Ulta Beauty Uses AI to Bridge Social Discovery and In-Store Experiences

Narrator: 0:06

This is PYMNTS On Air, a PYMNTS podcast. In-depth conversations, expert panels, and exclusive research brought to life by PYMNTS Intelligence. In this episode, Karen Webster sits down with Ulta Beauty's Senior Vice President of e-commerce and digital, Josh Friedman, to talk about how Ulta Beauty is building a commerce ecosystem where AI, social discovery, and stores work together to meet fast-moving consumer expectations.

Karen Webster: 0:38

Ulta Beauty sits at the intersection of inspiration and innovation where social discovery meets store experiences and technology amplifies every touch point. My conversation with Josh Friedman, Senior Vice President of E-Commerce and Digital at Ulta Beauty, will go inside how the beauty retailer is building a seamless data-driven ecosystem that keeps pace with fast-moving trends and consumer expectations. From TikTok to try-ons and from marketplaces to AI-powered advisors, Josh will share how Ulta's digital strategy connects customers to the products, the people, and the experience they love wherever they choose to shop.

Josh Friedman: 1:16

Absolutely. Thanks for having me.

Karen Webster: 1:18

So as we were preparing for this conversation, we talked about OmniChannel and how it's really become a buzzword that means something to us as we're trying to deliver that, but nothing whatsoever to the consumer who's just trying to navigate an experience across the physical and digital channels that represent their touch points. To start us off, how do you feel about the term omnichannel and how does Ulta make experiences feel continuous, regardless of whether it's an online experience or an in-the-store experience?

Josh Friedman: 1:56

Yeah, I it still exists. For us, there are a lot of uh overlaps, but for the customer, there is no distinguishing, as we talked about, Karen. And um so we try not to distinguish. We want to make sure that any way she wants to shop, discover her product, find her product, experience her product, and ultimately receive product. We can um give her that experience and we try to blend it. For us, especially in beauty, uh in-store experiences are paramount. We know that our guests love to go in store, they want to see our products, touch them, smell them, try them on. And we do give them digital versions of some of that. We've had our Glam Lab virtual try-on experience forever. Um, and it works really well. We've invested a lot in the AI behind that. But we know that they also want to go in and we and we encourage that. So we just make sure the digital experience is the uh mortar around those in-store bricks, and that if she does still want to shop online and make that purchase, that we make that very easy for her.

Karen Webster: 3:08

I I love I love that mortar brick analogy. That that's pretty that's a good one, Josh. I've I've not heard that before, but I think it's actually pretty, pretty relevant. When when you think about though the buy anywhere, fulfill anywhere experience that you talk a lot about. How how challenging is that to deliver, again, with the expectation that the consumer has that their preferences, their history, their loyalty, all of those things just kind of travel along with them regardless of the channel they happen to be doing something, discovering or buying at that particular moment in time.

Josh Friedman: 3:44

Yeah, I mean, there have been challenges over time in setting up the fulfillment methods and making sure the inventory is connected in a single place. But those are those are challenges that we've solved as many retailers have several years ago. So any piece of inventory that's anywhere in the chain is available to any customer, whether they're in the store or online. And if you just want to see things that are local to you, we've made that easy and obvious to the customer. So, really, as far as your account and your preferences and what we are investing a lot in, which is your beauty profile that's associated with your account, we make sure that that is seamless and travels with you. Uh, you can access it on Ulta.com, you can access it in the app, and our associates can access it when they uh pull you up in a store POS.

Karen Webster: 4:39

Let's talk about the marketplace, which is something you say allows you to tap into consumer trends and innovate in a way that is pretty quick to respond. How do you do that? How do you make that trend into something that a consumer can experience in such such a short period of time?

Josh Friedman: 5:02

Yeah, it's two parts. One is just finding those trends and finding the brands that are behind them. Sometimes it's one brand, sometimes it's multiple brands. And we do that through a lot of different ways. We keep a careful eye on what's going on in the market. Um, we've got some AI uh powered ways that we're doing that better and better every day. But the real unlock for the marketplace was us to be able to get them available to our guests in a very quick manner. So now once we identify them, um, we can get them up in a matter of weeks as opposed to months, um, and certainly in a much lower investment way than we have in the past. But honestly, Karen, uh, that tapping into those social trends is just one of the value propositions that the marketplace has unlocked for us. Uh, there's a lot of discussion around extended aisle and endless aisle. For us, it's really the second floor of our digital store. So, this is a set of categories that we've identified, mostly with the feedback from our guests that they wish that we would carry for them. They want to be able to put it in their cart, they want to be able to earn loyalty points on it, and quite honestly, they expect some of these categories to be available when they shop alta.com. So, wellness is one of them, beauty tech is another one, grooming, just some of these things that are not in the core of our uh historically of our of our assortment, but they the guests have asked us for. So we we really uh are careful to be targeted around those assortment choices, both the categories we pick and the brands we choose to bring on the marketplace, which is the other big uh differentiator for us. We only invite brands on, you do not get to come on at your own discretion, and we're really careful to make sure that we're we're bringing on uh brands that we trust so our guests so our guests continue to trust us.

