Subject: With Macy’s acquisition, Georgetown beauty company becomes a beast - The Washington Post
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>
Date: Sun, 8 Mar 2015 20:27:19 -0400

With Macy’s acquisition, Georgetown beauty company becomes a beast - The
Washington Post

http://www.washingtonpost.com/business/capitalbusiness/with-macys-acquisition-local-beauty-company-becomes-a-beast/2015/03/05/962c2c02-bd34-11e4-b274-e5209a3bc9a9_story.html

With Macy’s acquisition, Georgetown beauty company becomes a beast

The timing had seemed perfect.

It was the late ’90s, when the Internet boom was in full swing and
e-commerce sites were all the rage, and Marla Malcolm Beck and Barry Beck
set out to start a Web site specializing in the sale of luxury cosmetics.

They raised $1 million in venture capital in a week.

One investor from the Carlyle Group was so enamored with the idea that he
signed a blank check offering them seed money. It seemed too good to be
true.

And it was.

Marla Malcolm Beck, seen here in June 2012, launched a natural skin-care
line, M-61, in response to requests for vegan and gluten-free products.
(Jeffrey MacMillan/Capital Business)

Shortly after they launched Bluemercury.com, Barry said, it became clear it
was a losing proposition.

“We were victims of this idea of, ‘If you build it, they will come,’ ” he
said. “We built a whole supply chain. We spent $1 million on a Web site and
all this other stuff. In the end, we flipped the switch and it just didn’t
work.”

There were two big problems: Customers were wary of buying goods online,
and luxury brands such as Crème de la Mer, Bobbi Brown and Trish McEvoy
weren’t sure they belonged in cyberspace.

“It was just too early,” Barry said. “It was tantamount to delivering a
Tesla to the Romans. It was such great technology, but nobody knew what to
do with it.”

Sixteen years later, after shifting their focus to brick-and-mortar
locations, the District-based skin-care and cosmetics company is an
unlikely success story in a town that is known for being anything but
glamorous. Bluemercury has grown to include 61 stores across the country,
with at least 12 more slated to open this year, yielding more than $100
million in annual sales. The company has its own line of products, M-61,
which it recently began selling on the television network HSN, and is in
the process of doubling its corporate office space in Georgetown.

But perhaps its biggest victory came last month when Macy’s announced plans
to buy the company
<http://www.washingtonpost.com/news/digger/wp/2015/02/03/macys-to-buy-bluemercury-for-210m/>
for $210 million in cash. (The deal is expected to be completed by early
May.) It will remain headquartered in Georgetown, with Marla staying on as
chief executive and president; Barry will be the chief operating officer.

Macy’s will begin selling select Bluemercury products and adding the
company’s boutiques to stores across the country. But most important, the
Becks said, this new partnership with Macy’s will give them the resources
to build the digital powerhouse they’ve always dreamed of creating.

“With the Macy’s partnership, we’re ready to step on the gas,” Barry said.
“We want to take this company, which Marla and I have built into a cult
brand, and turn it into a household name.”

Years of preparation

Before they built an empire selling $160 tubs of La Mer face cream and $32
tubes of NARS lipstick, the Becks spent years racking up management
experience. Marla, who has an MBA from Harvard Business School, worked as a
consultant at McKinsey & Co. As a junior at Cornell University, Barry
helped found U.S. Maintenance, which provided janitorial and landscaping
services to national chains.

They met when Marla, then a vice president of acquisitions for a
Washington-based private-equity firm, was toying with buying Barry’s
company. The deal never went through, but they bonded over their shared
dissatisfaction with their respective careers.

Somewhere along the way, they fell in love.

(Or, as Barry likes to tell it, he fell in love with Marla, and on their
very first date over dinner at The Palm, told her he wanted to marry her.
Marla, for her part, remembers no such meal.)

After two years of dating, the couple married. In the dozen years since,
they have created a pragmatic partnership.

“The reason this works is because of the yin-and-yang relationship between
Marla and me,” Barry said, adding that the lines between the personal and
the professional are often blurred.

Barry is tactical; Marla, the ideas person. They have a rule that neither
attends any event of consequence, whether it be a parent-teacher conference
or a meeting with the chief executive of Macy’s, without the other.

“I tell Marla, ‘You’re the dream-teller,’ ” Barry said. “But then there’s
got to be someone to execute on those dreams, and that’s me.”

A novel idea

The first Bluemercury store opened in Georgetown in 1999.

The location was more a matter of convenience than strategy. The Becks
lived in the neighborhood, and came across an opportunity to buy EFX, a
local store that sold Kiehl’s and NARS products in Georgetown and Dupont
Circle. They took over both properties and got to work creating a company
that specialized in cosmetics.

It was a novel idea at the time, Marla says. Sephora, the France-based
makeup company, had yet to expand to the United States, and save for a
handful of MAC Cosmetics stores, stand-alone makeup shops were rare.

“I wanted a friendly neighborhood store where you could get expert, honest
advice,” Marla said. “It was important to have a staff full of absolute
beauty junkies.”

A turning point for the company, Barry says, came on the opening day of its
third store — in 2002, in Philadelphia. The couple spent the day running
the registers. One of the first women to come into the store spent $2,000.

“She comes in and says, ‘This is the greatest thing that ever happened in
Philadelphia,’ ” Barry said. “She takes out her pen and starts writing a
check, looks up at me and goes, ‘There’s no sign. What do you call this
place?’ ”

“I looked at Marla and said, ‘I think we’ve got a business, here.’ ”

Marla had long driven 45 minutes to buy her favorite shade of MAC lipstick,
and had Dermalogica products shipped from California. With Bluemercury, she
saw an opportunity to cater to others who were constantly looking for the
next big thing in beauty — even in Washington’s sleepy retail market.

“It wasn’t until a couple of years in that we realized Washington really
was not a mecca of retail,” Barry said. “It was hard to find retail brains
here. We didn’t think of that up front.”

Things are beginning to change, he said, as more major brands move into the
area. The company’s growing cachet is helping to attract top candidates.
Just last week, it brought on a new chief marketing officer, Ellen
Greenwald, formerly of Laura Mercier Cosmetics.

“Now, D.C. is just booming,” Barry said, adding that the company plans to
open a 10th area store downtown. “The city has really grown up around us.”

Back to the beginning

More and more, the Becks are shifting their focus back to the Internet.
From the beginning, they have kept close tabs on their customers,
cataloging the personal preferences and purchases of some 2 million clients.

“We have a giant Dell server in our office where we’re constantly
collecting data,” Barry said. “We know every customer, what they buy, what
day of the week, what products. Marla and I spend a lot of time studying
these trends, understanding what the customer is looking for.”

Those trends led them to create M-61, a natural skin-care line, two years
ago after Marla noticed an influx of customers looking for vegan and
gluten-free products.

There are other uses for the data, too.

A couple of times a year, Marla picks her favorite new products and mails
them to the company’s top 1,000 clients, along with a note explaining why
she likes each item.

“We’re able to use this data to surprise our clients in a way that no one
else does,” Marla said. “We’re using this data to tighten our relationship
with customers — not in a marketing way, but in a personal and intimate
way.”

Those personal touches, she said, help set Bluemercury apart from its
competitors — something the Becks hope to retain even after joining Macy’s
$28 billion-a-year conglomerate.

The Becks say they will run Bluemercury as they always have, with Marla
personally interviewing each new store manager.

“We don’t want to act like a big corporation,” Marla said. “We’re just a
company of beauty junkies.”

Eric D. Schwerin
[email-masked]

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