Ulta’s forthcoming invite-only marketplace will bring over 100 new emerging beauty brands to its website with a focus on wellness and men’s. Esker Beauty, Sara Happ, Caldera + Lab, Saalt, Wrinkles Schminkles and Byroe are a few of the brands joining the marketplace. Brands handle shipping and pay to list on the platform. Ulta doesn’t hold inventory for marketplace brands like it does with the 600-plus beauty brands stocked on its site outside the marketplace.

With e-commerce accounting for roughly 20% of its sales, Ulta is hoping the marketplace will boost its digital business as nearly half of beauty purchases move online and its rivalry with Amazon, Sephora and TikTok Shop heats up. Amazon is now the biggest beauty retailer in the world, while TikTok Shop is the seventh-largest online beauty retailer, according to market research firm NielsenIQ. Eager to enlarge its dot-com business, Sephora is expected to introduce a marketplace, too. The stakes for online beauty retail have never been higher.

To Jacob St. John, founder and CEO of Navigo Marketing, Ulta’s marketplace puts the retailer in a unique position against its competitors. “Ulta’s counter is a high-intent beauty audience plus a channel where paid, plus product detail pages (PDPs), plus merchandising, can move rank quickly. The players who align PDPs, paid search, seasonal demand and keep return on advertising spend (ROAS) disciplined, will win share,” he says, adding that Amazon “will still have scale advantage.”

At 18%, Ulta’s marketplace seller fee isn’t a deterrent for most brands signing up. Adding up Ulta’s seller fee, advertising costs and other miscellaneous fees, St. John estimates that Ulta’s margin will come out to about 30% on the marketplace. Shipping charges aren’t part of the estimate. Ulta’s margin for brands in its stores typically lands around 60%.

Comparatively, Amazon’s and Walmart’s marketplace seller fees generally register at 15% each. While Ulta charges brands more upfront, St. John expects net profit to be higher on the retailer’s marketplace since there will be fewer fees to pay and advertising will be less competitive, at least initially.

With deep expertise in building the Amazon presence of beauty brands like Subtl, About-Face, Lawless and Beauty Pie on Amazon, Navigo knows how brands can most effectively show up on Ulta’s marketplace to capture demand. St. John estimates that there’s a 60% crossover between Amazon and Ulta’s PDPs.

“None of our brands know that better than we do because we work so deeply in beauty across Amazon,” says St. John. “Ulta is really replicating the Amazon page layout. Our team is creating the graphics, they’re writing the content that goes up, they’re doing the advertising. Our team takes it all off of the brand’s plate.”

Navigo recommends brands to begin listing on Ulta’s marketplace with a limited selection of their products that focuses on bestsellers. The agency also helps brands unlock success across other third-party marketplaces and social media platforms like Meta and TikTok.

Similar to Amazon, paid search will be a crucial element in driving momentum on Ulta’s marketplace. Navigo forecasts that cost-per-click will rise around hero search terms as more brands join the platform in the coming months, rewarding those that join it early. St. John advises brands to lock in key search terms early and adopt a full-funnel approach to on-platform advertising that includes paid search and product page placements. Off-platform demand generation through social media and influencer strategies is important, but “it’s the in-platform coverage that determines whether you’re on page 1 or invisible,” notes St. John.

Applying Amazon best practices to Ulta has significantly boosted visibility for Navigo’s beauty clients online and in stores. Body care brand Fur claimed the top two paid placements above organic listings and jumped from row three to row one in search results after the agency optimized its product pages and advertising strategy. Advertising sales for the brand grew by a whopping 730% on Ulta’s website, while those on Amazon increased by over 40% year-over-year. Halsey’s makeup brand About-Face has experienced similar results since working with Navigo.

“That’s the exact playbook we’re now scaling for Ulta’s marketplace launch: combining proven growth levers with platform-specific customization to help brands win in Ulta’s ecosystem from day one,” says St. John, pointing out that Ulta.com’s return on advertising spend has generally been greater than that of Amazon, landing at between 4X and 6X.

Ulta’s marketplace will likely shift the retailer’s launch strategy for emerging brands moving forward. Navigo argues that Ulta will leverage the platform as a testing ground for smaller brands, pushing them to prove themselves there first before they’re considered for store debut. Larger brands will likely hold out for in-store placement.

Testing brands on digital channels before bringing them into store isn’t anything new in beauty retail, though. However, the marketplace model frees Ulta from making inventory investments on smaller brands with less proven track records, a move already adopted by retailers such as Target, Walmart, Macy’s and Nordstrom that have launched marketplaces. Ulta still operates its emerging brand program Sparked, which was established in 2019 and features four new brands online and in stores almost every quarter.

Regardless, emerging brands on Navigo’s roster see Ulta’s marketplace as a stepping stone to in-store distribution. “Many of our brands see the potential for outsized returns,” says St. John. “It might take $5,000 a month in ad spend to gain traction, but if they invest consistently for six months to a year and achieve growth, Ulta may reward that success by bringing them into stores.”

Emerging beauty brands with limited resources view Ulta’s marketplace as a low-risk testing ground. Stocked on Amazon, Goop, Bluemercury and in boutiques and spas, prestige bath and body brand Esker Beauty is entering Ulta’s marketplace with about 20 products, including bestseller $45 Body Plane. It’s largely shifted away from wholesale to concentrate on Amazon and its direct-to-consumer channel (DTC) over the past year. Amazon and DTC now constitute about 70% of the brand’s business combined, with wholesale accounting for the rest.

“The amount of money we would have to raise, borrow, whatever to make an Ulta launch successful, I am just now at this point not super comfortable with making big bets on external partners in a space that’s changing all the time,” says Shannon Davenport, CEO of Esker Beauty. Referring to the marketplace specifically, she says, “It’s a pretty cool opportunity for brands.”

Ulta’s marketplace is an awareness play rather than a revenue driver for Esker Beauty. It’s leaning on Navigo to devise its on-platform advertising strategy and determine where the marketplace fits in its broader marketing funnel. It’s predicting visibility and velocity as two of its main challenges on the marketplace.

“That’s where you get these agencies who really know these expert channels that are really specialized, like Navigo,” says Davenport. “We have to think of everything as different parts of the funnel now and really integrate Google, Ulta and Amazon. They’re all kind of interdependent now.”

Davenport believes the 18% fee for Ulta’s marketplace is a reasonable customer acquisition cost in a digital environment where nearly every eyeball is wildly expensive to capture. She says, “We still have margins there to keep some money, which is actually potentially more margin than on Amazon.”

With the marketplace model showing no sign of slowing down in beauty—buzzy DTC fashion brand Quince launched one in June—succeeding in online beauty retail has become more nuanced than ever. “As selection explodes, discovery gets pay-to-play. Rank, PDP quality and media cadence become inseparable,” says St. John. “Agencies like ours compress the learning curve. We forecast category pressure, pick the right SKU bets, time investment to seasonality and keep ROAS tight while growing visibility.”