For Bluemercury founders Marla Malcolm Beck and Barry Beck, the great Internet bust of 2000 was an unexpected boom.
The couple founded the business in 1999 as a pure-play beauty e-commerce business. Before even offering a single lipstick for sale, they had raised a million dollars, hired 20 employees and started to build out a web site.
Then the bubble burst. Literally.
In March 2000, the Nasdaq index started a free fall that would result in its value decreasing 76 percent in two years. Venture capital dried up instantly and the Becks were down to their last $150,000.
“We were in trouble,” recalled Beck. “We were too early, and sometimes being early is just being wrong. In fact, even today, cosmetics are still one of the lowest penetrated categories in e-commerce.”
Their solution was to buy a local beauty boutique in Washington, D.C., and rechristen it Bluemercury. Twenty years later, the company has established itself as a key player in the U.S. beauty retail scene, with 184 stores nationwide, including 14 stores in its D.C. home market.
“After the dot-com bust, you couldn’t raise any money. We really built the business store by store,” said Malcolm Beck, who remembered the early days when the washer and dryer were located in the store’s basement, right next to the buying office. “Every time we did the laundry, we’d have to leave,” she laughed. “It would just get too hot.”
Ultimately, e-commerce would explode for the retailer — but that was a decade away in those early days. First, the Becks had to create a new concept for Bluemercury, one that would be more compelling than their original plan, that would attract both consumers and investors alike. They hit on the idea of creating a nationwide neighborhood-based chain of luxury beauty retailers, with a cross-brand service model to differentiate themselves from department stores.
The vision was to give consumers a highly curated brand mix and exceptional service in hyper convenient locations — a concept that fueled the growth of Bluemercury and continues to be a guiding principal to this day. “Our neighborhood strategy is a key differentiator,” said Malcolm Beck. “We want to be near Starbucks and SoulCycle, so beauty becomes a part of their life, not a special occasion.”
The Becks bet — correctly — that the densification of cities and suburban neighborhoods would lead to more localized shopping, and that department stores would become less convenient for many people.
“Intense clustering of consumers drives neighborhood shopping due to perceived convenience and a desire for social connectivity and community,” Beck said. “While many commodity items like books and music are better delivered online, other products will find ways to differentiate themselves through a new breed of unusual neighborhood stores.
“As population nodes reach critical mass,” he continued, “there is a big opportunity for retailers to be a source of convenience and increase their store count.”
Despite having a store count of almost 200, Bluemercury sees ample opportunity to increase its footprint in the U.S. Malcolm Beck notes that Greenwich, Conn., and Hoboken, N.J., are two such locations on her radar screen. But the tricky part is finding the right store.
“I sift through hundreds of deals a month,” Beck said. “I look for wonderful real estate at fair prices rather than fair real estate at wonderful prices. I don’t swing at every pitch, but when I swing, I swing for the fences.”
Beck employs what he calls an “anthropologist's approach” to real estate rather than relying on data alone. “You can visit markets armed with legions of data on incomes, home prices and psychographics,” he said, “but there’s no substitute for spending a few days in a market understanding shopping patterns, behavior and how your potential clients live their lives.”
The couple has spent as much time creating and refining the corporate culture of Bluemercury as it has on its real estate strategy, with a belief that giving store associates a long-term career path and full-time work — with the attendant benefits — would engender both employee loyalty and customer loyalty.
“We designed our model around the customer, and by giving people full-time work and a career path, it meant they stayed with us and so all of the training and service stayed with us,” Malcolm Beck said. She cited a store manager in Boston who has been with the retailer since its opening there five years ago. “When you have a store manager who’s been with you that long, you’re embedded in the community,” she said. “When clients walk in, we know their name, we know their dog’s name, we know what they like. That intimate shopping experience is a key element of what we’ve created.”
Even as they’ve expanded and been acquired — Macy’s Inc. bought Bluemercury in 2015 for $210 million in cash — the Becks have worked hard to maintain that family feeling.
“A friend called last week and said they were in our La Jolla store and he was hoping to see me there,” Beck said. “I was like, 'We have a big company with 2,000 employees.' But this is the mind-set — we’ve been able to keep the mom-and-pop feel while we scaled company.”
In fact, the Becks can trace their own personal journey to the major milestones of the business. They met at a business meeting, when Marla Malcolm was in private equity and Beck was a young entrepreneur who was pitching his business to her company.
That deal didn’t go through, but the two clicked and decided to hash a business plan together. They built the company and their relationship simultaneously. Just after the opening of store number four — Suburban Square in Ardmore, Pa. — the two were married.
Their eldest daughter, Ariel, was born during store number five; their middle child, Sophie, during store number eight, and their youngest, Luc, during stores 12 through 20.
Both are as involved in the day-to-day running of the business now as they were in the beginning. Broadly speaking, Malcolm Beck oversees everything that touches the consumer, such as merchandising, staffing and stores, while Beck runs the operational side of the business.
“Unless we decide to swap duties,” Beck said.
“We never separate our business and personal life," he said. "It’s all one thing. We never go to a key meeting of consequence alone — we go together.”
Even with three kids and a retail empire to run, the Becks make time to talk in depth — every day. They continue a practice that started when they were first building the business, when they would take long walks around Georgetown and the monuments of Washington, D.C., puzzling out solutions to thorny business problems. These days, they still walk up to four miles every evening — even on vacation. (If they're sailing in the Caribbean, for example, they'll have a tender take them to shore.) Topics range from what’s happened that day to what’s new with the children to whatever else happens to be on their mind. Beck estimates the two have walked halfway around the world together.
