By Janet I. Tu The Seattle Times
WWR Article Summary (tl;dr) This article takes a look at Seattle Beauty company Julep's "omnichannel" approach to sales. Next month, several of its best selling online products will be carried at 250 Ulta Beauty stories. This added brick and mortar experience is part of an "ominchannel shopping experience" which is especially important to millenial consumers.
The Seattle Times Since its launch some nine years ago, Seattle beauty company Julep has built a large and loyal following, in large part through its online and social-media efforts.
Now, the purveyor of makeup and skin-care products is putting into place a big piece of its brick-and-mortar strategy.
Starting in August, some of Julep's best-selling products will be carried at 250 Ulta Beauty stores. By the end of the year, that number will expand to 300 of the national beauty-retailer chain's 886 stores, with more coming in 2017.
In doing so, Julep is becoming that big buzzword in retail these days: omnichannel (or multichannel) -- serving customers across various channels, whether online via desktop or mobile device, in brick-and-mortar stores or by phone.
Nordstrom has been praised as a brick-and-mortar retailer that's successfully going omnichannel, with an e-commerce business that now represents 20 percent of the company's sales, up from 8 percent five years ago. But the high-end retailer's recent financial challenges also illustrate how difficult such a move can be.
Approaching omnichannel from the opposite direction is Amazon.com, which is opening several physical bookstores and trying to figure out the right format and store size.
An omnichannel approach is especially important in reaching millennials, who "embrace an omnichannel shopping experience and don't hesitate to cross over from in-store browsing to online buying, and vice versa," market-research firm Mintel said in a recent analysis of beauty consumers.
"Millennials are strongly invested in the beauty category" and research trends and products both online and in-store far more than older generations, according to the analysis.
Julep is part of what Jason Stoffer, a partner at Seattle venture-capital firm Maveron -- a Julep investor -- calls the third generation of beauty brands. The first generation grew through department-store counters, he says. The second expanded through TV infomercials on QVC and beauty store Sephora. The third generation started out digitally native.
"Our belief is that the next generation of great consumer businesses are going to start online, really understand their core customer, and then move to omnichannel over time," Stoffer said.
"The reality is customers want to touch and feel. This is a natural evolution for Julep -- taking the brand they've built online and enabling it to reach more consumers by moving" to fast-growing retailer Ulta.
It's not that Julep hasn't had some brick-and-mortar and TV presence before. The company began in 2007 as a few nail parlors in Seattle that now serve, in part, as testing grounds for new products.
Over the years, some of its products have also been carried at Nordstrom, Sephora and Beauty Brands, and sold on QVC.
But the Ulta deal means more Julep products in hundreds more locations than the brand has ever secured before.
"This is a big growing-up moment for us," said Jane Park, Julep's CEO and founder. "This is what every brand dreams of in terms of the big leagues."
Defying trends Ulta, which carries both mass market and prestige brands and encourages customers to try products before buying, has succeeded at a time when many other retailers are faltering.
Sales at its retail stores open at least a year grew nearly 14 percent year-over-year in the most recent quarter, and e-commerce sales grew nearly 40 percent. Ulta plans to open about 100 new stores this year.
At Ulta locations, Julep will have a bay displaying 57 of its top-selling products, including the It's Whipped matte lip mousse and Love Your Bare Face cleansing oil.
But it's Julep's online presence and engagement with customers that's been the cornerstone of its success -- and an approach Julep hopes to bring to its Ulta deal.
"We're a cosmetics company that started in the era of social media," Park said. "We always invite women to give us feedback. The mission of always trying to have customers in the boat with us is part of Julep. Knock down the wall between customer and company as much as possible."
Customer feedback Julep solicits feedback on new products, colors and trends from people who sign up to be part of its Beauty Lab, and incorporates that feedback into its product lineup.
It takes into account comments it gets from its 94,000 followers on Instagram, nearly 55,000 followers on Twitter and some 800,000 people who like it on Facebook.
When the company was developing what became It's Whipped lip mousse, for instance, it planned on sending out 500 samples. But 80,000 women responded to the company's call on social media to help develop the product, Park said.
Prototypes were sent to some of the 80,000, who were then asked their opinions on two types of applicators and four formulas. Feedback on colors was solicited via Instagram.
It's an approach Park hopes to bring to Julep's Ulta presence, "taking our capabilities that developed from our online community and bringing it to support the launch of our brand in a bricks-and-mortar environment."
To that end, it has created an "Ultamate Fuchsia" nail-polish shade based on an online survey taken by members of Ulta's Ultamate Rewards loyalty program.
The company also has a monthly subscription box service, Julep Maven, through which the company first tests the reception to new products.
The Maven service came under criticism a few years ago by the Better Business Bureau, which gave the company an "F" rating in 2014 for not addressing numerous customer complaints that canceling the service was difficult and customer service unresponsive.
Julep has since worked with the Better Business Bureau to resolve those complaints and currently has a "B" rating.
The company also says there was a spike in calls to the call center two years ago because of some shipping-policy changes, and that it has since hired more customer-service reps and brought on a new operations leader.
Julep declined to disclose how many subscribers it has or to give sales figures.
It says it's raised nearly $56 million from venture-capital firms including Maveron, Madrona Venture Group and Andreessen Horowitz, as well as celebrities including Will Smith and Jay Z.
Customerconnection Julie Sandler, a principal at Madrona Venture Group, says the degree to which Julep solicits and incorporates customer feedback in its products seems unique in the beauty category.
"To be able, from the very beginning, to create that customer relationship using digital and social channels, allows you to create that feedback and ideation process," Sandler said.
Now, Julep is able to extend that process to more physical retail stores.
"From the get-go, we saw this as an omnichannel brand," Sandler said. "What we've been waiting for is this type of partnership to emerge -- where the retailer and brand are aligned."