Ulta’s Blueprint for Digital Beauty

[00:00:01] Phillip: Alright. Welcome back. We're at Shoptalk Spring here in Las Vegas, and we're at the Lore pop up. This is our bookshop. And, Brian, we're having a great time.

[00:01:41] Brian: So good.

[00:01:41] Phillip: We're here with our friend, Josh Friedman from Ulta. Welcome.

[00:01:44] Josh: Thanks for having me.

[00:01:45] Phillip: Josh, what are you doing these days over at Ulta?

[00:01:48] Josh: Little bit of this, a little bit of that. We have so much going on just making sure that we're delivering everything we can for all the beauty enthusiasts out there. I'm happy to be here this week. We're spending a lot of time talking about the announcement of the launch of our marketplace.

[00:02:04] Brian: Congrats.

[00:02:04] Phillip: Congrats.

[00:02:05] Josh: So that's a big one for us, but a lot else going on with our expansion into wellness, our personalization efforts, all the big buzzwords.

[00:02:15] Phillip: And you're running ecommerce digital. You're heading up all of these efforts.

[00:02:21] Josh: Yes.

[00:02:22] Phillip: Okay. And with this launch of Marketplace, it seems like a really big shift. Give us the download. Give us the strategy.

[00:02:30] Josh: Yeah. Yeah. I don't know if I'd characterize a big shift, but it's a really big opportunity for us.

[00:02:36] Phillip: Okay. Yeah.

[00:02:37] Josh: We do really well curating a great set of brands. We have about 600 brands that we sell across the chain and a few extra online only. But we meet and talk to thousands of brands every year. We have our brand incubator through our sparked program, and we just don't have enough space and sometimes even enough time to get these brands in front of our customers, and we know that they're looking for them. We can see them trending on social media. We can see searches on them. And we want the opportunity to bring those brands to life on ulta.com and especially in our app. So the marketplace is a easy win for us and all of our guests to get access to some of those brands and even some new categories. I mentioned wellness earlier. That'll be a big part of it, but there's even some other adjacency categories that we don't have enough chance to get into for our customers. Men's, K beauty, the list goes on. So the marketplace will give us a chance to play in a lot of those adjacencies as well.

[00:03:35] Brian: Absolutely. Yeah. There's a lot of different ways to do a marketplace.

[00:03:38] Josh: Yeah.

[00:03:39] Brian: Tell us a little bit about how you approach the strategy and then the implementation of that marketplace. Or is it just open? Can anyone come in and list?

[00:03:48] Josh: Yeah. Thanks for asking. Yeah. It's being curated. I know that's a buzzword, but ours is invitation only, closed marketplace, no buy box competition. We're just looking to make sure we can bring the best of beauty and wellness to our guests, and so we'll be using the marketplace to do that. Any brand can apply to be on ulta.com/marketplaces where they can go, and we'll be reviewing them for assortment and the ability to take care of our customers. And that's the basic program. So nothing too open, nothing too extensive. A lot of folks are going after an endless aisle. We're really just going after an extended aisle.

[00:04:26] Brian: Oh, I love that. Yeah. Curation is such a part of your brand. Types of products you brought in, everyone trusts the Ulta name as a result. And so I love this approach to marketplace.

[00:04:36] Josh: Yeah. Yeah. We're excited. Thanks.

[00:04:37] Phillip: Yeah. And and it it does give you this opportunity, I think, to grow with your customer. Like you said, there are space constraints in atoms. It's only so much space in the real world. I think part of the opportunity to overcome space constraints has been this partnership with Target. And and so I think that has to have driven a lot of opportunity, I think, for the brand. I think that that also probably drives a lot of opportunity for you to deepen this relationship online with the customer too. So the wellness expansion seems like a really key opportunity now to grow with those types of customers. Talk to me about how you drive this this new category expansion. I think of that as category expansion, lifestyle expansion.

[00:05:24] Josh: Yeah. We've had a a decent presence in wellness previously, but the lines are blurring.

[00:05:30] Phillip: Sure.

[00:05:30] Josh: And there are so many opportunities, whether it's around sleep care or lots of other extensions. And so we actually did some research. And our customers, not just our customers, everyone's customers, and came back and said, "The number one place assume I can get wellness products is at Ulta Beauty." So it was already on the tip of their tongue. In fact, the fact that we probably aren't in some of these wellness categories would surprise some of our customers because beauty and wellness have blended so nicely. So we've got an idea of what we can do to take care of our customer. We already want her to feel great about how she looks and feels. And so getting into wellness just is right in line with that ethos.

