Pestel Analysis for Ulta

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        “We are the largest beauty retailer that provides one-stop shopping for prestige, mass and salon products and salon services in the United States. We focus on providing affordable indulgence to our guests by combining unmatched product breadth, value and convenience with the distinctive environment and experience of a specialty retailer.” (Ulta.com) They operate within the large and growing US beauty products and salon services industry.  This market represents approximately $127 billion in retail sales, according to Euromonitor International and IBIS World Inc. as stated on Ulta’s 2015 annual report.  

PESTEL Framework:

Political Factors

        Ulta is affected by extensive laws, government regulations, administrative determinations, and court decisions.  Many of the products Ulta sells are regulated by the U.S. Food and Drug Administration (FDA), the U.S. Federal Trade Commission (FTC), the Consumer Product Safety Commission (CPSC), state regulatory agencies and State Attorneys General (AGs). These regulations relate to the safety, labeling, manufacturing, advertising, packaging and distribution of the products.

        There are also federal and state laws that affect their day-to-day operations.  Laws that affect the minimum wage and benefits make a big difference for a company that employs around 9,700 full-time and 16,800 part-time employees as of January 30, 2016.  The Affordable Care Act expanded healthcare coverage which affected Ulta and other businesses as well.  Ulta’s salons also require state licensing.  Any changes to the state licensing would impact the profit company makes from their salon.  Lastly, some states impose legislation on chemicals used for their products.  These changes can impact their profit negatively or positively, depending on the change.

Economic Factors

        An economic crisis will affect the growth of the business.  If a recession occurs, people will not be spending disposable income on discretionary items such as beauty products and salon services.  Factors that affect consumers’ discretionary purchases are general business conditions, levels of unemployment, interest rates, tax rates, consumer credit and consumers’ confidence in the future economy.   Since Ulta has lots of landlords for their store fronts, negative economic changes would make a big impact.  If the landlords cannot get a good price for rent or get their credit approved, they might not be able to open stores.

        Increase cost or disruption to their third-party vendors could affect production, shipment or receipt of their merchandise.  Ulta directly sources their promotional gifts with third-party vendors overseas.  This can result in lost sales for the company.  Any changes to international trade being considered by the current presidential administration can have an effect on the company.

Sociocultural Factors

        Due to Ulta’s industry, they have to pay close attention to customers’ needs/shopping patterns.  They need to be able to recognize/define products and beauty trends.  Then they need to be able to anticipate, gauge and react to these changing demands in a timely manner.  Ulta must be efficient and translate these market trends into suitable products and service offerings in their stores and salons to stay competitive.

        Ulta works with over 300 vendors.  This allows them to get inventory to their stores in a timely manner.  Their executive staff have over 30 years of experience in merchandising and 15 years in developing relationships in the industry.  Due to their experience, their vendors view them as a huge distribution channel for growth and brand enhancement.  They have a strong brand loyalty over competition.

        Ulta’s marketing strategy reaches to people of all ages.  They advertise in beauty and lifestyle magazines.  Their Ulta.com website not only allows customers to purchase their products but also includes a forum that is available 24 hours a day.  They also email customers with promotions which is very effective for them with online and retail sales.  

Technological Factors

        Ulta is committed to using technology that allows consumers to purchase their products and to stay in a competitive position.  Their website allows them to not only purchase products but to communicate in an interactive/enjoyable way to reinforce the Ulta brand and bring customers to their stores.    In 2016 4th quarter, Ulta reported an increase in e-commerce sales of 63.4% to $ 154.9 million.

        Since Ulta is experiencing increase in e-commerce sales, they need to focus on cyber security.  They need to make sure that their websites are not hacked and their customers’ information is stolen.  Their data collection from their vendors, business, customers and business partners needs to be secured.  Breach of cybersecurity not only ruins the reputation of the company but customers tend to go shopping somewhere else to make sure this does not happen to them again.  This is especially important in areas where the technological platforms are not stable.