Ulta Beauty's Quest For The Ultimate Omni-Channel Experience

By Matt Pillar, chief editor

July 2015 Integrated Solutions For Retailers

Almost two years after an intensive e-commerce upgrade, Ulta Beauty is making steady progress toward its goal of reaching 10% of total sales via the Internet — a major milestone in the cosmetics segment.

"We look at the test-and-learn phase as an experiment, so we limit our exposure, funding, and risk until we learn what the results are."

Diane Randolph, CIO, Ulta Beauty

Categories like electronics, books, music, and software have led the online retailing league since the dawn of e-commerce because, generally speaking, consumers don’t have to try them on or test them out before they buy. Even if they prefer to do so, they can often sample those wares from their shopping device du jour. Cosmetics, on the other hand, require a high-touch, highly personalized path to the sale. That is, until the consumer has discovered the product mix that achieves their desired outcome. As Ulta Beauty found, once the consumer has mastered the look they’re after, they’re more often than not willing to turn to e-commerce to replenish the cosmetics they need to achieve it. That realization was recently proven in spades by the 56 percent online comp sales increase Ulta Beauty experienced in Q4 2014. It came just two years after a comprehensive investment in its omni-channel retailing systems.

Six Pillars To Omni-Channel Growth
The omni-channel success at Ulta Beauty is the result of a six-pillar strategy the retailer is executing, which comes on the heels of an Oracle Commerce platform upgrade to support the approach. Diane Randolph, CIO at Ulta Beauty, explains the six-pillar strategy:

1. Acquire new guests and deepen loyalty with existing guests. Ulta Beauty offers a very attractive CRM awards program that allows point accumulation for purchase redemption. As a result, more than 80 percent of transactions at Ulta Beauty are conducted by its 15 million loyalty members. “We’re focused on using technology to ensure that experience is consistent across our online, salon, and store channels, both for associates and guests,” says Randolph. “Besides responsive design, we’ve deployed native iPad and smartphone applications for loyalty, creating customer access to point balances and earned rewards.”
2. Differentiate by delivering a distinctive and personalized guest experience across all channels. With access to volumes of rich data garnered through its loyalty program, Ulta Beauty knows what its customers are buying. “We launched a clienteling application that replaces paper consultation. The application allows us to track and respond to brand preferences, as well as situations, problems, and challenges our guests are facing,” says Randolph. The mobile clienteling application exposes historic one-on-one customer consultations to the associate on the iPad, allowing full access to previous guest interactions while she’s being served. “We’ve also begun to pilot mobile POS from Micros, and our loyalty program is integrated there as well. By leveraging product content online and making it accessible at every touch point, we’re making the experience consistent across every channel,” explains Randolph. “Our guests are heavily engaged in their product choices, and we’ve found that they’re glad to share their experiences, recommendations, and feedback. We’re encouraging product reviews and social media engagement through direct integration with our customer-facing applications.”
3. Offer relevant, innovative, and often exclusive products that excite guests. The technology Ulta Beauty deploys must support the ever-increasing number of cosmetic brands it carries. The retailer is using its digital commerce channels and loyalty applications to communicate the availability of those brands. “We just launched a new organic hair care brand, and we’re having great success leveraging our digital channels and loyalty vehicles to get the word out,” says Randolph.
4. Deliver exceptional service in three core areas: hair, skin health, and brows. While these services are executed in-salon, Randolph says omni-channel promotions are pivotal to communicate service offerings to guests. “As it relates to salon services, the omni-channel play is more than creating market awareness. We’re growing that business through online booking, and digital channels offer an excellent medium for customers to experience the broad menu of services available to them,” says Randolph.
5. Growing stores and e-commerce to reach and serve more guests. Randolph says Ulta Beauty is on an incredible growth trajectory; it’s moving forward with plans to add 100 stores per year, building on the addition of 225 stores during the past two years. “While we’re intent on growing our store and salon count, we’re also actively pursuing growth in e-commerce,” says Randolph. “We enabled that through scalability and design upgrades which are fueling our e-commerce growth goal of 10 percent of total sales.”
6. Investing in infrastructure to support guest experience and growth and capture scale efficiencies. Ulta Beauty has spent the past two years building the technology platform that serves as the foundation of the guest experience. That foundation includes integration of solutions from the Oracle technology stack, including Oracle Commerce Platform, Endeca, Micros, and RightNow Technologies. “While we continue to invest in both online and in-store POS, we’re also increasing our supply chain capacity and capabilities,” she says. “We launched a new DC from the ground up this year, and we’ll add another next year.” These efforts will support the retailer’s omni-channel position of shared inventory to supply stores and digital channels simULTAneously.

