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Beauty and the Best

Marla Malcolm, a "clicks and bricks" CEO, outfits her fast-growing online and offline business. Her experience has generated useful lessons for start-ups of every stripe.

CEO's Start-Up Toolkit: CEO Profile

As she outfits her fast-growing "clicks and bricks" business, this CEO has one cardinal rule: Don't waste my time

Whether she's buying or selling, whether it's computers or cosmetics, Marla Malcolm loves brand names.

In fact, it was Malcolm's own frustrating quest to track down her favorite specialty skin-care line that prompted her to launch Bluemercury Inc., a retailer of high-end, hard-to-find beauty products.

From July to December 1999, Malcolm and cofounder Barry Jon Beck bought and refurbished two cosmetic boutiques in Washington, D.C., created a mail-order catalog, and launched an online store. In the process Bluemercury's staff has grown from 2 to 33; it will multiply again as the company opens more stores this year. Malcolm and Beck want to equip their expanding staff with every tool necessary to serve the company's well-heeled customers.

Well, every tool within reason. True, Bluemercury projects revenues of $8 million for this year. And according to its cofounders, the company is already profitable. But with equipment- and software-related expenses approaching $100,000 a year, the tools outlay could well be a torpedo aimed at Bluemercury's financial health.

Inc. Technology asked Malcolm to explain how she equipped her start-up from scratch. And just for fun, we asked her to whip up a money-is-no-object wish list. (See "The Gear She Skipped," below.) We figured her experiences with outfitting a new, fast-growing company would generate useful lessons for start-ups of every stripe.

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When buying off-brand products, get two- or three-year warranties and unlimited phone support.

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Malcolm budgeted about $60,000 to equip her business during its first six months. She and Beck each had a notebook computer that would serve their needs, so that freed up the budget for other things. On her shopping list: desktop computers and laser printers for office staffers and salespeople at each store, an accounting computer, and fax machines for communicating with skin-care advisers and vendors. She also needed to purchase servers that would run the point-of-sale and information systems, manage the Web site, and store an Oracle customer database.

Malcolm sums up her tech-buying philosophy succinctly: "We're supercheap. If a product doesn't affect the customer, we don't care about it." As with her skin-care regimen, she trusts brand names. She wants reliable, easy-to-use products. She expects fast delivery and instant response to complaints. And she doesn't want to waste time, money, or energy along the way.

"That stuff is secondary to our customers," says Malcolm, gesturing toward the notebook computer and laser printer on her desk at Bluemercury's headquarters, just off M Street in Washington's upscale Georgetown neighborhood. The 30-year-old entrepreneur, whose tailored black pantsuit and neatly swept-back blonde hair mirror her quiet, brisk manner, believes that small technology purchases fall into the find-it-fast-and-forget-about-it category. She'd rather focus her energies on the things she considers critical for success: raising money, opening new stores, and choosing merchandise like the Acqua di Parma line of colognes and soaps and Nars cosmetics with names like Orgasm (inexplicably, a peach-toned blush). And she wants her employees to concentrate on serving customers, who spend an average of $400 a year on products like the Nars nail-polish quartet ($45) and the three-piece Shu Uemura cosmetic brush set ($110).

Malcolm, whose father was an insurance agent in Oakland, Calif., knew since childhood that she, too, wanted to be her own boss. After receiving an M.B.A. from Harvard Business School, she became VP of strategy for a high-powered Washington, D.C., entrepreneur. But she yearned for her own opportunity. Conventional wisdom dictated launching an online business-to-business company, but no b-to-b ideas set her soul afire. She wanted something fun. She kept looking.

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Short-term gain, long-term pain: Bluemercury saved up front by buying printers for each store.

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The answer was staring her in the face. She'd long used, but suddenly had trouble finding, high-quality skin-care products from Dermalogica, of Torrance, Calif. Then she discovered Efx (pronounced effects), a two-store chain in Washington, D.C., that specialized in such elusive niche brands. Last year Malcolm and Beck spent less than $1 million of their own money to buy the stores and then raised more money from angel and seed-round investors to build complementary Web and catalog ventures. In October she moved Bluemercury -- a name she created because it sounds "calm and strong and fast" -- from her dining-room table to an office complex a few blocks from the company's flagship store in Georgetown. She continued hiring people, buying products, and planning her expansion. Within six months the company was profitable, and Malcolm was closing the deal for her third store and negotiating deals for the fourth and fifth.

During her technology shopping, Malcolm hired consultants only when the time came to choose servers -- a decision too complex and expensive to make without expert advice. For everything else, she relied on her own research and input from Beck, the company's chief operating officer. Malcolm depended most on the product reviews, lab tests, and rankings on CNet and ZDNet's Computer Shopper site (www.computershopper.com). She cut through the deluge of information by defaulting to trusted brands like Hewlett-Packard, Dell, IBM, and Nokia.