Ulta 2011 Annual Report Download - page 8

led to what we believe to be a unique retail approach that focuses on all aspects of how women prefer to shop for
beauty products by combining the fundamental elements of a beauty superstore, including one-stop shopping, a
compelling value proposition and convenient locations, together with an uplifting specialty retail experience.
While we are currently executing on the core elements of our business strategy, we plan to continually refine our
approach in order to further enhance the shopping experience for our customers.
Our competitive strengths
We believe the following competitive strengths differentiate us from our competitors and are critical to our
continuing success:
Differentiated merchandising strategy with broad appeal. We believe our broad selection of merchandise across
categories, price points and brands offers a unique shopping experience for our customers. While the products we sell
can be found in department stores, specialty stores, salons, drug stores and mass merchandisers, we offer all of these
products in one retail format so that our customer can find everything she needs in one shopping trip. We appeal to a
wide range of customers by offering over 500 brands, such as Bare Escentuals cosmetics, Chanel and Estée Lauder
fragrances, L’Oréal haircare and cosmetics and Paul Mitchell haircare. We also have private label Ulta offerings in key
categories. Because our offerings span a broad array of product categories in prestige, mass and salon, we appeal to a
wide range of customers including women of all ages, demographics, and lifestyles.
Our unique customer experience. We combine the value and convenience of a beauty superstore with the
distinctive environment and experience of a specialty retailer. We cater to the woman who loves to indulge in
shopping for beauty products as well as the woman who is time constrained and comes to the store knowing
exactly what she wants. Our distribution infrastructure consistently delivers an in-stock rate of greater than 95%,
so our customers know they will find the products they are looking for. Our well-trained beauty consultants are
not commission-based and therefore can provide unbiased and customized advice tailored to our customers’
needs. Together with our customer service strategy, our store locations, layout and design help create our unique
retail shopping experience, which we believe increases both the frequency and length of our customers’ visits.
Retail format poised to benefit from shifting channel dynamics. Over the past several years, the approximately
$93 billion beauty products and salon services industry has experienced significant changes, including a shift in
how manufacturers distribute and customers purchase beauty products. This has enabled the specialty retail
channel in which we operate to grow at a greater rate than the industry overall since at least 2000. We are
capitalizing on these trends by offering a primarily off-mall, service-oriented specialty retail concept with a
comprehensive product mix across categories and price points.
Loyal and active customer base. We have over nine million customer loyalty program members. We utilize this
valuable proprietary database to drive traffic, better understand our customers’ purchasing patterns and support
new store site selection. We employ a broad range of media, including digital, catalogs and newspaper inserts, to
entertain and educate our customers and, most importantly, to drive traffic to our stores.
Strong vendor relationships across product categories. We have strong, active relationships with over 300
vendors, including Estée Lauder, Bare Escentuals, Coty, L’Oréal and Procter & Gamble. We believe the scope
and extent of these relationships, which span the three distinct beauty categories of prestige, mass and salon and
have taken years to develop, create a significant impediment for other retailers to replicate our model. These
relationships also frequently afford us the opportunity to work closely with our vendors to market both new and
existing brands in a collaborative manner.
Experienced management team.We have an experienced senior management team with extensive retail experience
that brings a creative merchandising approach and a disciplined operating philosophy to our business. We continue to
expand the depth of our management team at all levels and in all functional areas to support our growth strategy.
Growth strategy
We intend to expand our presence as a leading retailer of beauty products and salon services by pursuing the
following primary growth strategies:
Accelerate pace of new store expansion and grow to over 1,000 stores in the United States. We continue to
believe that over the long-term, we have the potential to grow our store base to over 1,000 Ulta stores in the
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