Why Chanel chose Ulta over Sephora

By June 4, 2018Insights

While Chanel fragrances are widely available at U.S. retail stores, the brand’s flagship Chanel Beauté line has always been hard to find outside of high streets and malls. That’s now changed—and the potential implications for American malls and department stores are both significant and under-appreciated.

The flagship Chanel Beauté line is coming to one of the fastest-expanding retailers in the beauty category: Ulta Beauty, where they will launch Chanel Beauté cosmetics stations at a small number of stores this year to launch the rollout.

Why did prestigious Chanel Beauté choose Ulta over Sephora? Real Estate.

Ulta has about 1,000 U.S. stores, many right in the neighborhoods of its core customers, whereas mostly international Sephora only operates 430 stateside stores located mostly in malls. Clearly, Chanel sees the upside of branching out and leaving behind the traditional four walls of the mall.

Ulta is in the midst of a major expansion of brands like Morphe, E.L.F, and Makeup Revolution, even as it introduces new brands like Milani, Flower, and Wet n Wild. Meanwhile, the retailer is deepening its offerings in the prestige category by adding Estée Lauder, NARS, COVER FX and Beauty by POPSUGAR, to name a few.

The broadening of offerings speaks to a larger trend at the retailer which has evolved its merchandising strategy to attract and retain customers in a powerful way. Ulta’s high-low offerings lure shoppers with new mass-market and prestige offerings that ensure engagement and retention across the demographic spectrum including 92 new brands launched in stores and online across all categories in the past year.

On the opposite side of the spectrum from Chanel Beauté is ColourPop, a brand specializing in matte lipsticks selling for $6 each. Cultivated on social media, new shades and product sell out instantly. That’s important because 77% of Ulta’s shoppers buy both prestige and mass brands, and their 28 million loyalty members make up 90% of sales. Ulta is unique in offering both options under one (beautiful) roof.

For department stores and malls, Ulta’s momentum is a troubling sign. Right now, the fact that beauty is still hanging in there is just about the only bright spot for department stores. As Ulta Beauty scores more Millennial and Gen Z brands and races ahead with its Dollar Tree-like expansion, we could easily hit a tipping point.

After that, beauty will no longer drive traffic to department stores—and that’s not pretty.

Rachel Elias Wein

Rachel Elias Wein

Rachel Elias Wein founded WeinPlus, a strategy and management consultancy focused exclusively on retail and real estate organizations, in 2008. A consultant to Fortune 500 companies and an experienced development executive, Ms. Wein serves as the principal strategic advisor for industry-leading public and private real estate owners, a top-tier grocery retailer, as well as several boutique real estate firms nationwide.

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