Beauty secrets
How Ulta CEO repositioned brand for big success
In the past two years, Ulta Beauty, a salon chain and retailer carrying more than 500 cosmetics brands, has surpassed Sephora to become the nation’s largest beauty merchant, opening more than 200 stores, breaking ground on its first location in Manhattan and upping its online sales by more than 50 percent.
That’s all good news for CEO Mary Dillon, but one of her biggest accomplishments isn’t as quantifiable. Dillon, a veteran of McDonald’s and Gatorade, summarizes the sorry state of Ulta’s brand awareness when she took the helm in 2013 with an impression of her target customer: “Ultra? What’s that?” Though sales were satisfactory, a long association with tired strip malls and budget shopping had taken its toll.
Dillon repositioned the brand, putting new stores closer to urban centers (she expects to open 300 more by 2019) and investing in technology to deliver online orders more efficiently. Total sales reached $3.9 billion in 2015. “We’re a 27-year-old brand that, I feel, is just getting started,” she says.
Here are some of the strategies in her corporate-makeover playbook.
Beyond numbers
Although Dillon is an Ulta shopper herself, she still leans on tactics she honed at other companies when understanding the consumer didn’t come as easily (she recalls her dog-less days marketing for Kibbles ’n Bits). Members of her team go on shop-alongs with customers, asking them about what they like and how they use the products. Dillon couples that with data from Ulta’s robust loyalty program, Ultamate Rewards, to complete her picture of the customer.
That understanding informs her decisions about how to market Ulta’s more than 20,000 products.
Personal savings
Before Dillon’s arrival, Ulta was known for its abundance of discounts and coupons.
Dillon has edged away from that blunt-force strategy, instead giving customers incentives to join the loyalty program, which allows her to tailor benefits to the shopper. The theory: Thoughtful freebies (some members recently received Urban Decay eyeshadow kits; others got a custom colormatched Clinique foundation) do more to deepen the customer’s emotional connection to the store than a generic 15 percent off mailer.
The strategy appears to be working. The program’s 21.7 million active members now generate more than 90 percent of Ulta’s overall sales.
Paying attention
About 20 times a year, Dillon makes trips to several stores across the country to talk to associates and listen to what bubbles up.
“I kind of collect these ‘a-has,’ ” she says, remembering the time she heard staff members mention how long it took to unpack the boxes that came from distribution centers. She instructed the centers to reorganize the boxes, aligning them with store layout. The move enabled employees to spend more time with shoppers.
“That’s the kind of insight within the seams that’s important,” Dillon says.
Better e-commerce
Dillon believes brick-and-mortar stores are crucial to growth, but she’s equally committed to improving Ulta’s online shopping experience. One of her early triumphs was investing in a pair of distribution centers that dramatically improved Ulta’s e-commerce processing times.
“People want to buy online, and they want to come into the store and try things,” she says. But she also can guide them toward new experiences. Last year, Ulta debuted Glam Lab, a virtual try-on experience that allows users to upload a selfie and test products against their skin tones.
Open feedback
Ulta generates 2,500 new jobs annually, but Dillon isn’t content to just create positions — they have to be fulfilling.
During a management meeting early in her tenure, Dillon noticed that no one seemed comfortable asking questions. The ones that were voiced were often shut down. Today, she encourages open feedback through a quantitative survey that goes out to the 30,000 associates, measuring how engaged they are, how much they trust management and whether they believe their managers support career development.
“At the end of the day, especially in retail, you’ve got humans serving humans,” she says. “And really, the more engaged and happier the associates are, the happier our guests are. It’s not complicated.”
“We’re a 27-year-old brand that, I feel, is just getting started.” —Ulta CEO Mary Dillon, above Dillon believes brick-and-mortar stores are crucial to growth, but she’s equally committed to improving Ulta’s online shopping experience.