Beauty retailers will need to recreate a playground

Beauty is a high touch business. People want to be able to smell, feel and try on cosmetics and fragrances before buying. Ulta Beauty and rival Sephora rose to dominate the $93 billion a year US beauty retail market by letting shoppers do just that. But in a post coronavirus world, it is hard to imagine sharing make-up with friends, let alone using communal display testers. The gloom is reflected in Ulta’s share price. Ulta started reopening stores in May. But the resumption of retailing in the US is tentative so far. To survive, specialist beauty retailers will need to recreate a playground where shoppers could dab and smear lipsticks and face creams online. This makes Ulta’s quiet investments in artificial intelligence and augmented reality technology look prescient. They also make its mussed-up stock price attractive…While privately-held Sephora focuses on pricier “prestige” offerings, Ulta has positioned itself as a “one-stop shop” for all things beauty by stocking both mass-market and high-end brands in its 1,264 stores. Ulta is better equipped than many of its peers to deal with the coming challenges. It is sitting on $1.2 billion in cash and cash equivalents after drawing down part of its lending facility. The business should benefit as the former anchor of the cosmetics industry, the department store, continues to struggle.