Karen Webster: 7:06

How has that process evolved over time where you've been able to more appropriately align what your guests expect and what brands may bring into the marketplace? Are there specific lessons learned or KPIs that you apply when you're making those decisions?

Josh Friedman: 7:26

Well, it's a pretty new uh muscle for us. We just launched in September. So there's not been a whole lot of evolve, but we now have well over 100 brands. We make sure that we have curated them from across our assortment strategy, both core and new categories. And when we evaluate brands, we evaluate both the quality of their product and the quality of their content. And lastly, the quality of their ability to serve our customers, meaning that they can get the product that they promised on time. So we go through some painstaking steps. We could probably get more product on faster if we lower those standards, but we we choose to make sure that we stand behind every one of those products and we we carefully bring them on.

Karen Webster: 8:15

Josh, is is the idea to to attract new guests or to increase the basket size of existing customers?

Josh Friedman: 8:24

The answer to your I knew that was going to be a yes, yes. And we've actually it it started for sure with the extended. I mentioned that our guests were asking us and telling us, hey, we we thought you'd be selling wellness products, or it'd be great if you had more grooming assortments. So it was really to extend basket. Um, but what we've actually seen and been delighted by is how many new guests have come to Ulta through some of these categories that might not have tried us or or even tried us in a long time. Uh, so it's actually serving both of those uh objectives pretty nicely.

Karen Webster: 9:00

What's the role of influencers in in a in in being a signal for how you think about bringing new brands into Ulta, either as something that you'll carry or something that's part of the marketplace?

Josh Friedman: 9:16

Uh it's a big part. We talked about trends and the social trends. Uh, we we have our own um recruited group of influencers and we rely on them uh to to keep us honest. And then we track obviously TikTok's the big one, Karen, but we track uh uh several places and make sure we see what's trending quickly, and then our category managers jump on those opportunities uh as quickly as they can. So it's especially in beauty, Karen, uh so much is happening on TikTok. We we stay very aware of those trends.

Karen Webster: 9:50

Let's talk about AI, Gen AI, AI agents, and the role that it plays within Ulta and the expectations of your of your guest. I mean, you recently completed a proof of concept for a virtual beauty advisor powered by Gen AI. How's that going?

Josh Friedman: 10:09

It's going well. Uh, we got some great learnings, and now we continue to tweak. We're tweaking both the experience as well as the LLM um training itself. And looking forward into next year, what other um information we can bring to the Virtual Beauty Advisor. While while it starts off as really advising on beauty questions and our product catalog, we've seen a lot of great use cases around uh guests who want to information on their stores and information on inventory and information on our return policy and our loyalty program, all of which we have. And AI makes those things readily available. So we are now making sure that we can expand that. You know, for us and every retailer, the question is one super agent, multiple uh agents that are fit for purpose. We're going through all those conversations as we speak. But um, we were really excited about the the this year's version and what what that brought to us. And you know, the other thing for all of us, Karen, is not just what we're learning from our guests, but just what we're learning internally about what we can do with the with the rags and the LLMs and and uh and what customers are expecting. And uh while we'll continue to watch that, we're also watching other trends. Obviously, there's a lot of uh browsers now being powered by AI, including Atlas and Comet. And we recognize that um many of our guests will want to use those um chat experiences as well as our own native one. And we're we're making sure that we're paying respect to all of those opportunities and not uh placing all of our eggs in any basket yet.

Karen Webster: 11:51

Yeah. Why do you think your guests or shoppers more generally will use the LLMs for search and discovery versus the embedded conversational experience on your own site? Do you think that there'll be different questions, similar questions, just different different uh different different channels?

Josh Friedman: 12:14

Uh I think there'll be a lot of overlap. And I think it's just a matter of where guests feel comfortable. Uh I guess the best corollary in the physical world is we still see guests who want to come in and talk to one of our beauty advisors, and many guests who still want to talk to their friends, and some guests who want to get their inspiration from TikTok. And so there's not a there's not a straightforward answer. And we want to make sure that they can they have all of those opportunities in a digital context too. So I I do feel like off of our property, they'll probably look be looking for more solutions and less um less uh questions around which product and more around like which routine or which solution. And then once they come shopping with us, it might be which products are are best for me, whether it's for my foundation or my budget or or things like that.

