How Ulta and Mary Dillon Are Winning the Beauty Warfare

Six months into her tenure as CEO of Ulta Beauty, Dillon wanted to look what it felt want to paintings on the retailer’s the front lines on the craziest purchasing day of the yr. So on Christmas Eve in 2013, at some stage in a own family ski vacation, she picked up a six-hour income-floor shift at an Ulta keep close to Salt Lake City.

Inconspicuous in get dressed-code-compliant black blouse and pants and an Ulta call tag, Dillon determined herself besieged with questions from clients—approximately this facial masks or that hair-coloring remedy—and beaten via simply how lots she didn’t recognize approximately the 20,000 one-of-a-kind merchandise Ulta sells. In the end, at the store supervisor’s concept, she took a spot on the front of the shop. “The only aspect I was qualified for was handing out shopping baggage,” she recalls.

That’s what she become doing when she had an epiphany. Every other purchaser got here up with a stack of coupons and asked Dillon how to apply them, given their mazes of phrases and conditions. Dillon couldn’t decipher the discounts either. But what genuinely ignited her agita become what those coupons stated about Ulta’s advertising—its cognizance on the constant discounting that she calls a “race to the lowest.”

“It definitely hit me that day,” Dillon says. “I didn’t need Ulta to be notion of as the store for discounts. I wanted Ulta to be known as a Beauty retailer.”

Which could sound like a hair’s-breadth difference to a layperson, However it’s a massive deal to Dillon and Ulta Beauty ULTA -1.eighty% .

Ulta’s system for selling Beauty merchandise—placed them all underneath one roof and provide offers, offers, offers—grew to become the chain into a quick-developing juggernaut, a completely uncommon fulfillment story in a dark decade for retail. Although it’s in large part invisible in posh city purchasing districts, the Bolingbrook, Unwell., business enterprise now ranks because the us of a’s biggest specialised Splendor retailer. “They understand how American girls purchase Beauty,” says Wendy Liebmann, CEO of WSL Strategic Retail.
Considering 2008, Ulta’s safe count number has tripled—it lately opened its 900th location—and sales have accompanied suit, reaching $3.9 billion in 2015. Comparable income boom, which strips out results from newly closed or opened stores, has additionally soared, growing a fantastic 14.4% 12 months over year in Ulta’s maximum latest area, head and shoulders above even the fine-acting chains (most of which could be pleased to hit 2%). Traders have salivated over the outcomes: Ulta’s stock is up greater than 250% Considering the fact that Dillon have become CEO, and its market capitalization now exceeds $15 billion, towering over retailers like Macy’s, Kohl’s KSS 0.68% , and Nordstrom JWN 4.63% , whose income are numerous instances greater.

However all that increase has added Ulta to a important juncture. Competition is getting hotter, as rivals from drugstores to department stores to forte chains like Sephora chase the short-developing spending of Beauty-product shoppers. Shareholders’ expectancies are sky-high—perhaps unsustainably so. And Ulta remains unknown to a big swath of The united states.

To maintain Winning on this area, Ulta is striving to redefine itself—making its photo more about purchaser experience and convenience, less about coupons. That task and plenty of others fall to Dillon, a 55-12 months-old advertising veteran with an easygoing air—and a deep properly of enjoy at massive manufacturers ranging from Gatorade to McDonald’s. Howard Schultz, CEO of Starbucks SBUX zero.39% , whose board Dillon joined in January, says she has the form of savvy that will help Ulta stand out in a crowded retail subject: “She knows the theater and the romance.”

That savvy has helped Dillon maintain the momen­tum going, notwithstanding her loss of a Splendor heritage: The Ulta CEO task is her first inside the enterprise Due to the fact that she turned into 16. “Ulta was not even on my radar” whilst she changed into approached approximately the gig in 2013, she tells Fortune at Ulta’s headquarters, 30 miles southwest of Chicago. However, that, she adds, became an awesome thing: It gave her a smooth slate. Any hypothesis Dillon is probably a don’t-rock-the-boat leader changed into quashed in 2014, whilst she introduced that Ulta planned to make bigger to one,200 stores via 2019. En direction to that aim, she has already rewritten a whole lot of Ulta’s playbook—the first steps in a transition she hopes will elevate the organisation from strip-mall secret to household call.

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Ulta owes its success to date to an all-inclusive ethos. It sells the lot from mass-marketplace manufacturers to excessive-quit cosmetics to expert hair-care merchandise, all in a layout that lets clients strive earlier than they buy. Ulta gives salon services too, so in a single journey you theoretically may want to get your hair completed and get a facial, and then buy a curling iron and moisturizer to maintain the look at home.

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