Following on the heels of the strategic partnership with Credo that lends credibility to Ulta’s clean initiatives, Ulta is creating more waves with the announcement of a long-term, strategic partnership with Target. The partnership of these two retail powerhouses has the potential of transforming the beauty retail landscape.
Ulta Beauty at Target will debut at more than 100 Target stores nationwide and online at Target.com. The “shop-in-shop” concept will offer established and emerging prestige brands online and in select Target locations nationwide beginning next year. The synergies lie in their shared ability at curation, omnichannel engagement, and guest-centric experiences.
“Ulta Beauty at Target reflects further evolution in our omnichannel strategy, rooted in unlocking the potential of our physical and digital footprints, creating more seamless shopping opportunities for our loyal guests and continuing to lead the beauty industry. More than ever before, now is the time for innovation in retail,” said Mary Dillon, CEO, Ulta Beauty. “This partnership is an amazing way to further reimagine guest experiences with a partner who shares our company values. We are thrilled to bring our beauty expertise, unparalleled assortment and digital innovation to life in a new channel to delight and deepen loyalty with our existing guests and introduce Ulta Beauty to new guests.”
Target has been redefining big-box beauty with a Sephora-like open-floor plan upgrade that includes better lighting, low shelving, and counters staffed by associates. Their merchandising strategy is in line with current market trends focusing on clean, green, and natural brands, including their Target Clean icon representing products that meet their standard of unwanted chemical, beauty-centric wellness, and an online feature to make it easier for customers to identify and shop from Black-owned or Black-founded brands. They’ve also differentiated themselves through innovative private-label initiatives, partnerships with DTC beauty disruptors like Harry’s, Flamingo, Bevel, and Winky Lux, as well as with exclusive brands like Kristin Ess, Rae, Odele, and the soon-to-launch Jason Wu Beauty. The investments have resulted in strong category sales and market share gains.
While Target definitely got its “Tar-jay” groove back in the beauty department, the partnership brings Ulta Beauty’s best-in-class beauty authority to millions of guests who love the ease and convenience of Target’s one-stop shopping experience. It also provides beauty brands an opportunity to expand and grow in a new, industry-leading omnichannel retail experience. If there is one lesson to be learned from the COVID crisis, it is that the winners will be the brands and retailers that look beyond constructs of historic distribution paradigms. Consumers have made it clear they want brands to show up where they want them, when they want them, and how they want them—in fact, they probably buy the same brand/product from multiple retailers in multiple channels.
“The durable strategy we have built has made Target a top retail destination. The ease and convenience of our stores and fulfillment services provide broad reach and relevance for the curated brands our guests love,” said Brian Cornell, Chairman and CEO, Target. “In partnership with Ulta Beauty, a company that shares our deep guest focus, we are able to expand our growing beauty business with new, exciting brands, an immersive experience, and loyalty benefits to transform how our guests shop for all their beauty needs.”
The Rollout of Ulta Beauty at Target
Ulta Beauty at Target will roll out at more than 100 Target locations starting in 2021, with plans to scale to hundreds more over time. The planned locations will complement Ulta Beauty’s current store footprint and build upon Target’s existing beauty assortment. The branded shop-in-shop will operate as an extension of the Ulta Beauty experience, mirroring its existing stores and designed to discover established and emerging prestige brands. With approximately 1,000 square feet of retail space, Ulta Beauty at Target will be adjacent to the existing beauty section.
The company will train newly hired Target team members to serve as experts on prestige beauty offerings, aligning to Target’s focus on providing guest service with deep product expertise. The shop-in-shop is expected to be enhanced with Ulta Beauty’s immersive, in-store digital discovery tools such as GLAMLab, a virtual try-on tool that provides safe trial across beauty categories.
Guests who shop Ulta Beauty at Target online will enjoy free shipping available for qualifying orders as well as Target’s same-day fulfillment services, Drive Up, Order Pickup, and Shipt same-day delivery at participating store locations. As always, Drive-Up and Order Pickup are free on all orders.
The online experience on Target.com and the Target app will reflect the look and feel of the elevated Ulta Beauty experience for an immersive, engaging way to find beauty favorites and new products.
Reaching New Guests
Collectively the retailers have more than 100 million active loyalty program members across Target Circle and Ultimate Rewards. In addition to enhanced offerings and expertise, the partnership will seek to create compelling, integrated opportunities to harness the power of these loyal guests and reward them when they shop at Ulta Beauty at Target.
In recent years, Target has reinvented its beauty business, including expanding its assortment and creating an engaging in-store shopping experience. Similarly, as the nation’s leading beauty destination and category market share leader, Ulta Beauty has strong brand awareness and is a top destination for discovery and services, connecting meaningfully with teens and the growing, influential Latinx audience. This collaboration embodies meeting the customer where they are and providing them the convenience they crave.
The Experts Opine
The market spoke: Shares of Ulta were up about 7% to $265.49 at market close. Shares of Target were up about 2% to $158.07 at market close yesterday.
Richard Kestenbaum, partner at Triangle Capital told BeautyMatter, “This deal hearkens back to the JCPenney/Sephora arrangement and it shows that Ulta, like Sephora, has made itself into a true brand with credibility that other retailers, even very successful and innovative ones like Target, want to latch on to. It also shows that the growth in beauty and the importance of it for driving traffic into stores is undiminished.”
The partnership gives Ulta “another growth channel” as it faces limited opportunities to expand in the US, Quo Vadis Capital’s John Zolidis said to Bloomberg. It will also help offset margin pressure amid a shift to online sales, he said.
“This is probably not a foot-traffic driver, but it could be a basket enhancer” for Target, Michael Baker, an analyst at D.A. Davidson Cos., said to The Wall Street Journal.
“For Ulta, it would be difficult to offer same-day delivery without a partnership with someone,” Oppenheimer & Co. analyst Rupesh Parikh said to The Wall Street Journal. “Target has a really strong ecosystem.”
“The benefit for Ulta is increased exposure,” GlobalData Retail Managing Director Neil Saunders commented to Retail Dive. “Ulta has an incredibly successful track record and, before the pandemic, was posting consistently strong growth. However, Ulta has a weaker penetration among younger shoppers—especially compared to Sephora—and among those who purchase beauty only occasionally. Target is able to deliver both of these audiences to Ulta.”
Speaking to the potential threat this collaboration poses for other players in the beauty market, Saunders said, “Specialists like Sephora will be able to hold their own because of the strength of their brands and the underlying loyalty of their shoppers. However, department stores and drug store chains—which have been losing [customers] for years—should think carefully about their response to this latest development.”
“This is yet another meaningful example of the creativity the larger brick-and-mortar players are utilizing in their efforts to ensure increased store and website traffic,” Moody’s Vice President Charlie O’Shea said to Retail Dive.
