This new "shop-in-shop" model will feature 1,000 square feet of Ulta beauty brands that have a rotating assembly of products. Ulta will be training Target employees as beauty consultants and customers have the option to shop in person or utilize Target's same-day curbside pickup or home delivery services.
While Ulta didn't share the length or financial terms of their agreement with Target, expanding their brand to more stores will no doubt bring more customers to both companies and drive higher sales. With the pandemic changing the way the retail industry works and alters shopping behaviors, perhaps permanently, many retailers are looking to innovative deals and ideas to keep up with consumers demands.
Both Target and Ulta benefit from a deal like this. Ulta will gain visibility on store shelves and reach online, while Target will draw in a new demographic. Foot traffic both in person and online is expected to rise once Target has Ulta's products available. Between the two of them, they already have over 100 million active loyalty program members from their respective programs. Target Circle hosts the bulk of those members, but Ulta brings in more than 33 million members from their Ultamate Rewards program alone.
Target has shown strength in the market through the pandemic, as it's been one of the few retailers that has been able to keep its nearly 1,900 stores open. Its curbside and home delivery service grew more than 700% during its second quarter, and profits actually jumped 80% in its second quarter, proving a store with variety is one that lasts.
Meanwhile, Ulta was hard-hit by store closures. The beauty retailer's sales dropped by 26.7%, but they have been steadily improving since. Their business really picked up again when most of their stores were able to re-open in July. However, beauty sales have been unstable as less social outings and working from home lets consumers go makeup-free more often. Their saving grace has been their soaps and skin care, which has actually gained popularity as self-care and relaxation has taken hold while everyone stays at home.
The two companies aren't the only ones who think this deal is a good idea. Once their plan was announced, Ulta's stock rose over 7%, even though it did slip 4% the day after. Target, on the other hand, increased 3% over two days and seems to be settled there.