Makeup Monopoly: A Look at Ulta Beauty's Canadian Competitors

photo:    fortune.com

By Julia Marchionda

Canadian makeup lovers erupted into a collective cheer when the rumours of Ulta Beauty’s expansion north of the border became reality following an official press release from the company on May 4th, 2019. The focus of the release is not the confirmation of a Canadian expansion, rather it is the reveal of the company’s first quarter results – talk about burying the lede. The first quarter results are cool for the investors but we knew the real news was Ulta preparing for their Canadian launch.  Now that our wishes have gone from our glossy lips to CEO Mary Dillon’s ears, where exactly does Ulta fit into the Canadian beauty retail landscape?

Competition in the beauty industry is fierce, and it continues to intensify as more brands enter the market whether they be lines like Rihanna’s Kendo-backed Fenty Beauty or independently funded start-ups like Trixie Cosmetics, brought to us by well-known drag queen, Trixie Mattel. A combination of e-commerce and a smart influencer marketing strategy has enabled digitally native brands like Kylie Cosmetics, Morphe, and Dose of Colors to break into the retail world.  Whether it be via their own brick-and-mortar stores, wholesale contracts with companies like Ulta and Sephora or a combination of the two, these brands have managed to maintain their e-commerce operations in addition to their retail expansions.

GRAPHIC: ULTA

GRAPHIC: ULTA

My point is, though the market for beauty brands is saturated, the market for beauty retailers is not - it is an oligopoly, dominated by a handful of major retailers.  To pinpoint one true competitor for Ulta is difficult because their offerings span several categories across both products and services. In Ulta’s 2018 Annual Report, the company describes their competitors as: “traditional department stores, specialty stores, drug stores, mass merchandisers… the online capabilities of national retailers, as well as pure-play e-commerce companies.” So… basically anyone that sells beauty products, got it.

In the Canadian market, Ulta’s main competitors will be: Sephora, Walmart, and Shoppers Drug Mart. Let’s take a deeper dive into each of the three retailers.

Sephora

SEPHORA AT CF CHINOOK CENTRE PHOTO: AMACHRIS CONSTRUCTION

SEPHORA AT CF CHINOOK CENTRE PHOTO: AMACHRIS CONSTRUCTION

The retail version of the ultra-cool French exchange student who wears red lipstick and no other makeup, Sephora first opened the doors of their its first Canadian store in 2004. Since then, the French retailer has opened 72 locations across Canada and has a presence in nearly every province.  In 2016, Sephora embarked on a “Toronto Takeover”, which saw it open four new stores in record time; Sephora’s North American store count is up to a whopping 430. 

Sephora is definitely the more luxe or premium retailer of the bunch, with a heavy focus on client service.  Sephora’s price points range from mid-range to ultra-high end, the Sephora Collection private label brand being the most “entry-level” of price points.  The company added Volition Beauty to their product assortment; a unique brand that harnesses the power of crowdsourcing to find their next beauty innovation.  They also offer select services from full makeup applications, “express services” like false lash application, to mini skincare services at the in-store Beauty Studio. 

photo: sephora canada via facebook

photo: sephora canada via facebook

Sephora’s Yorkdale location was remodelled to become one of their TIP (Teach, Inspire, Play) concept stores where clients can participate in self-guided makeup lessons or join a class led by one of the in-store experts.  The TIP concept was also rolled out at Sephora’s West Edmonton Mall location following their renovation in late 2017.

The brand made headlines recently for its in-store treatment of Grammy-nominated artist, SZA and the makeup artist of Saturday Night Live’s Leslie Jones (on separate occasions). Despite the controversy, Sephora continues to be a destination for popular and cutting-edge independent beauty brands.

Walmart

PHOTO: WALMART CANADA

PHOTO: WALMART CANADA

Walmart is the kind of girl whose makeup routine consists of exclusively mascara and tinted moisturizer.  She’s known George since kindergarten and thinks YSL is short for “Y Study Late.”  Though Walmart lacks the glitz and glam of shopping at Sephora, they offer a wide range of mass-market beauty, haircare, and skincare products.  Due to Walmart’s savvy corporate buyers, they are able to offer the lowest prices on all our mass-market beauty, haircare, and skincare favourites.

Ulta and Walmart are similar in that they both carry mass-market beauty brands, but that is where the similarities begin and end.  The product assortment is classic “drugstore makeup,” meaning you will almost always find brands like Revlon, L’Oréal, and Covergirl.  Walmart is the exclusive retailer of Hard Candy, who in a previous life, was a sister brand to Urban Decay and sold in Sephora.  Though the line is no longer available in Canada, Walmart was also the exclusive retailer of Drew Barrymore’s FLOWER Beauty. 