Karen Webster: 13:13

Or, you know, what was the shade of lipstick that pick your favorite celebrity was wearing at this particular event? I think people are curious about that. Um, those kinds of things. So it may be that those are more the nature of the questions on these LLMs.

Josh Friedman: 13:32

And it's a great use case, and we're really um lucky um that we've got our Glam Lab uh virtual AI and visual AI, and we um think we'll be able to leverage some of that technology and even that experience for uh for some of those instances. So I don't want to get too deep into our roadmap here, but we're we're looking into opportunities like that.

Karen Webster: 13:57

Anytime I've ever done that and I've gotten the product, I'm like, it doesn't look the same on me. But anyway, I still made I still made the purchase. And I think that's what most people will continue to do. Um, you know, pulling back and looking at the many channels, it isn't just you know, online and in-store online has so many different touch points now, and that will obviously expand with LLNs and and how that evolves. What does the next evolution of OmniChannel look like for Ulta?

Josh Friedman: 14:32

The next evolution. Well, I I think this will be an expected answer, but it has a lot to do with personalization for us. And we're um we've announced partnerships, especially with Adobe and a few others, that we are making sure that our 45 million loyalty members who share with us uh implicitly and explicitly a lot about them, that we are requiting that uh information with great personal experiences, whether it's what you purchased or what you prefer, and giving you recommendations and easy ways to do that. So for us, OmniChannel uh evolves into a deeply personal experience uh for all of our all of our guests. We've invested in our own proprietary recommendation engine quasi uh dozens of recipes that all um are personalized based on the guest. And uh and we mentioned Glam Lab earlier, and so those will be big, and um, and then we want to bring those in uh even more present in the app and in the store in the future.

Karen Webster: 15:39

Do do your guests buy the same thing almost like a replenishment? Like I always like this kind of eyeliner in this shade, and I'm buying it because I've run out, or do they like to experiment with new things? Like I like black eyeliner, but I I'm ready to try a different brand because I heard an influencer talk about this particular type of product. What's what what tends to be the experience and how does your recommendation engine account for the tried and true versus the serendipity of discovery?

Josh Friedman: 16:13

Yep, uh both, Karen, uh in the beauty category, newness is always big. Everyone loves to just try things for the sake of of variety, not to mention all of the innovation that's coming through in products and even categories like skincare and K-Beauty and and things like that. So there's no there's no either or on this. Uh, but for for our guests who do have tried and true, whether it's your shampoo or or something like that, we launched our replenishment uh platform earlier this year, and we've seen a great uptick on that because it just makes it so easy, not to mention you get a little bit of a 5% discount when you sign up for a replenishment um program. And uh and and there are things that are tried and true, and then there are things that you want to try. We we try to foster the the try-on and the variety. We have tons of samples, tons of free gift programs that we're always putting together. If you're uh if you're checking out on ulta.com and you're not getting any gifts with your purchase, you're missing out because we've got dozens and dozens. In fact, for the holiday season, we were just counting. We have over 150 different uh free offers that'll be coming your way. So we make sure that we're feeding you inspiration on things that we we think you might want to try or you think you might want to try while we're giving you the oldy but goody ones that you rely on.

Karen Webster: 17:46

Final, final question. When you think about all these various touch points across the spectrum of physical and digital, how does this redefine what beauty and a connected beauty experience really is now for guests and for those who would like to be a guest at Ulta?

Josh Friedman: 18:08

Uh well, I I I don't know about a redefinition, but uh what I guess I will say is we view the store and the physical experience as the core of your experience. So everything we do digitally or with the loyalty program circles around that uh that in-person experience for you, which includes not only the the aisles and the product in the store and its presentation, but also the service you get uh in those aisles and in our beauty salons. So everything is in service of getting you the information and the inspiration you need before you go into the store, while you're in the store, and certainly when you come out of the store. So as we think through our roadmap, uh whether it's digital or omni-channel, it's in service of those uh experiences and making sure that you get what you need and you're excited when you walk into the store and even more excited when you walk out.

Karen Webster: 19:09

Josh, thanks so much for your time. Great conversation. Thanks again.

Narrator: 19:13

Thank you. That's it for this episode of the PYMNTS Podcast: The Thinking Behind the Doing. Conversations with the leaders transforming payments, commerce, and the digital economy. Be sure to follow us on Spotify and Apple Podcasts. You can also catch every episode at pymnts.com /podcasts. Thanks for listening.