Is Ulta Beauty a model for the beauty industry on Reddit?

What is the Beauty industry doing on Reddit?

According to ChatGPT when asked "What is the Lipstick Indicator?" she said :

The lipstick indicator is an informal economic theory suggesting that during times of economic downturn or recession, consumers will often purchase less expensive luxury items, such as lipstick, rather than higher-priced luxury goods. The idea is that while people may not be able to afford expensive indulgences like vacations or luxury cars during tough economic times, they will still treat themselves to smaller, more affordable luxuries like cosmetics.

The term gained popularity after Leonard Lauder, the chairman of Estée Lauder, noted that lipstick sales tended to increase during economic downturns, serving as a potential indicator of consumer behavior during such periods. While it is not a scientifically proven or universally accepted measure, the lipstick indicator is often cited as a way to gauge consumer sentiment during economic slowdowns.

It's been recently reported that Warren Buffet's Berkshire Hathaway purchased 690,106 Ulta Beauty shares in Q2, worth about $266 million.?Is this an indicator of where they think the economy is going? The Ulta shares rose 15% since the Berkshire purchase was revealed even though the shares are still down about 22% for the year.

This got me wondering about the beauty industry on Reddit and particularly what we can see about organic or paid Ulta activity on Reddit.

There is an r/ulta subreddit that has 85,000 fans and employees of Ulta Beauty Stores. This is an unofficial Subreddit that is not managed by Ulta. However there appears to be a lot of activity from Ulta Employees

Some employees are very engaged with fans of the stores offering informal AMA's like the one below. Employees will tag their posts with the "employee" flair and some with indicate in their bio what their specialty is. It is not clear if this is voluntary activity or if it is activity that is part of their jobs. As you can tell form the level of engagement, thier presence is accepted and welcomed by member of the Ulta subreddit. This post got 68 upvotes and 221 comments with the employee answering a broad variety of questions in great detail.

Ulta's competitor Sephora has an unofficial subreddit with 7x more members which makes sense as the company is global vs. Ulta being a US only company and Sephora having double the stores but it does explain Buffets rationale for the opportunity.

Marketers in the beauty and makeup industry can very easily find prospects on reddit talking about different brands, looking for deals and discount codes, getting help with skincare issues and chatting about their fave influencers or gurus. Some Subreddits like the r/makeupaddiction have 5M members, fans of r/beautyboxes 510,000 members

I recently wrote about Reddit's new ad innovation with the Dynamic Product Ads where retailers can have Reddit ingest their entire inventory and serve relevant products in Reddit feeds or discussions. Ulta Beauty was an early adopter testing this Ad type last holiday season with success. Reddit has the Ulta case study highlighted here where they share the remarkable results.

tl;dr?

Ulta saw purchases increase and achieved a greater return on investment by implementing Reddit’s Dynamic Product Ads during the peak holiday shopping season. source: Reddit

What are some takeaways for retail marketers...

1. Don't have the budget for social media managers? maybe empower your employees to participate and show up authentically answering questions related to brands and common category questions.
2. The conversations about brands you carry or brands you've developed will happen with or without you. Is there a way you can be a helpful brand engaging in relevant questions?
3. Got Deals, discounts, offers, promotions? customer love them. You even have the phenomenon of employees sharing their discount codes. Not sure if this is sanctioned behavior but is there a way to leverage the spirit of it if you are not already.
4. Looking for micro influencers? Looking for Trends - look no further than reddit for what people are really taking about.
5. HR dept. looking to get a sense of what your employees really think - look no further than Reddit and ignore the sentiments at your peril. The r/ultaunion subreddit will raise eyebrows but now sure how representative it is of whats going on behind the scenes
6. For those retailers with budget for advertising testing the Dynamic ad type seems like it might be worth a try particularly if there are already brand relevant conversations happening.

What do you think? Interested in doing a deeper dive on Reddit marketing? Sign up for our deep dive course waitlist here.