hair, skin and makeup. Which, again, will be good for the beauty industry overall as salon owners and stylists can expect to see the same type of growth in luxury service areas such as hair color services, straightening, conditioning, etc.

No, ULTA’s 100 store growth plan is not good for the beauty industry. 

For some of the same reasons that I said ULTA’s success is good for the beauty industry, I’m also saying it’s bad.  There has been a blurring of the line of what constitutes salon quality hair products, skin care products and cosmetics since the first manufacturer elected to divert products to mass retailers – a blurring that has been occurring for decades.

The same consumer perceptions about perceived beauty retail product quality that can help the beauty industry, in this case, can also hurt them. Add to that today’s consumer, who is totally into self-service, self-help, self-diagnosing and self-prescribing. Today’s consumer wants to shop at 2 AM in their jammies, on Saturday afternoon from the field while their kids are playing soccer, on weekday evenings while they are vegging in front of the television, and on Sunday mornings in between church and football.  They expect to be able to find what they (think they) need quickly and get it any time.

This is not a knock on stores like ULTA. As their growth shows, they have found a niche and their continued success is evidence that they are meeting the needs of their customers.  But it’s not necessarily a good thing for the beauty industry, either, as some consumers who might otherwise have listened to prescriptive advice of a stylist or esthetician in the salon and purchased products truly suited to their hair, skin and beauty needs are being diverted to a self-service retailer instead. (And by extension, it’s not good for some of these self-prescribing consumers, either!)

It depends, maybe ULTA’s growth and success will be good for the beauty industry.

Whether it can be leveraged for good in the beauty industry overall remains to be seen. But at a micro level, you have the ability to turn this trend into good results for your salon and your clients.  Here’s how.

4 Ways Beauty Industry Pros Can Use ULTA’s Growth to Their Advantage

1. Don’t stop prescribing.

I’m hearing this point in my head to the tune of Journey’s “Don’t Stop Believing.” If that gets stuck in your head too, all the better, because it’s a tune you should be singing not only every day in the salon, but with each and every client.  Don’t stop telling clients how they can take better care of their hair, skin, and appearance, and don’t stop telling them about the products they really need to get the looks they want.

2. Up your game.

Consumers want convenience. Most aren’t going to plan a special trip to the salon to pick up shampoo, conditioner, cosmetics or skin care products if they happen to run out in between appointments, especially if your salon is not close to their home or job.  Think about what you can do to ensure clients don’t run out – take inventory, keep track of their purchases, put them on an auto-buying schedule, set up an online store, offer delivery services – and communicate with clients in between appointments using email, social networks and texting.

3. Make it fun; at least, make it something.

ULTA’s CEO, Mary Dillon, is quoted in Fortune.com as saying that their sole focus is to keep customers happy, “It’s a really fun beauty destination. It’s not a chore.”  This is a great reminder to stylists, estheticians and salon owners that if the client experience in their salon isn’t special in some way that is meaningful to their clients, the experience is – well – meh. If the client experience isn’t special, it’s replaceable.

4. Leverage loyalty.

VIP and loyalty programs that motivate clients to repeat retail purchases and give them the opportunity to try new products, attend private events or receive other loyalty program-exclusive perks can all help move salon retail more quickly.  ULTA’s loyalty programs account for more than 80% of its revenues – do yours?

Ulta Salon, Cosmetics & Fragrance, Inc. is a beauty retailer that operates specialty retail stores selling cosmetics, fragrance, hair care and skincare products, and related accessories and services.

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Salon marketing ideas – by the hundreds – are available in 12 Months of Marketing for Salon and Spa and in the salon marketing calendars that I publish every year.

The 2015 salon marketing calendar is an edition that can be used equally well by salon owners and independent salon professionals like salon suite franchise owners, booth renters, hairdressers, estheticians and more.