[00:06:11] Brian: Oh, so smart. And I feel like I think back over the years to Ulta and my impression of you, one of the things you've done so well is invest in digital experiences and then bringing them into the store, and having customers interact with your app and interact with your programs through their phones while they're shopping in your physical stores.

[00:06:34] Phillip: Yeah.

[00:06:34] Brian: And so I'd love to hear more about how the marketplace is gonna continue to enhance that strategy and kind of bring that additional product assortment into that store experience?

[00:06:46] Josh: Yeah. You know, it'll be tough to bring all of those products into the store.

[00:06:51] Brian: Of course. Yeah.

[00:06:52] Josh: But what we've always done through the app is wanna make sure it is a magnet. We mean it when we say we wanna be the destination of a lifetime in beauty and wellness. So for us to be a destination, we gotta make sure we've got everything that our customer would want to buy that includes products, but also solutions and services. And so the app is the hub of that for us. So what that means for us is before you come into a store, we know you're gonna come to our app. We know you are gonna look for solutions. You might wanna use any of our AR and VR tools that we've invested in. Virtual try on's a great use for us. We see huge benefits of people who engage in that experience to try on beauty, try on hair, do our skin analyzers. So that's a big one for the app. And, course, you can do that in the store too. And then it's the normal stuff that you would expect. Do you have what I'm looking for in my local store? Are you in stock? BOPIS? Those sorts of things. The other parts that we're really excited about bringing to life in the future coming year, we just launched our events platform. So our stores do tens of thousands of events in the store. Not always easy to know about and find. We want the app to be the place where you learn about those and even RSVP for those, and so that launched a little earlier this year.

[00:08:06] Brian: That's so cool.

[00:08:07] Phillip: And then we launched our community platform at the end of last year. We're seeing much bigger numbers than we even expected. We had some pretty high hopes of people joining our community. Lots of great forums and a lot of new video content coming to our community platform later this year. So it's the typical ecosystem that we know we need to have, both in the app and that will engender folks to shop with us and especially in the store. Listen. Beauty enthusiasts love stores. They love to go in. They love to experience the product. They love the theater shopping. We encourage that. We're not looking to keep them online or anything like that. It it all goes together as far as we're concerned.

[00:08:47] Brian: It's so cool because it seems to me like you already, the community already existed. You're just helping formalize and improve the connection between your customers. That's huge.

[00:08:56] Josh: Yep. Yep.

[00:08:57] Brian: That already already existed in an organic way.

[00:09:00] Josh: It did. And we see it. I mean, there's subreddits. There's lots of places...

[00:09:03] Phillip: Sure.

[00:09:03] Josh: Yeah. We wanna make sure we had a place where, a) they could get together on our properties, but we can also engage with them. And we're actually seeing great engagement from our brand partners as well on our community.

[00:09:13] Brian: So cool.

[00:09:13] Phillip: Yeah. I went back and I pulled my own family spend at Ulta.

[00:09:18] Josh: Okay.

[00:09:19] Phillip: That was eye opening. {laughter}

[00:09:21] Josh: Do you want me to double check it for you?

[00:09:22] Phillip: Yeah. You might have to. There might be secret accounts that I don't know about. I have to wonder, this is a really interesting opportunity. Right? Because rewards, I know there's, like, 44,000,000 loyalty members. And I know the first thing that we do when we come to the register is we ask, "Do we have any rewards."

[00:09:47] Josh: Of course.

[00:09:48] Phillip: I have two shoppers in my house. Actually, three shoppers in my house. I buy a lot of skincare and I buy a lot of hair care from Ulta. My wife does as well, but now we have a 14 year old daughter and she's starting to buy a lot of stuff from Ulta as well. And so we have three people in my house that's represented. I'm starting to think about, like, our baskets are growing, and I think with the addition of other lines that you're offering, growth into wellness, I think that there's just so much opportunity there too. But so I'm looking at our spend. In January we spent $134. In February, we spent $300. And I was like, why did we spend $300? It's like, we bought a curling iron, we bought a hair dryer, and I'm like, okay, pump the brakes, y'all. It's like, we're spending, like, way too much money. I'm like, we're entrepreneurs. We don't have time to spend that much money. But congratulations, because I think there's so many places to be spending those dollars, and we spend a ton of money on Amazon. There's a lot of places for us to go. We go out of our way to shop at Ulta. So I think that that's, there's a lot of folks like that. So I think marketplace seems to me like a really interesting choice, and I think one that's gonna require a lot of customer enablement. So I'm coming a long way around to say, I think customer enablement and it's almost like a digital shift of a certain kind of a behavior in a customer. Personalization could probably enable some of that. Tell me a little bit about how you're going to sort of shape some of that behavior with the customer and maybe personalization drive some of that behavior.

