It is unusual for an early stage beauty brand to launch in both Ulta and Sephora. Typically, the retailers push for some level of exclusivity and are willing to give additional support to get it. In addition, it is hard for an early stage beauty brand to manage the needs of these two behemoths, both on an inventory and marketing front.
So how does an early stage brand determine the best partner?
First, it is important to note, these are both great retailers. The strength and consistency of their same store sales growth, as shown below, is impressive. Even post COVID, the brands have rebounded, with Ulta in particular seeing two year stacked same-store sales around 30%.
Source: Company reports, note: LVMH includes all retail
Second, both also have created innovative partnerships with other retailers. Sephora will be launching stores within Kohl’s to try to target a younger, more diverse demographic. Ulta is partnering with Target with dedicated beauty aisles to drive increased prestige to the beauty offering at the mass retailer. They are both forward thinking with their partnerships, ensuring increased distribution and working to get key brand partners additional brand recognition with the consumers.
One of the key differences for the retailers is price point. While Ulta continues to invest in prestige brands, and Sephora continues to invest in more masstige brands, our data would suggest there continues to be a meaningful difference in price points. Below, we use Helio to estimate percentage of revenue at different price points for two key skincare categories, face moisturizer and eye serums. As you can see almost 50% of face moisturizer is sold below $30 at Ulta, whereas that counts for around 10% of sales at Sephora. And 50% of Sephora eye serums are sold above $70, whereas only 20% of Ulta’s products are at that price point.
Source: CircleUp Helio
And finally, and likely the most important factor, is understanding the support that the retailer will give you. Are they putting you online only? That is likely a sign of lukewarm excitement in your brand. Are they asking you for samples for their holiday grab bags? That is a good sign that they want to get your product in the hands of more consumers and that your brand is one that they want to help grow.
Partnering with the right retailer can be an important driver of success to an early stage beauty brand. While both retailers are impressive, understanding where your brands pricing strategy and the support that you can get from the retailers is key.