Ulta Beauty and Sephora are two of the most recognizable beauty retailers in the United States, and at first glance, their business models look very similar. Both sell makeup, skincare, fragrance, and haircare products, and many of the same brands appear in both stores. However, Chapter 3’s resource-based view suggests that a company’s competitive advantage does not come from just one product or service. Instead, firms can create a sustainable competitive advantage through a combination of tangible and intangible resources and organizational capabilities.
Rewards That Actually Feel Rewarding
One of Ulta’s most valuable resources is its loyalty program. At the end of fiscal year 2025, Ulta’s rewards program had more than 46 million members, and approximately 95% of the company’s sales came from members. Beyond encouraging repeat purchases, Ulta says the program gives the company information about customer preferences that it can use to personalize recommendations and promotions.
Like most modern retailers, both Ulta and Sephora reward customer loyalty, but each takes a different approach. Sephora’s Beauty Insider program offers points, rewards, free shipping, promotional savings, and other benefits. Ulta’s program, however, lets customers convert accumulated points into money they can apply to almost any product or beauty service offered by Ulta.
For someone who regularly buys beauty products, this can influence where they shop. If the same product is available at both Ulta and Sephora for the same price, the product itself doesn’t give either company an advantage. However, the additional value or savings customers receive from purchasing it at one retailer may.
Location, Location, Location
Physical stores are another important tangible resource. As of January 2026, Ulta operated 1,505 stores across all 50 states, while Sephora has taken a somewhat different approach to expanding its physical presence.
Sephora previously operated inside JCPenney stores before transitioning to a partnership with Kohl’s. JCPenney ultimately developed its own JCPenney Beauty concept, which expanded to more than 600 stores by 2023. Meanwhile, Sephora continued expanding its partnership with Kohl’s. In 2025, the companies completed a rollout that brought Sephora to more than 1,100 Kohl’s locations nationwide.
This Kohl’s partnership has increased Sephora’s accessibility, particularly in communities without a standalone Sephora. However, access to Sephora products isn’t necessarily the same as access to a full Sephora store. Some Sephora at Kohl’s locations use smaller formats with a curated selection of products rather than the assortment and experience available at larger locations.
Ulta’s store network therefore represents more than just the number of places where its products can be purchased. Its stores allow the company to provide a more consistent Ulta experience under its own brand rather than depending primarily on another retailer to expand its physical presence.
Come for the Makeup, Stay for the Hair Appointment
One of my favorite differences between the two retailers is Ulta’s salon model. Nearly every Ulta location includes a full-service salon. In fact, Ulta treats retail stores, salon services, and e-commerce as part of the same business.
The salon gives customers another reason to enter an Ulta store, even when they aren’t necessarily shopping for a product. A customer can schedule a hair appointment, get recommendations from a stylist, buy those products, and earn rewards in one visit. The next visit may be to redeem those rewards on another product or service.
Each of these elements, on its own, is not particularly groundbreaking or hard to replicate. The resource-based view becomes more useful when you consider these resources together. Ulta has combined its physical stores, salon services, product assortment, loyalty program, e-commerce business, customer data, and brand relationships into one hassle-free ecosystem.
Everybody Loves a Sale
Promotions are another way Ulta encourages repeat visits. Anyone who regularly shops at Ulta is probably familiar with its coupons, bonus-point offers, and major promotional events. Sephora also runs promotions and offers savings through Beauty Insider, so sales are certainly not rare in the beauty industry.
However, these promotions become more valuable when combined with Ulta’s other resources. A sale may bring a customer into the store, the purchase generates rewards points, the rewards encourage another purchase, and the customer’s purchase history gives Ulta additional information it can use to personalize future promotions. Ulta reported that approximately 95% of its fiscal 2025 sales came from loyalty members, showing just how closely its loyalty program is connected to its overall business.
This is where I think Ulta’s advantage becomes less about any individual promotion and more about how its different resources work together.
So, Is Ulta’s Advantage Sustainable?
Chapter 3 identifies four characteristics resources must possess to support a sustainable competitive advantage: value, rarity, difficulty in imitation, and difficulty in substitution.
Ulta’s resources clearly provide value. Its stores make products accessible, its salon provides services, its loyalty program encourages repeat visits, and its customer data helps the company better understand its shoppers.
Rarity and imitation are a little more complicated. Sephora also has a large loyalty program, a significant physical presence, strong brand relationships, digital shopping, beauty services, and promotional events. None of Ulta’s individual resources are completely unique. What may be more difficult to imitate is the combination of them at Ulta’s scale. More than 1,500 U.S. stores, salons in nearly every location, millions of loyalty members, and an integrated retail and digital business cannot be duplicated overnight. Ulta Beauty
Substitution may be Ulta’s biggest challenge. Beauty consumers have plenty of alternatives. They can shop at Sephora, department stores, mass retailers, brand websites, online marketplaces, or directly through beauty brands. They can also receive hair and beauty services elsewhere. Ulta therefore cannot rely on simply carrying popular products to keep customers loyal.
The resource-based view helped me look at Ulta differently because its competitive advantage may not be any one thing that it offers. Sephora can compete with Ulta on products. Other salons can compete with its beauty services. Other retailers can offer sales, and almost every major retailer has some form of rewards program. What is harder to recreate is the entire combination, making convenience its own resource.
Maybe Ulta’s biggest resource isn’t what it sells at all. It is how many different reasons it has created for beauty consumers to come back.
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