[00:11:25] Josh: Yeah. Absolutely. We're making a big emphasis this year as many of our retail brethren are around personalization. And it's really important for us because even within your family, what beauty means to you versus your wife is different. What beauty means to your wife versus her friend is very different. They're trying to solve for different opportunities, whether it's in their hair or their skin or how they look. We wanna make sure that's relevant to each customer. So we announced last year a huge partnership with Adobe who's powering a lot of our personalization efforts.

[00:11:55] Brian: Very cool.

[00:11:57] Phillip: But what we really owe it to our customers to do with 44,000,000 people that we know actually a lot about, Phillip, is to make sure that we are requiting them with a personalized experience, with a relevant experience that's based on shopping habits, personal preferences. Hopefully, you engage in our virtual try on tools, which we can learn a lot about you and therefore give you some great relevance there. And so we're putting that all into your beauty profile, your wife's beauty profile. So that way, that can build over time. You can contribute to it yourself. We can contribute to it on your behalf and keep getting more and more relevant over time. So that way, the stuff that that you need and maybe some things that you didn't know you you might be interested in pop up for you during your shopping journey.

[00:12:43] Phillip: We're definitely not helping you cause we're all shopping under one profile.

[00:12:46] Brian: No.

[00:12:48] Phillip: I know. And I know better. I know better.

[00:12:52] Brian: Normally, everything's like, you're so good at curating your own.

[00:12:55] Phillip: I know. I'm absolutely the worst. One of the challenges, especially around personalization is clean data. Right? And so getting clean data, I think I'm probably an outlier in that regard. I think a lot of folks are, you know, not shopping for an entire house. I think clean data is one part of it too. AI is another part of it. You all have really led the way, like you said, in driving a lot of these sort of AR experiences too.

[00:14:32] Josh: Yes.

[00:14:33] Phillip: And I think that all roads leading back to these sorts of personal not just personalization, but I think seeing Ulta as a sort of like a an innovator in the space in a lot of ways, I think it keeps that customer as a digitally enabled customer generally. So you tend to have that sort of relationship with the customer.

[00:14:56] Brian: It it also gives them an the opportunity to experiment. Right?

[00:14:59] Josh: Absolutely.

[00:14:59] Phillip: And I think it's really, really hard to do when you're talking about physical product, like being able to do it digitally and having it available digitally gives people more power to try new things. And then they can come to the store and already have a sense of, like, I wanna go talk to somebody about how these things might look in the real world.

[00:15:20] Josh: Absolutely.

[00:15:20] Brian: They already have a few ideas, and then they can start to play around from there.

[00:15:23] Josh: And if you consider them two channels, which personally I do not, customers shop in between, and that's great.

[00:15:32] Phillip: Yeah.

[00:15:32] Josh: We have 1,400 stores. We'll have 1,500 later this year, if not next year. That's great. We want you to have that store at the center of your universe. We want the app to be your virtual beauty bestie, if you will. And neither of those are channels to us. It's one shopping journey, especially Gen Z and Gen A, but we actually see this a ton in Gen X too of folks really wanting to use the app to complement their pre store and post store experiences, and we encourage all of it.

[00:16:08] Phillip: So the people listening are definitely you know, they're leaders. They understand the strategies. They understand the tactics. I'm curious if you could sort of lift the hood a little bit and tell us a little bit of some of the technologies implemented. I think you partnered with Mirakl.

[00:16:27] Josh: So in the marketplace, we're partnering with Mirakl to be our marketplace platform. I mentioned our partnership with Adobe on the personalization side.

[00:16:36] Phillip: Real time CDP, I think.

[00:16:38] Josh: CDP and several other products bringing that together. And we're building a few things in-house on some of the decisioning and science sides to complement that. We have a big partnership with with Databricks, for instance, So we'd like to bring best of breed to the stack to make sure whatever capabilities that we're bringing, we really think about it from a capability perspective and then apply use cases to those over time is so that we can build on those. You mentioned testing earlier. I'll just say we're really excited also about what the marketplace will allow us to do to test brands. It's typically a little harder for us to test brands, to find them and bring them on board and and get them built out. And we know the marketplace will give us a chance to not only chase trends, but also to test some things that we think we wanna get into in a big way and see what works for us.

