Ulta Beauty Follows a Disturbing New Retail Trend
Ulta Beauty (ULTA) - Get Free Report enhanced its beauty and skin care digital capabilities in 2022 with the creation of the GLAMlab, which is a virtual way of trying on products before purchasing. Customers can upload a picture of themselves and use the different products to see how they might look on their own face and skin.
Ulta Beauty and Target (TGT) - Get Free Report also committed to expanding the shop-in-shop footprint in Target, with a goal of at least 800 mini Ulta Beauty stores inside Target locations. The shop-in-shop Ulta Beauty shopping experience is supposed to give Target shoppers a little taste of what it would be like to shop at the standalone Ulta Beauty stores. The partnership competes with the Kohls and Sephora partnership.
Ulta Beauty has plans to open another 25 to 30 new stores in 2023, similar to what it did in 2022. The beauty chain also plans on giving ‘facelifts’ or relocating another 25 or so stores, according to Ulta Beauty CEO Dave Kimbell. As Ulta Beauty looks to the future, it plans to expand from 1,500 up to 1,700 standalone stores alongside its shop-in-shops located inside Target stores. Target is also expanding its same-day delivery in 2023, finding more ways to compete against Amazon’s fast delivery services.
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Ulta Beauty Faces Challenges
Ulta, however, has still been facing some challenges. Kimbell noted theft as an “increasingly concerning challenge.” Other retailers are also seeing an increase in shrink, aka theft, like Walmart, CVS, and Walgreens according to Business Insider. Many stores are dealing with the upswing of theft, and the labor shortage in similar ways.
Ulta Beauty is working to help reduce shrink by beefing up staff, as best it can. In the short- and long-term, companies are looking to combat the theft of higher end products like fragrances in other ways. Stores are installing locked cabinets to reduce shrinkage, and creating a situation where customers who want to purchase a high-end fragrance must ask for assistance to make their purchase. However, this works two ways, it causes customers to not want to buy because of having to wait for a staff member to assist them in making a purchase, but it protects the inventory from theft.
The locked cabinets and many retailers not being fully staffed means companies have resorted to hiring out security and moving higher priced products to being available online only and not in the retail locations. When products at Ulta Beauty can retail up to $355 for a fragrance like Chanel or Dior, the loss of product is more than just a couple bucks. High-end inventory will be locked up in cabinets at 70% of stores by the end of 2023 said Kecia Steelman, chief operating officer for Ulta Beauty.
Ulta Beauty is Not Alone
Other retailers are facing the same problem even with lower-priced inventory, as the Dollar Tree is also considering a “defensive merchandising” technique as well, by locking up merchandise. "This is not unlike what you're seeing in many other retailers across the industry," said Dollar Tree CFO Jeffrey Davis. "Some of this is societal, some of it is economic, some of it, of course, is particular to us. And we're taking all the appropriate steps that we can to control and mitigate this where we can."
The growing shrinkage problem is across the retail industry as even Target has noted that theft has impacted on the shrinkage rates at the retailer. In a contrasting report, thieves target cheaper goods such as household products over high-end products like jewelry, according to National Retail Federation and K2 a risk advisory firm.
Source: TheStreet
