Bluemercury’s Secret Sauce to 20 Years in Business

At a time when department stores reigned supreme, Marla and Barry Beck had a different idea.
The couple envisioned a network of neighborhood-based beauty stores that carried department store brands and were staffed by well-trained but brand-agnostic employees. They opened the first one in Georgetown in 1999, and it was a hit.
"It was probably the first curated concept based on the clientele they were trying to reach, not simply based on demand," said Leonard Lauder, chairman emeritus at the Estée Lauder Cos. "They created the demand for the brands they were selling rather than simply servicing the demand based on advertising, etc. And they knew how to do it. They had a wonderful instinct for it. These are two great partners, each does something a little bit different than the other and they do it so well."
"Marla and Barry saw a pain point in respect of purchasing beauty products and they went after it," said Jack Levy, partner at investment bank Centerview. "The idea of putting the spa together with the store was a thoughtful one, because it was a way to draw women in for the service, it was a way to let them test the product, it was a way to transition product used in the spa to product sold in the store. It was a very virtuous circle."
Gradually, the Becks started opening more and more locations. They were all based in neighborhoods, in convenient locations for people to pop in and shop. Employees were trained thoroughly and were able to guide shoppers across multiple brands, selecting what might work best for a customer with a certain skin concern or makeup need. It was a low-pressure alternative to shopping at department store makeup counters, and things started to pick up.
But to really accelerate growth, the Beck's needed more capital.
Enter, the Invus Group and chief executive officer Ray Debbane.
He met the Becks in 2006 when they were looking to expand their store network. At that point, they had 16 locations, he said.
"I had the opportunity to go with my team to visit Marla and Barry and we were very impressed with what we found," Debbane said. "They had already implemented a very differentiated approach within the industry."
They'd also started developing a name for themselves, he said.
"Bluemercury had developed a reputation for a friendly, low-pressure environment that created a high level of consumer satisfaction and tremendous repeat purchases," Debbane said. That impressed him. He was also surprised by the level of brands that the company had been able to recruit.
"The beauty industry is very choosy and picky about where they put their products … and they're not going to give them to a retailer if they don't think this is the environment they want their brands to be made available. Even though it was a small chain with 16 stores, they had some of the most sought after beauty , such as Trish MacEvoy and La Mer," Debbane said.
That, combined with the company's real estate differentiation, sold him. Invus took a majority stake and started laying the groundwork for Bluemercury's next phase.
Perhaps the company's gutsiest move was making the decision to move forward on the store opening path despite the Great Recession, which started shortly after Invus' investment. "Rather than be impacted negatively by the recession, we decided to accelerate the opening of new stores and enter other parts of the country. The same approach was resonating with consumers outside of the D.C. area where they had started," Debbane said.
Between 2007 and 2014, Bluemercury grew its store network to 60 locations. It also launched two private label lines, Lune & Aster and M-61, both pet projects of product guru Marla Malcolm. Today, the lines are still important growth drivers for the business.
"She leveraged the insight developed from being a high-end beauty product retailer to really understand what consumers were looking for. She used that knowledge to develop a full line of products…in two years, M-61 became the best-selling skin-care line at Bluemercury," Debbane said.
Then it was time to hand off the company to a new owner for its next phase of growth. Invus and the Becks hired Levy, who was then at Goldman Sachs, to explore options for the business.
It turned out, Macy's Inc. wanted to buy it.
"They saw beauty as an important category and a growing category and they shrewdly decided that Bluemercury could be a growing stand-alone business and it could be an important addition in store," Levy said.
In 2015, Macy's offered $210 million to take over the business.
Since then, the Becks have continued to grow the business; each focuses on their differentiated skill set. Marla builds out the product portfolio and builds relationships with the brands, and Barry executes the real estate strategy and other business initiatives.
"Their skill sets are very complementary," Levy said.
"Marla is clearly the beauty authority," Debbane said. "She represents the brand, she knows the industry and the products and she's great at product development and at strategy. And Barry was more involved in operations and negotiating leases — when you open so many stores and every location is a stand-alone, you have to negotiate with the landlord."
"Some entrepreneurs don't have business skills…You don't always get that, especially in founders," said Gregory Brown, founder of ReVive. "I managed ReVive until it got to be about $20 million. Then I sold it, because I'm not the best business man in the world, I'm a doctor…but they have both start-up entrepreneurial skill and business skills."
Those skillsets not only benefited Bluemercury, but also the brands they have worked with.
"When I started ReVive, it was very small and they were very small," recalled Brown. The two grew together, and eventually, Bluemercury started stocking Brown's hair start-up Renessence in several of its doors, too.
"Marla was doing a WWD summit, and she said, 'don't do more skin care, bring me hair,'" Brown recalled. "They've been great with that—they've nurtured it."
"You know everything in that store has been hand-picked by Marla," said Holly Thaggard, founder of sunscreen business Supergoop! "I send her every new launch and she gives me the feedback, she's still that hands on with product. When you're that hands on with product from the founder, it resonates with the customer.
"Her neighborhood locations really service that family—that mom that's on the go and that truly needs products for a big day with her family out and about, and as such, a lot of our play sku's…are really resonating in the space. People are out and about in their neighborhoods," Thaggard said.
For Supergoop!, the Becks helped amplify the brand's sunscreen-all-the-time message.