[00:17:33] Brian: I love that.

[00:17:33] Phillip: Well, we went through an era where we saw this sort of Cambrian explosion of direct to consumer brands. A sign of having made it is, you know, a test and then deployment across Ulta into all of the stores. I think that needs to still be a sign of graduation in...

[00:17:56] Josh: Absolutely. Right.

[00:17:59] Phillip: Maybe marketplace can be part of that.

[00:18:00] Josh: Oh, marketplace should be a gateway into experimenting, figuring out what's gonna work, growing a bit of a business, and then catching on and eventually becoming a great candidate to be on the shelves of our physical stores.

[00:18:14] Phillip: What is the Ulta story around retail media networks at the moment? Is there a strategy?

[00:18:19] Josh: Yeah. We have a retail media network. Okay. UB Media is the name of it.

[00:18:23] Phillip: Right.

[00:18:23] Brian: Cool.

[00:18:23] Josh: It's growing like gangbusters as you would expect in our category. The majority of it is happening digitally right now. So many of our brands participate in a meaningful way in our retail media network, and we've got some really great plans to expand it in the coming years. And we'll be experimenting with some things too in our stores as well as continuing to kinda expand the digital footprint of that media network over time.

[00:18:49] Brian: I would imagine the marketplace is probably gonna be a part of that too. Like those brands coming in and...

[00:18:54] Josh: We expect our sellers are gonna wanna participate in that, and we're gonna welcome that with open arms.

[00:19:00] Brian: Genius. Yeah. Oh. Yeah. You guys are doing some cool stuff.

[00:19:04] Josh: Yeah. Well, hopefully.

[00:19:06] Phillip: Yeah.

[00:19:07] Josh: We're only doing it, I know this is kind of a a bit catering to the masses or preaching to the safe. We're really doing it because our guests expect it from us. If we are going to give them the solutions that they need in beauty and wellness, we've gotta be able to do stuff like this. And that means we have to have lots of great brands and brand partners, and that means we need assortment. We need retail media. We need to be able to build those brands up, and we're usually pretty good at that. We just need to continue to add to the cadre of capabilities we have that we can execute against.

[00:22:00] Brian: The test word, it got me so excited because I talked about, you know, customers testing things, and then you're like, "We're testing things also."

[00:22:08] Josh: Always.

[00:22:09] Brian: But you know what's really cool is I feel like customers testing things and brands testing things are actually coming together because you all are actually able to see how your customers respond to this new set of brands they're gonna have exposure to.

[00:22:24] Josh: Yep.

[00:22:25] Brian: How are you collecting data and working things back into your digital product strategy, but also to your product mix strategy in terms of social listing.

[00:22:35] Josh: Well, yeah, we do social listing, and some of these will be expected by your audience, I assume. But we watch our search data very carefully. We know where we see things that we don't carry yet, where we kinda carry them but maybe not enough, and follow some of those breadcrumbs.

[00:22:53] Phillip: Mhmm.

[00:22:53] Josh: We watch our guided nav and filter nav usage really closely to see what attributes and filters are resonating with customers. Those are always a great indication for us on on how we should be leaning in and helping them find what they're looking for, whether it's clean ingredients, which had a lot to do with our explosion in conscious beauty in that program, which now is over 300 brands. Dermatological recommended products, we see those trends and we lean into them, not only make them easy to find, but then when it gives us a chance to go out and say, "Hey. What can we do to bring more of these types of products and solutions to customer when we see them shopping that way?"

[00:23:35] Phillip: Shifting gears a little bit too, you know, I think there's also the question of continued cultural relevance. And that is one thing that we talk about a lot. We're called Future Commerce. So we're always talking about the future. And our big thesis is that commerce is our culture. Commerce is culture. I don't know that we like that, but that's just the truth.

[00:24:02] Josh: Right.

[00:24:03] Phillip: And I think that we experience culture often through commerce and what we buy. And so a lot of what we're seeing culturally is well, a lot of culture is happening through the Internet and a lot of creators are creating culture right now. And a lot of cultural behavior is happening at the point of purchase, and that purchase funnel is collapsing and people are buying directly online. So I'm curious, do you feel like there's pressure at all, or do you feel an acceleration in this moment? What do you think you have to do in your role to sort of change and shift to sort of keep up with those cultural shifts? And is that a generational thing?

