Gitika Kishor

Assignment 1
Contemporary Retail Management FM 262-205 (Fall 2020)
Oct 13, 2020
Professor Stragazzi

Ulta vs. Sephora: Sustainable Competitive Advantage

A sustainable competitive advantage is that element of a business which provides it a

meaningful advantage over both existing and future competitors. A sustainable competitive

advantage provides a firm with an advantage relative to competing firms that is able to be

sustained by the firm and not easily eroded by competitors over time. It is the force that enables a

business to have greater focus, more sales, better profit margins, and higher customer loyalty

than the competitor. Understanding what the brand’s strengths and core competencies as well as

how they can be used in innovative ways to provide value to a chosen market and developing a

target audience are one of the early and most basic steps to develop a sustainable competitive

advantage. It can help guide in decision-making and provide the brand with direction and a sharp

focus. The idea, here, often is to use the VRIO framework, which includes four, critical

characteristics: valuable, rare, imperfectly imitable and non-substitutable. One example of this

can be Nike, a customer-oriented brand, which has customer loyalty as its source of competitive

advantage. The company has several methods to increase customer loyalty a part from investing

in design and quality. Another example is Coca Cola; it has the competitive advantage of

pursuing an environment-friendly product. Many of its products are recyclable, and it is going

for the green effect.

While Ulta and Sephora have a similar customer bases, they try to constantly compete

with each other to attract young shoppers. The customer base(s) involves middle to higher

1
income women who value quality and are willing to spend. Statista (IN TEXT CITATION)

states that until a few years ago, the majority of female customers at Sephora were between the

ages 18 and 34 years. The demographics of Ulta showed American consumers between 18 and

24 years, but by 2019, Ulta beauty shoppers were older, having an average age of 41, whereas it

was 36 for Sephora shoppers.

Even though some might say that Sephora is known for selling more luxury brands and

ulta as a retailer of drugstore brands, they both are quite similar. Being the one stop destination

for offering hundreds of brands under one roof and membership programs that rewards shoppers

with points programs, they both create an inviting beauty experience and inspire every guest with

a range of possibilities (CITATION). It is safe to say, together, these two, dominate the specialty

retail market for beauty and cosmetics.

Although, both carry products from prestigious brands, they are making various efforts to add

more and more options to upgrade and boost sales. Sephora is adding a technological advantage

which allows its store buyers that runs on a mobile, making it easier for them to find new

products that will boast well with the store’s audience. They plan on using technology as a new

way of attracting people and beauty lovers. Another aspect of creating a long-term relationship

with its customers, it added new features which would have appointments with Sephora beauty

specialists and that would help them make their purchasing decisions. They also further

developed its own house brand as a lower-cost alternative to the name brands it carries and while

Sephora focuses on differentiation with their products, Ulta has been differentiating with their

customer experience, loyalty programs and rewards appealing to older shoppers. Ulta’s shoppers

get loads of benefits with ulta points as members, birthday perks and excellent curation of budget

2
beauty brands. Their relationships with customers are their key to success, making them feel

welcomed and comfortable, personal recommendations and support to make them feel like a

wanted guest. Another focus of theirs is a focus on their supply chain with effective

commitments which resonates with their customers. Forbes states, “Everything the company is

doing is generating more customers. Fast fulfillment, quick recognition through personalization,

greater loyalty through constant offerings, and rewards all add up to a successful operation.”

While Sephora’s approach would be displaying the new launches and the entire collection and

having spotlights in the racks, they create buzz-worthy make up to hype up their products while

ulta displays products for every budget and commitment level. While Ulta would choose to fill

shelves in relation to price points, Sephora would negate the push for limited and exclusive

products using interactive displays.

Ulta executes their strategies to drive long-term growth and sustainable competitive advantages

such as deepening beauty love and loyalty, reinventing beauty digital engagement and delivering

a world class beauty assortment. They have been increasing the in store and beauty services

offering operational excellence and high performance. Sephora on the other hand, promotes a

culture of belonging with inclusion programs and standing with women entrepreneurs. They also

take action to cultivate sustainability throughout the company. It continues to have a huge

diverse customer base operating over 2600 stores in 36 countries, committed to creating a culture

of belonging with their clients. They also offer state-of-the-art facilities and have an enhanced

employment program designed for people with disabilities. These technologies help simplify and

streamline our processes to expand employment opportunities for our diverse workforce. On

comparing the two, Sephora does carry a wider range of products than ulta whereas utla carries a

3
full-service salon at the back of the store. Sephora holds one thing over ulta which is samples

which attracts customers who aren’t ready to purchase an expensive product but Ulta wins when

it comes to hair care having a wider range in that section.

