Ulta to open 100 Target shop-in-shops

Dive Brief:

Ulta Beauty is coming to Target. The two retailers announced a partnership on Tuesday, with the beauty giant set to open shop-in-shops at more than 100 Target stores starting in the second half of 2021 and planning for "hundreds more over time," according to a joint press release.
The 1,000-square-foot installations will feature both established and emerging brands, and be situated next to Target's existing assortment. They will mirror Ulta's shopping experience, and the beauty retailer will train Target employees as experts in prestige beauty products.
Those who buy from Ulta through Target's online experiences will be offered the mass merchant's free shipping and other fulfillment options, including drive-up, pick-up and Shipt. Both the website and the app will reflect "the look and feel" of Ulta's current experience.

Dive Insight:

Target and Ulta are making a joint play for the beauty market.

In announcing their partnership, the two retailers highlighted a shared focus on "guest-centric experiences" and omnichannel, as well as the strength each has in the market. The companies touted a collective 100 million active loyalty members, with plans to introduce reward offerings for Ulta shoppers that buy at Target, and integrate Ulta's digital tools like virtual try-on into the Target experience.

GlobalData Retail Managing Director Neil Saunders called it a partnership of "two of the most successful US retailers," while Moody's Vice President Charlie O'Shea said the move would bring increased traffic and an enhanced product line to Target. Target CEO Brian Cornell highlighted Target's ease and convenience in a statement, while Ulta CEO Mary Dillon noted that the pairing would introduce Ulta to new consumers. Saunders agreed with that view.

"The benefit for Ulta is increased exposure," Saunders said in emailed comments. "Ulta has an incredibly successful track record and, before the pandemic, was posting consistently strong growth. However, Ulta has a weaker penetration among younger shoppers — especially compared to Sephora — and among those who purchase beauty only occasionally. Target is able to deliver both of these audiences to Ulta."

Leading up to the deal, Target has been refreshing its beauty business through an expanded assortment and a more engaging in-store shopping experience. Saunders noted that strategy has grown Target's business, but the partnership with Ulta will give it more clout as a beauty player. For Ulta's part, the deal should not only introduce it to new customers, but also may help fill the gap of its planned store openings, which were significantly reduced by the pandemic.

"This is yet another meaningful example of the creativity the larger brick-and-mortar players are utilizing in their efforts to ensure increased store and website traffic," O'Shea said in emailed comments.

The partnership of two retail powerhouses also poses a threat to others trying to play in the beauty market, especially those with a less inspiring experience.

"Specialists like Sephora will be able to hold their own because of the strength of their brands and the underlying loyalty of their shoppers," Saunders said. "However, department stores and drug store chains — which have been losing [customers] for years — should think carefully about their response to this latest development."