No doubt, a key area of conversation recently has been how to continue to expand the business exponentially in a time of ever-increasing complexity. The duo are very focused on the pivot to Gen Z and the continually evolving expectations that the digital-first generation brings to the shopping experience.
Beck sees three big opportunities for the future: social selling, speed and the continued clustering of stores in key areas. He believes that social media shopping will hasten the decline of traditional marketing, and will make the in-store experience all the more critical for foot traffic.
“The store will transition to become an important form of branding, customer relationship and even edu-tainment vehicle,” he said. “Customers who come for education, treatments and makeovers have higher than average purchases. Creating in-store brand experiences and strong emotional connections will drive increased purchases across all channels, including digital.”
Beck also believes that the need for speed — he is fond of citing the comparison between the attention span of a goldfish (nine seconds) and a human being (eight seconds) — will amplify the need for more stores, albeit with a different footprint.
“Over the past 10 years, the number of U.S. retail locations has grown 11.6 percent, but the number of square footage is down 3.7 percent,” he said, “which illustrates the growing trend of smaller store formats.”
Despite the global growth of the beauty business, the Becks are primarily focused on North America — for now. “It’s an opportunity, but there is still so much for us here,” said Beck, when asked if he is considering international expansion. “There are probably 40 cities the size of Manhattan in China, but I’d probably more quickly open a store in Chinatown than in China. There is still so much runway — we haven’t seen a cannibalization in sales when we open a new store.”
One reason for that may be the almost customized approach that Bluemercury takes when it comes to merchandising. Rather than a one-size-fits-all strategy, Malcolm Beck tailors the assortment to each market where a store is located. She has a standing conference call on Fridays with store managers to make sure that information is flowing from the store level to headquarters and back again.
“I ask a lot of questions. What are you hearing? What are you excited about? What ideas do you have?” she said. “Getting their thoughts keeps me in touch with what’s going on. A lot of texting happens in our company —have you seen this or what do you think about that? Our culture is about the fluid transfer of information.”
Being headquartered in Washington also helps the team stay close to consumer desires. “D.C. is large — it has urban, suburban and far suburban locations,” Malcolm Beck said. “Being based here gives us a better feel for the consumer. It’s close enough to New York so that we can meet with all of the vendors, but the perspective of being far away gives us a day-to-day on what the client needs are.”
As the definitions of beauty are expanding, Bluemercury is following suit. The retailer has been a pioneer in the clean and natural space — its in-house created brands M-61 Skincare and Lune + Aster makeup were among the earliest launches in the clean space — and the Becks strongly believe the trend will continue to grow.
“Conscious beauty is an important platform that we’ve developed to communicate our perspective on clean and natural beauty,” Beck said. “Millennials have made the industry more ingredient-conscious, and Gen Z is prioritizing self care and purchasing more candles, bath products and masks.
“The overall health and beauty conscious lifestyle really continues to drive our business,” he said, noting supplements are also a “dramatically expanding” category.
As with the U.S. prestige market overall, Bluemercury is seeing a surge in its hair-care business, with sales up 28 percent. “Hair care is a focus for Gen Z, which is not yet afflicted by the skin-care concerns of the Millennials, some of whom are in their 30s,” Beck said. “Momentum in the category started in 2017, and it’s exploding this year because of skin-care type of innovations. Gen Z is looking for not just healthy hair, but a healthy scalp, too.”
The men’s category is another fast-growing business at Bluemercury, accounting for about 20 percent of overall sales, according to Beck. While much of that can be attributed to traditional products like shaving cream, shower gel and shampoo, there’s also been a marked shift to concealers, bronzers and tinted moisturizers.
“This has now become a substantial focus for our business model,” Beck said. “In this Instagram and selfie world, men now understand that their image is forever. Men’s grooming has grown to give a competitive edge in the workplace, online dating and social media profiles."
While the men’s category has long been spoken of as having potential, Beck believes that it is finally coming to fruition. “The male grooming industry is seeing a revolution,” he said. “It is becoming mainstream.”
Despite their success, both Becks remain as intensely committed to the business as ever. “One of the hardest things about running a business is the mental stamina required to stay in the game,” Beck said. “No matter how successful you are as an entrepreneur, you’re often one bad decision away from losing everything.”
That scenario seems unlikely for the Becks, and they’ve made it part of their life’s work to help smooth the path for fledgling entrepreneurs. They created and endowed The Beck Entrepreneurship Fellows Program at Beck's alma mater Cornell University and The Beck Visiting Social Innovators Fund at Malcolm Beck's alma mater Harvard University to further opportunities for young entrepreneurs, investors and advisers.
In the meantime, they are eagerly leveraging the resources of Macy’s to fuel their vision of growth. And while the business may have changed dramatically, some things will always stay the same.
“It was a completely different time,” said Beck, musing on the early days. “The process for purchasing beauty was so different — it was so linear.
“It’s like a completely different industry now, but the needs of the consumer are the same,” she said. “That will never change. They just want the best products that work for their hair and their skin and that’s what everyone is trying to do.”
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For Bluemercury founders Marla Malcolm Beck and Barry Beck, the great Internet bust of 2000 was an unexpected boom.