Ulta offers more to offer than Sephora, especially for those on a budget but I would choose

Sephora as it is more accessible, it has stores nationwide and so I am familiar with shopping at

Sephora before I came to the States. I would have a better understanding and news about

Sephora as it has a stronger International presence than Ulta and how we are revolving around

social media, Sephora has been leading in terms of Instagram, connecting with people and

creating meaningful relationships but Ulta is coming on top of it slowly in the past few years.

While I would personally be fascinated with the concept of rewards, Sephora makes it possible to

earn gift packages of high-end products while Ulta gives dollars of a purchase. Growing up in

India, I obviously was more familiar with Sephora and their system and didn’t have anything to

compare them to but even after being introduced to Ulta, I didn’t see a competitive advantage

over Sephora. I would like to add that since I’m not really an avid beauty shopper, I wouldn’t

really want to pick one, but it was interesting to see their membership programs which in

Sephora, one must spend $350 a year and in Ulta, $450 a year to become a member. As I

mentioned the location factor, for many shoppers, it’s a matter of what they know and so they

would go to their local Sephora and trust its worth but for someone who is very specific on their

choice of brands, they would like to research more. Personally, I am a shopper who runs after

discount coupons and gift hampers instead of collecting points to get one product in the end. I

would love the store to have more locations as over the world as I mentioned earlier as well, I

have been to various Sephora stores from India to Chicago and New York, but I have only been

to Ulta in Chicago which then does not make me a good judge. I might not be an avid beauty

4
shopper, but I like to explore with my beauty products but at the same time a lot of times I have

gotten to pick my favorites at Sephora which I have been using for years now.

References:

Bhasin, H., George, Macwan, N., Nahdi, A., & Gimba, M. (2019, April 17). What is Sustainable
competitive advantage? What is SCA? Retrieved October 13, 2020, from
https://www.marketing91.com/sustainable-competitive-advantage/

About Us. (n.d.). Retrieved October 13, 2020, from https://www.sephora.com/beauty/about-us

Beauty, U. (n.d.). Retrieved October 13, 2020, from https://www.ulta.com/company/about-us/

Shahbandeh, M. (2020, May 15). Sephora, Ulta, and Target: Beauty shoppers' average age U.S.
2019. Retrieved October 13, 2020, from
https://www.statista.com/statistics/1117633/sephora-and-ulta-and-target-beauty-shoppers-
age/

Danziger, P. (2018, August 09). Sephora, Ulta And The Battle For The $56B U.S. Beauty Retail
Market. Retrieved October 13, 2020, from
https://www.forbes.com/sites/pamdanziger/2018/08/06/sephora-and-ulta-are-on-a-
collision-course-then-there-is-amazon-where-is-us-beauty-retail-headed/

Sephora innovates business practices with mobile buying platform. (n.d.). Retrieved October 13,
2020, from https://www.retaildive.com/ex/mobilecommercedaily/sephora-innovates-
business-practices-with-mobile-buying-platform

Mack, S. (n.d.). How to Build the Ultimate Merchandising Strategy at Sephora, Ulta, and CVS.
Retrieved October 13, 2020, from https://www.repsly.com/blog/consumer-goods/build-
ultimate-cosmetics-merchandising-strategy-sephora-ulta-cvs

Loeb, W. (2019, March 22). Why Ulta Beauty Is Winning Customers And Keeps Growing
Rapidly. Retrieved October 13, 2020, from
https://www.forbes.com/sites/walterloeb/2019/03/18/why-ulta-beauty-wins-customers-and-
keeps-growing-rapidly/

Winker, K., Winker, K., & Read more by Katelyn Winker. (2019, September 10). Sephora vs.
Ulta: Beauty Retailer Competitor Analysis: Digital Beauty HQ. Retrieved October 13,
2020, from https://digitalbeauty.com/sephora-vs-ulta-competitor-analysis/