Retail Insider reported on Walmart’s newest store concept, the “Urban Supercentre,” that launched at the Toronto Stockyards. One of the many features is an element similar to the Amazon Go store – the “Fast Lane”. The new technology allows customers to use their My Walmart app to checkout seamlessly and without the use of a traditional checkout.  Shoppers must show their digital receipt to a greeter as they exit, utilizing a similar strategy to Costco.  Beauty product shopping at Walmart may not be as exciting as visiting Sephora or Shoppers Drug Mart, but the low prices and convenience offered are appealing for the “no muss no fuss” shopper.

WALMART’S NEW FAST LANE CONCEPT AT THEIR TORONTO STOCKYARD’S LOCATION PHOTO: WALMART CANADA

WALMART’S NEW FAST LANE CONCEPT AT THEIR TORONTO STOCKYARD’S LOCATION PHOTO: WALMART CANADA

Shoppers Drug Mart

PHOTO: BEAUTY BOUTIQUE AT CF RICHMOND CENTRE VIA FACEBOOK

PHOTO: BEAUTY BOUTIQUE AT CF RICHMOND CENTRE VIA FACEBOOK

Not afraid to pair her Gucci sneakers and Louis Vuitton bag with her Old Navy jeans and Zara blouse, Shoppers Drug Mart showcases a mixture of high and low price points like Ulta.  She doesn’t believe in paying more than $10 for mascara but has no problem dropping $50 or more on a serum or moisturizer.  Of the three, Shoppers Drug Mart is the closest competitor to Ulta in Canada because they both house mass and prestige beauty brands under one roof. 

In terms of product offering, there is quite a bit of cross over between Sephora, Walmart, and Shoppers Drug Mart.  Consumers can find prestige brands like Benefit, Smashbox, and Stila at both Sephora and Shoppers Drug Mart.  They can also find drugstore brands like Maybelline, Almay, and Rimmel that are sold in both Walmart and Shoppers.  Though their list of exclusive brands is not quite as robust as Sephora’s, Shoppers Drug Mart carries some great product lines that aren’t available in other retailers like PÜR, Soap & Glory, and Pixi Beauty.

PHOTO: CONFEDERATION COURT MALL

PHOTO: CONFEDERATION COURT MALL

Like Sephora, you can book an appointment to have your makeup done at Shoppers Drug Mart but services are not a key part of their offering.  The Loblaws-owned retailer appears to be taking steps in a new direction though, with the launch of their Beauty Clinic concept.  Beauty Clinic is a cosmetic services center offering treatments like laser, cosmetic injectables, and microdermabrasion.  Currently there is only one Beauty Clinic in all of Canada; the concept is still fairly new so it is possible we could see more in future.

Shoppers Drug Mart appears to be shuttering their Murale concept – a standalone prestige beauty store that first opened in 2008 and at its height had 8 locations in Canada.  Over the last few years, Shoppers seems to have made bolstering their prestige beauty business a priority.  In 2013, the company unveiled an amplified beautyBOUTIQUE at Bayview Village in Toronto around the same time Sephora debuted their renovated CF Toronto Eaton Centre flagship. 

GRAPHIC: ULTA 2017 ANNUAL REPORT

GRAPHIC: ULTA 2017 ANNUAL REPORT

ulta photo: henderson engineers

ulta photo: henderson engineers

GRAPHIC: ULTA 2017 ANNUAL REPORT

GRAPHIC: ULTA 2017 ANNUAL REPORT

Conclusion

Ulta is still in the early stages of their Canadian expansion; Sam Winberg of Retail CND has reportedly been tapped by the US company to help find their first Canadian home.  Ulta is unlike any beauty retailer currently available to Canadian shoppers.  The combination of mass and prestige beauty, haircare, and skincare along with their exclusive branded services makes for a truly unique offering that Canadian beauty lovers will embrace with open arms. 

So where will Ulta open its first Canadian store?  Only time will tell, and once time tells Retail Insider I’ll be sure to share it with all of you.  In the meantime I’ll start drafting my shopping list and setting aside a small fortune.

Julia+Headshot+250x273.png

Retail expert and consultant, Julia Marchionda, is a graduate from both the University of Toronto and Humber College. She spent most of her educational career honing her skills in critical thinking, marketing communications, and finding her unique voice in her writing. With tenures in several areas of retail under her belt, Julia has lead teams in achieving sales goals and allowed herself to become consumed in understanding retail business.  

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