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January 3, 2020

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Ulta Beauty, Influencer Marketing, and The Rise of E-Commerce

On the latest episode of Today In Five:

Once the leading force in the beauty market, department stores have lost their footing to Ulta, the rise of e-commerce, and influencer marketing.

  • It’s officially return season. According to a company press release, UPS expects to process 1.9 million returns. The predicted number reflects a 26% year over year increase. Per the release, the increase, “illustrates how e-commerce continues transforming shopping patterns." A report from Oracle Retail stated that 77% of consumers plan to return a portion of their holiday gifts, with 65% returning in-store and 32% anticipating a return via mail.
  • A new survey from communications agency, Diffusion, revealed that 40% of Americans have made a purchase from direct-to-consumer brands. Of those shoppers, 14% said they made between 1 and 19% of their purchases from direct-to-consumer companies. Notable categories for DTC purchasing over traditional retail included health and beauty products, apparel, and tech and gadgets. Shoppers reported the leading reason for choosing direct-to-consumer over traditional retailers was cost, followed by fast, free shipping.
  • According to a case study from Dynamic Yield, E.l.f. Cosmetics found that revenue per user increased after adding product recommendations to item detail pages. Adding a ‘You may love’ section of recommended products garnered a lift in click-through rate of more than 23%, per the report. The beauty company also saw a 17.6% increase in mobile menu clicks after personalizing the menu based on users’ past shopping behaviors. The case study illustrates the growing importance of personalization to attract customers. A 2018 survey from Accenture and the Retail Industry Leaders Association revealed that 63% of consumers are interested in personalized recommendations. Another survey revealed that 93% of businesses with advanced personalization strategies increased their revenue in 2018.

Ulta Beauty, Department Stores, E-Commerce, and Influencers

As retailers like Ulta Beauty and Sephora have won over shoppers, the former cosmetics powerhouse – the department store – has lost its strong footing in the market. Social media and influencer marketing has helped see the rise of specialty stores and cultivated a number of billion-dollar upstart beauty brands that are going head-to-head with established players like Estee Lauder. Since 2009, U.S. beauty and personal care sales have risen 52% according to market research from Euromonitor. The global cosmetics industry is expected to hit $430 billion by 2022. 

It’s an uphill battle for department stores as consumer trends shift. More shoppers are opting for natural looks, and increasingly searching for clean beauty brands to use. Ulta’s strength has been its focus on becoming a one-stop destination for shoppers by offering several services in-store. Its appeal has also been assisted by celebrity brands. Sephora launched its product line, Clean by Sephora, with the chief merchandiser officer noting, “The past decade has been a time of significant growth and change for the beauty industry." 

Department stores are also facing challenges as the rise of e-commerce eats into their normal foot traffic. Many stores are revamping their strategy to re-engage with their beauty customers. Nordstrom has shifted its beauty strategy by dedicating two of its floors in its new Manhattan flagship to the category. The store also recently partnered with Glossier to feature pop-up shops by the popular brand. Macy’s general business manager for beauty said, “Technology and experiential components will continue to be paramount to successful beauty campaigns, launches, and displays." 

With the rise of e-commerce and social media, influencer marketing has become a preferred tactic for beauty brands. Social media marketing, coupled with the boom in e-commerce, has bred a mega-industry, with online beauty projected to be worth $38 million by the end of 2023. According to a survey, 58% of respondents admitted they purchased a product because of an influencer. “All of the power went from manufacturers and retailers to the consumers themselves...Now we have social media where makeup artists are going on there and showing people exactly what to do."   

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