Placer.ai: Ulta, Sephora ‘sitting pretty’ amid economic uncertainty
Beauty retailers continue to outperform during a tough economy.
Beauty retailers such as Ulta Beauty, Sephora, and Sally Beauty are “sitting pretty” even as an uncertain economy rattles shoppers, according to a new white paper from foot traffic analytics firm Placer.ai. Compared to both 2019 and 2021, visits to beauty stores have increased significantly. Throughout 2022, foot traffic remained between 13.4% and 30.9% higher than it was three years prior.
Overall, the beauty industry saw visits up 13.4% in November compared to November 2019, the report found. By the same measure, visits to Ulta were up 17.8%, while Sephora’s visitis were up 56.1%.
How are they doing it? A combination of strategic positioning, shop-in-shops, and store optimization. Gen-Z’s “obsession” with beauty products isn’t hurting, either, according to Placer.ai’s analysts.
Ulta and Sephora’s continued success can also likely be attributed to their thriving shop-in-shop partnerships with Target and Kohl’s, respectively, according to the report. Rather than cannibalizing visits from their other venues, the shop-in-shop strategy appears to be fueling increased visits to their full-size brick-and-mortar stores.
The key takeways in Placer.ai’s Beauty’s Irresistible Allure report are below.
1. The Gen-Z factor rules: From its obsession with skin care products to its affinity for parting hair down the middle, Gen-Z will likely continue to be a driving force in the beauty industry for years to come. Leaning into the things that are important to this demographic – from sustainability to inclusivity and ethical business practices – will be an important strategy for brands seeking to increase market share.
2. Strategic positioning is key: Beauty products can appeal to a wide variety of audiences, and there is room at the top for both discount and luxury brands. Chains that meet their customer base where they are – strategically positioning their stores to meet their customers’ needs – will continue to thrive.
3. Shop-in-shops work: The experience of Ulta and Sephora shows how brands can benefit from partnerships with other venues to increase their reach. Far from cannibalizing existing sales, shop-in-shops can increase brand awareness and actually drive more customers to full-size stores.
4. Store optimization can be critical to success: Rightsizing a chain’s fleet can draw more customers to remaining stores and increase their trade area. While this can be a good way to navigate challenges like inflation, it can also enhance performance overall.