Inside the brand, they call that practice "deseasonalizing," Thaggard said. "It's important for me for our retail partners to support that vision of not making it a seasonal distortion, then pulling it back in the winter months," she said. And ever since Marla discovered the products on a family ski trip, Bluermercury has been the brand's partner for that journey.
"Marla and Barry have been so incredibly supportive and making sure our brand looks as beautiful in the dead of winter as it does in summer," Thaggard noted.
"Twenty years ago Marla and Barry had this epic approach to retail—their strategy as we observed was to plant themselves in the heart of the community, directly in the path of the consumer, offering that consumer a curated assortment of essential but everyday innovative products," said Nest Fragrances founder Laura Slatkin. "It was revolutionary, and when they did it, the question for Nest Fragrances was how can we be part of that strategy? So, I simply stalked Marla."
Slatkin sent "dozens of e-mails" telling Marla about how much the Nest fragrance business, best known for its candles, wanted to be part of the Bluemercury story. "Finally, she said 'yes,'" Slatkin said. "When she did it was a terrific marriage. Nest Fragrances at Bluemercury just doubled and tripled and grew every year."
When Alex Chantecaille, vice president of sales and promotions at the family brand, first met Barry and Marla, the line was only sold at Neiman Marcus. "It was like, one day we'll get there, but we weren't set up as a company to support them in the way their model works," Chantecaille said.
Things changed about three years ago at the WWD Beauty CEO Summit in Palm Beach, Fla., Chantecaille said. "Marla had tea with us, and she said, 'now I think is the right time,'" Chantecaille recalled. "We started with about 20 stores about three years ago, and now we're in 100."
For Chantecaille, being at Bluemercury provides access to a new customer and an added point of sale. "The customer either was saying, 'Oh, I've heard of this line,' 'oh, it was my mom's line,' but they weren't playing and touching it as much," Chantecaille said. "It wasn't like we stole from our current retail partners…it was a whole new customer for us that was coming through Bluemercury stores."
Growing its number of Bluemercury stores has allowed Chantecaille to become more of a household name. "There's been a tipping point of the knowledge of the brand," Chantecaille said.
"It's that store you pop in after lunch, it's that store you grab something quickly after dropping your kids off or when you're walking in town on a weekend," she said. For Chantecaille, Bluermercury is said to be driving similar volumes as Saks Fifth Avenue and Neiman Marcus.
To get the most out of the retail partnership, Chantecaille often takes matters into its own hands.
"When they open a store, we're there at 6 a.m. unpacking," Chantecaille said. "We get in early and make friends with them and show them how hard we work."
"We're not dialing it in, we're very in," Chantecaille said. "In a world where beauty is becoming more and more digitized, they're proving the brick-and-mortar experience is vital to the beauty industry."
While Bluemercury has gone on to open legions more of stand-alone stores—it has 184—the company's trajectory was not without hiccups.
When the Becks were starting out, they envisioned Bluemercury as an online beauty shopping destination. They raised $1 million to start building out the business, only to find out that two other businesses with similar e-commerce concepts had each raised $10 million.
They got down to work, but after the Nasdaq crashed, bet the remaining $150,000 on a stand-alone store in Georgetown. Then, still in its early days in the U.S., Sephora opened next door.
Still, Bluemercury carved out a specialized way of freshening the beauty retail mix, which still remained heavily dependent on department stores. It also differentiated itself from Sephora and Ulta Beauty with its real estate strategy.
"They're very upmarket," Lauder said. "They really are the quality chain. I believe they came into the business when Space NK was there and had first started, but Space NK, which was a wonderful concept, also was launched in the U.K. and the U.S. is a long way off. But Barry and Marla were right on top of their business."
"I first met them once when I was down in Washington, D.C., and I walked into the first Bluemercury store," Lauder said. "I just shook hands a little bit and left and was very impressed. Then we started to do business with them, and got bigger and bigger and somehow along the way we got together and talked and talked and talked.
"We talked about how you can make it in today's world where there's a lot of distribution in different places that is prospering and some that wasn't prospering," Lauder continued. "They were doing very well with shops like the one in Washington, D.C., this is before the sale to Macy's, but how to do that, how to choose the locations, how to put together the brand assortment, etc. Just in general terms, I wanted to see them succeed."
Lauder became a mentor to the duo. "I give nothing but advice. I can't remember ever speaking to any retailer without giving them advice that they haven't even asked for," he said.
The Bluemercury sales staff is also credited with a large part of the company's success.
"They have people that are dedicated that are for the whole store—they do inter-sell," Brown said. "The key is to have people on the ground for your brand that make contact with their people. You don't have to have dedicated people in the store, which is so great for a little company, especially."
It also helps with the bottom line, Brown noted. "They have fully trained, eager young folks that will sell your brand when you're not there, and they're great about that," he said.
"When you get into bigger stores the counters are competitive, and it takes all of that out. It's a breath of fresh air," Thaggard said.
To this day, Marla and Barry remain the heart of the operation, and the company remains headquartered in Georgetown. In 2019, Macy's unveiled plans to open 55 more Bluemercury locations. Even with the constant expansion, the Beck's remain focused.
"Marla has a really clear vision of what she wants her stores to be and what she wants her brand to represent and she doesn't let anybody tell her which direction to do in. She's very focused and has really strong guard rails, and I respect her for that," Slatkin said. "She has a firm opinion about what she wants to do and where she wants to go and how she's going to get there."
Source: Read Full Article