“We have a large and growing store count and more than 22,000 amazing beauty-loving associates. It’s our goal to make sure they have as much guest-facing time as possible,” says Randolph. The condensed timeline of technology implementation Ulta Beauty has engaged in to accomplish that goal and support its six-pillar omni-channel strategy paints a picture of aggressive innovation.

Inside Ulta Beauty’s Omni-Channel Overhaul
Back in 2006, Ulta Beauty had implemented Oracle Commerce Platform to run its online effort. The site’s back end remained relatively static for the next several years, but in 2012 the retailer put the wheels in motion to grow its online impact. “We needed to up our game in that space, so in 2012 we started out on an omni-channel road map. Scalability and stabilization were our first priorities,” explains Randolph. Meteoric growth was straining its Web server capacity, which proved to be problematic and telling at once. “Historically, the Web was not a great sales driver for Ulta Beauty. But as we grew, its contribution became evident. We needed to scale,” she says. In late 2012, Ulta Beauty upgraded to the newest version of Oracle Commerce Platform to achieve its scalability and stability goals. Then, in 2013, it tackled the user experience and implemented responsive design. “Much of our customers’ digital purchasing is still done on the desktop, but we see a distinct rise in the use of mobile, and more specifically, tablets,” says Randolph.

Simultaneously, Ulta Beauty chose to retrofit stores with Micros POS in 2012, an effort that saw a 2014 chainwide rollout on the heels of a 2013 pilot. “At the time we selected Micros, it was not yet a part of Oracle,” says Randolph. “We have a lot of items and offers that are very specific to the beauty business, such as gifts with purchase. We needed something that would accommodate that seamlessly and scale to our growing volume, and Micros was the closest fit to our needs.”

In 2014, Ulta Beauty focused its attention on the dissemination of product knowledge and user-generated content, perhaps most notably through the development of shoppable videos. “We have a lot of beauty enthusiasts who go home after a great experience at Ulta Beauty and produce full videos for YouTube, so we leverage that content by chapterizing it,” explains Randolph. “Customers can play those videos back and jump to products identified within them, and they can purchase those products while still viewing the video.” Online booking of skin, hair, and brow services at Ulta Beauty salons was implemented in 2014 through integration of Oracle Commerce Platform with Shortcuts salon software, and Randolph says the results have been nothing short of tremendous in attracting new visitors. In Q1 2015 alone, 60,000 appointments were booked via the application, and new salon guests accounted for more than 70 percent of those appointments.

Innovation: Threaded Into The Fiber
While Randolph lauds the recent innovation explosion in retail, she isn’t necessarily a fan of the “innovation lab” concept. “A lot of retailers have been very public about setting up innovation labs that operate as a wholly distinct division of the business, but I believe innovation has to be integrated into everything we do,” she says. “That’s a key concept that’s embraced by leadership here. We look at how we do things, we plan how we’re going to improve them, and we seek those improvements in real time.” As a result, Ulta Beauty is constantly piloting and testing new solutions in the live store and e-commerce environments, which equates to an innovation road map that’s baked into its day-today processes. “We’ve institutionalized the test-and-learn approach, which isn’t always about the cool, shiny new object,” says Randolph. Still, she admits that choosing the next tech to test is challenging in the current, rapidly moving environment. Ultimately, she says, those decisions come down to a few important considerations:

• Does the solution or technology serve a guest need? “The guest is the center of our universe, so investment decisions have to be made with full consciousness of how we’re making that experience better,” says Randolph. “Sometimes that’s about making the associate experience better, which is why the associate should always be part of the decision.”
• How can we, as “carpenters,” create differentiation with the tools offered by the vendor community? Randolph, who serves on the NRF CIO council, says it’s important to immerse yourself in a collaborative forum, even if that forum includes competition. “Differentiation is achieved in the way technology is incorporated into cultures and processes. But as an industry group, we can network, learn, leverage our power, and lobby more effectively.”
• What’s the technology’s track record? Randolph says start-up companies are great at pushing the innovation envelope, but she cautions that a company as large as Ulta Beauty is careful to not stake too deep a claim into unproven companies. “You have to blend risk and reward. Be prepared to test and learn, but don’t be eager to fund too many small initiatives,” she advises.