[00:24:50] Josh: So there's a few pivot points that I think, but they're not, they're not new. They just need to be emphasized. We talked about assortment. I'll continue to come back to that. That means that we've got a great stable of great brand partners in the main part of our assortment, which we already do, and we will continue to have. That will always be what we lean on. And then some of these expanded planets and moons around those planets as we go build it. So the assortment will always be there. It has to be there. The second thing, though, is the content around that products has to be excellent. It has to be excellent. And not just because your product pages have to look good anymore, but over time, this is what the agents will be gravitating towards when they're looking for solutions. And we wanna make sure that our product content and even our nonproduct content is relevant. So that way, when you're engaging on an AI platform or using conversational tools that those come back.

[00:25:51] Brian: So smart.

[00:25:52] Josh: So we're doubling back as I'm sure many of my retail brethren are to make sure all of our product content is excellent. And there's really it's either a plus or bust, and that's where we're trying to get to.

[00:26:09] Phillip: Are you tracking a content or traffic at all coming from AI search yet?

[00:26:15] Josh: Yeah. We are tracking several of the big platforms to see what's coming from them. I won't be able to discuss too many. I'm not sure yet if there's partnerships that we should be leaning into.

[00:26:25] Brian: There's only a couple we can actually crawl right now.

[00:26:27] Phillip: Perplexity in particular is sort of a one click solution. We produced a insight piece in a research report last year called New Modes. And I think one risk is, I don't know that this is necessarily a new channel because I think some people are characterizing, you know, AI purchasing as a new channel. I don't know if that's a channel because brands have no control over it, really. You can't really merchandise there because you have no control over the experience. It's not really a display ad. It's not really, like you can't really fight over a buy box, really.

[00:27:11] Josh: Right.

[00:27:12] Phillip: It's not really the same thing as a channel. So it's like a new mode of purchase. And in my mind, it's like, I think it's a totally new modality. It's a totally new thing. And maybe the website is a new sort of a magazine. This is something else entirely.

[00:27:31] Josh: Right.

[00:27:31] Phillip: And so I think it's like, we're all going to have to just understand it in a totally new way. And that's think it's exciting.

[00:27:38] Josh: Yeah.

[00:27:39] Phillip: I think some people might be afraid of it. But I think it should be exciting to some some people, like, maybe it's incrementality. I don't know. We're also coming up on time too. I think we're really excited to to think about the future of commerce. We always ask people what they think the future of commerce is. We didn't really prep you for it, but what do you think the future looks like, you know, as far as the next eighteen to twenty four months? You've got a job to do. You've got to enable people. You've to enable you've to do the this thing. AI, you know?

[00:28:13] Josh: It's absolutely one of the major topics that we're figuring out, and it's happening at a faster and faster pace. So like I said, we wanna be ready. We're not sure which directions we'll go, which directions we'll win. But we wanna make sure that the capabilities that we have so, you know, I mentioned the assortment. I mentioned the product data. We feel like the power of our loyalty program will continue to bring gravity to our experiences, and we wanna make sure that that's a rich place and folks enjoy being in that club, so to speak. So we'll continue to focus on those things while we test and learn on which way the AIs can go. The other places are we know the AI will help us get more productive, more efficient internally, and we're looking forward to figuring out how that can help us in a marketing and a digital perspective.

[00:29:10] Phillip: I think that's the key.

[00:29:11] Josh: Yep.

[00:29:12] Phillip: Yeah. I think that's yeah. I think that's where most people will see most of the productivity from it too, for sure. This has been great.

[00:29:18] Brian: Oh, yeah.

[00:29:19] Phillip: I love to have you. Love to have you back.

[00:29:21] Brian: Yeah. Yeah. Yeah. We would love you.

[00:29:22] Phillip: Congrats.

[00:29:23] Josh: Yeah. Thank you.

[00:29:23] Phillip: And congrats on all the success so far.

[00:29:25] Josh: Yeah. Maybe we'll see you in Chicago.

[00:29:27] Brian: Absolutely.

[00:29:28] Phillip: And you're gonna continue to just grow a basket with me. I know that's for sure.

[00:29:31] Josh: Come on in.

[00:29:33] Brian: Split it up into three baskets.

[00:29:34] Josh: We'll even put you in a chair and help you trim your haircut.

[00:29:36] Phillip: Love it. I'm gonna get that low taper fade.

[00:29:39] Brian: Love that.

[00:29:39] Phillip: Appreciate you. Thank you for coming.

[00:29:43] Brian: Thank you.

[00:29:44] Phillip: Thank you all for watching.