Marketplace Briefing: Ulta bets on marketplace to reclaim lost market share as Amazon’s beauty sales grow

The launch of Ulta’s online marketplace comes at a time when Ulta faces more competition from rivals than ever before. Ulta competes not only with other specialty retailers like LVMH-owned Sephora but also major companies like Walmart and Amazon, both of which have heavily expanded their beauty and personal care offerings in the past year or so. Ulta is also fending off competition from upstarts like TikTok Shop, which has emerged as a top platform for beauty and skin care since it debuted in the U.S. in fall 2023. 

“The competitive environment in beauty has never been more intense,” Steelman said during the earnings call. “For the first time, we lost market share in the beauty category in 2024.”

Ulta joins a growing list of retailers and brands that have launched their own third-party marketplaces in recent years, including Nordstrom, Michael’s and Macy’s. Simply put, the third-party model, first perfected by Amazon, is continuing to reshape the retail landscape. And more retailers see these marketplaces as key to hitting their strategic priorities, like growing their profits, reaching a wider audience or, in the case of Ulta, regaining market share as competition intensifies. But to grow its marketplace, Ulta will be tasked with beating Amazon at its own game, as the e-commerce giant has added more premium beauty brands to its platform in recent years.

For brands, Ulta’s marketplace presents a significant opportunity to reach a dedicated beauty-focused audience. Unlike Amazon, which spans multiple product categories, Ulta’s marketplace will be dedicated to beauty and wellness, potentially providing a more targeted shopping experience.

“There’s a lot of appeal in selling on Ulta’s marketplace because the brand is synonymous with beauty,” said Jay Antokol, senior marketplace manager for Tiger Companies. “The challenge will be ensuring that Ulta makes the marketplace worthwhile for brands.”

Ulta’s marketplace plans 

Ulta Beauty is taking a curated approach to its upcoming marketplace. For now, the marketplace is available to brands on an invitation-only basis, allowing Ulta to expand its product offerings while maintaining a level of curation that aligns with its brand identity. “We have thousands of brands that want to come work with us,” Steelman said. 

The upcoming online marketplace will offer customers a “broader assortment of beauty, wellness and lifestyle products from established and emerging third-party brands,” Josh Friedman, Ulta’s svp of e-commerce and digital, said in a statement to Modern Retail. Wellness, in particular, has become a core part of Ulta’s corporate strategy in recent years, according to Glossy. 

He also added Ulta is “focused on identifying brands that are not currently part of the Ulta Beauty ecosystem, in an effort to broaden our assortment, but prospective third-party marketplace brands will still be aligned to the company’s assortment strategies across beauty and wellness.”

Ulta has already seen positive demand from interested brands, with dozens of sellers applying within hours of the company’s announcement, Friedman said.

A key differentiator for Ulta’s marketplace is its integration with the retailer’s loyalty program — shoppers will be able to earn rewards points on their marketplace purchases and even return online marketplace items in Ulta stores. “We’re trying to make this as seamless as possible for our guests,” Steelman said.

While the marketplace is a significant strategic move, Ulta is taking a measured approach to its financial expectations. Steelman said that the company does not anticipate the marketplace to be a material revenue driver in 2025 but is actively building a dedicated team to oversee selling and operations. “The plan is to launch this in the back half of 2025, and we’ve got a dedicated team that we’re building around selling and operations to operate this model,” she said, adding that Ulta will continue sharing updates as the launch nears.

With Ulta’s new marketplace, brands can reach more than 44 million customers through Ulta’s rewards program, according to a dedicated landing page on Ulta’s corporate website. Brands can also tap into an array of tools and tech to grow their e-commerce businesses, although the retailer does not specify what exact capabilities partnering brands will have access to. Lastly, Ulta’s marketplace brands will have dedicated support from a marketplace team. 

George Hatch, director of marketplaces (excluding Amazon U.S.) at the e-commerce accelerator Pattern sees Ulta’s platform as a potential launchpad for up-and-coming brands seeking exposure in a highly competitive beauty market. He said that testing products in online marketplaces before securing in-store placements has become a proven strategy for major retailers. “We’ve seen this approach with Walmart and Target—brands that perform well online often have a better chance of making it onto store shelves.”

The Amazon effect

Ulta’s marketplace launch comes as Amazon aggressively expands its beauty category, wooing premium brands that were previously hesitant to sell on the platform, Modern Retail previously reported. For instance, last year Amazon courted Estée Lauder and its portfolio of brands to its marketplace, including Clinique, Ulta’s top seller, per Glossy.

There are a few reasons for Amazon’s growing dominance in the beauty arena. The e-commerce giant is delivering products faster than ever, making it an increasingly appealing option for shoppers — especially as retailers, including Ulta, have tested locking up some merchandise in stores to deter theft, adding friction to in-person shopping. Dharmesh Mehta, Amazon’s vp of worldwide selling partner services, told Modern Retail last year that the company’s success in beauty stems from its marketplace’s pricing, vast selection and rapid delivery. Put together, Amazon’s retail power has made it too big for beauty brands — even high-end ones — to ignore.

But on the flip side, many sellers are branching out to new platforms amid rising costs and dwindling profits on Amazon, and Ulta could be an attractive platform for such brands. 

Last year, Amazon’s beauty sales in the U.S. rose 12.3% from 2023 to $32.7 billion, according to estimates from Momentum Commerce, an e-commerce intelligence firm. Meanwhile, Ulta rival Sephora delivered “double-digit growth in both revenue and profit,” according to the retailer’s parent, LVMH, which did not disclose exact figures. Ulta’s net sales were $11.3 billion in 2024, a less than 1% increase. Ulta is forecasting comparable sales to be flat or grow 1% in 2025, citing consumer uncertainty due to tariffs, inflation and fears over a possible recession. 

“When you look at it both from a size perspective and a growth rate perspective, Amazon, within the beauty space, is performing very, very well,” said Andrew Waber, director of market research at Momentum Commerce. “Ulta will need to differentiate itself by curating unique offerings and leveraging its established customer loyalty.”

Despite the promise of new revenue opportunities, launching a marketplace comes with challenges. A key concern is the impact on Ulta’s existing brand partnerships. If major beauty brands perceive the marketplace as undermining their exclusivity, it could strain relationships, Waber said. Indeed, Nike stopped selling on Amazon in 2019 to regain control over its brand image and customer experience, and to combat the proliferation of counterfeit and unauthorized products on the platform. 

“The biggest thing Ulta will need to navigate around — and this is true of any retailer spinning up a third-party marketplace — is communicating clearly its brand protections around resellers and the grey market,” Waber said. “It will have to balance that with not upsetting the big brand partners that are pretty critical to its overall offering as a retailer.

What I’m reading

• Amazon is aggressively expanding its advertising business, aiming to challenge Google’s dominance by leveraging its vast consumer data and positioning itself as the go-to platform for buying ads across the internet, per The Information.
• A U.S. district judge has dismissed an antitrust lawsuit alleging that Amazon was using an algorithm to steer customers away from third-party sellers, per Reuters.
• A U.S. ban on TikTok could trigger a social shopping boom in Mexico, as creators and brands look for alternative markets to reach their audiences and maintain their online presence.

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