Ulta Beauty

Ulta’s moat rests on a stack of advantages rather than a single winner-take-all effect. Switching costs are meaningful as Ulta Beauty Rewards drives more than 95% of sales and 44.6 million active members provide habits, points balances, and personalized offers that are sticky and data-rich.

Intangible assets include brand relationships, vendor marketing dollars, and a trusted omnichannel shopping experience including salon services that increase visit frequency and basket size. Cost advantages arise from scale in procurement, marketing and supply chain, plus store productivity and an efficient off‑mall footprint.

Network effects are moderate: as more guests and brands engage, marketplace breadth improves and the experience draws more discovery, but this is not a pure platform network effect. Efficient scale exists in local trade areas where Ulta’s store-plus-salon format and brand breadth make new entry less compelling.

Risks to durability include prestige competition (notably Sephora’s expanded distribution), normalization of category growth, and the 2026 sunset of Target shop‑in‑shops which removes an incremental channel even if it reduces cannibalization. Recent strategic moves (UB Marketplace, Mexico JV, Space NK) can reinforce the ecosystem if executed well.

Component view and weights: switching costs 85 (30%), cost advantage 82 (25%), network effects 75 (25%), intangible assets 75 (15%), efficient scale 65 (5%).