Operational Execution: It Takes A Village
Not surprisingly, Randolph describes the IT/business partner relationship at Ulta Beauty as extremely collaborative and key to executional success there. “Our CEO has done a phenomenal job assembling our team, and one of her key drivers is that everyone on the team has to think not only collaboratively, but functionally,” she says. “We equalize the wearing of our enterprise hat and understanding the bigger picture. When stakeholders are thinking solely about what’s important to achieve their particular business unit objectives, it’s easy to end up with several silos. At Ulta Beauty, it’s all about the overall goal. That helps us have healthy discussions, especially in an engaged environment where everyone wants more than we have the capacity to do.” And while the significant amount of recent change at Ulta Beauty has happened in timely fashion, Randolph says speed of implementation is secondary to the company’s goal of achieving the thorough understanding that drives adoption and success. “All the projects we take on are done in a collaborative style, and we seek support throughout all of the phases from inception to execution,” she says. “When we develop an innovative product, like clienteling, we typically pilot and refine it for more than a year, which gives us the opportunity to understand how to execute it in a most optimal way when it’s time for wide-scale rollout.” With more than 800 stores, Randolph admits that rollout usually poses a challenge, but the extra time taken in the pilot phase pays off in spades due to a higher quality outcome. “During pilot and testing, we work in conjunction with our business team, and we solicit information from dedicated field resources to help design and deploy,” she says. “We look at the test-and-learn phase as an experiment, so we limit our exposure, funding, and risk until we learn what the results are.”

"The guest is the center of our universe, so investment decisions have to be made with full consciousness of how we’re making that experience better."

Diane Randolph, CIO, Ulta Beauty

The execution of the omni-channel journey at Ulta Beauty is well under way. On the back end, its supply chain initiatives are ensuring store stocks are optimally auto-replenished, and that its network of distribution centers are making inventory available to fulfill consumers' anytime, anywhere demand. On the front end, clienteling applications are delivering a seamless view of customer activity in any channel. And in the consumer’s hands, mobile and social applications have surpassed 1 million downloads and enjoy an average 4.5 star review. Equally important, as Ulta Beauty’s store count and percent of online sales both grow, it finds itself operating on the stable, scalable omni-channel- enabling IT infrastructure that will continue to support the business’ demands.

Ulta Beauty: Ready For Its E-Commerce Close-Up

According to A.T. Kearney, the beauty and personal care category was merely a blip on the e-commerce radar screen in 2011. But, by March of 2012, it says beauty e-commerce was generating $3.8 billion, or close to 5.5 percent of total category sales. Recognizing the groundswell, Ulta Beauty invested heavily in Oracle’s portfolio of e-commerce and omni-channel solutions in 2013. By the end of 2014, its annual e-commerce sales had grown a whopping 56 percent over the previous year, representing a giant leap in the retailer’s effort to conduct 10 percent of its total sales through digital channels.

Ulta Beauty’s new Oracle Commerce platform integrates search and navigation, facilitates commerce anywhere, enables cross-channel promotions, and features responsive Web design architecture that caters to customers on nearly any device. Highlights of the upgrade include:

• The replacement of a third-party search service with Oracle Commerce’s integrated search and navigation, which lets Ulta Beauty’s customers browse categories and find specific products among Ulta Beauty’s more than 20,000 cosmetics, fragrance, hair care, skin care, body and bath products, and salon styling SKUs.
• Displacement of a third-party mobile solution that required exhaustive resources to maintain consistency between online and mobile channels with a responsive Web design that optimizes the site for mobile, tablet, and desktop devices.
• Reliance on the solution’s best-in-class dynamic content capabilities to engage customers and implementation of Oracle Commerce with minimal customizations.
• More seamless integration of third-party solutions, such as shoppable video and social media integration, to further enhance the customer experience.
• A 50 percent reduction in processing time for key content deployments since going live on the platform.