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.
When buying off-brand products, get two- or three-year warranties and unlimited phone support.
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.
Short-term gain, long-term pain: Bluemercury saved up front by buying printers for each store.
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.
The next step: deciding where to buy and what to spend. Malcolm tried bargain hunting with the free online shopping robot mySimon but found that it returned too much information, most of it from unknown sources.
In fact, her sole deviation from brand-name buying: the company's Emachines PCs. At $499 each, including the monitor, the Emachines were "the cheapest little desktop computers available," Malcolm says. Why break the big-name rule? Because, she says, Bluemercury employees use PCs primarily for doing E-mail, word processing, and spreadsheets, functions that don't require best-of-breed machines.
But sharing printers over a network will save a company money in the long run.
Ironically, considering her company's presence in the cutthroat Web cosmetics marketplace, Malcolm made no technology purchases online. Except for the Dell servers, which she ordered by phone, Malcolm has so far bought most of her gear at her neighborhood Staples. "You can look at the stuff and develop a relationship with the local store," she says, adding that deliveries and returns have been fast and painless.
The Bluemercury folks have fumbled a few times in their shopping. To save money and space, they initially picked an all-in-one machine -- printer, fax, and copier. The machine was slow, unreliable, and produced unreadable faxes. Lesson learned: "No more multifunction machines," Malcolm says. "We only buy machines that do the one thing that they're designed to do."
Problem solved? Not yet. They goofed once again, applying Malcolm's cheaper-is-better philosophy and buying a fax machine that cost less than $90. They saved about $60 by passing up a fax in the next-higher price tier, but they ultimately paid a steep price in frustration -- the machine kept breaking down under the incoming fax load. Eventually, the company invested in heavy-duty workhorses from Hewlett-Packard -- which was, of course, a name they knew.
Anne Stuart is a senior writer at Inc. Technology.
The Gear She Picked
SERVERS: Malcolm chose machines from Dell because the build-to-order computer manufacturer offers unmatched customer service.
Final Choice: Two Dell PowerEdge 1300 servers and one PowerEdge 2300 machine, approximately $5,000 each
FAX MACHINES: Bluemercury currently has four heavy-duty fax machines, two at its headquarters and one in each store. Malcolm also uses the eFax.com online service to get faxes by E-mail while traveling.
Final Choice: High-speed Hewlett-Packard 920s, $250 each; the eFax service is free
DESKTOP COMPUTERS: Bluemercury employees aren't power users; they need only a few basic functions, such as word processing, E-mail, and spreadsheets. Malcolm's pick: #2 on CNet's list of top-five inexpensive PCs. It provides those basic functions at a bargain price.
Final Choice: Nine Emachines PCs, all 400 MHz with 32MB of RAM and 4.3GB hard drives, $499 each
ACCOUNTING COMPUTER: For the company's accounting tasks, Malcolm wanted a computer that would never crash and wouldn't take up a lot of space. Her selection received high marks from CNet for its reliability and slim, space-saving design.
Final Choice: Compaq Presario 3550 (500MHz, 64MB of RAM, and an 8GB hard drive), about $2,000
NOTEBOOK COMPUTERS: Malcolm and Beck each brought their own notebooks to the business. (Malcolm uses an IBM ThinkPad 600; Beck has a Dell Inspiron 7000.) They're not in the market for new machines, but if they were, they would both upgrade to the 4.9-pound ThinkPad 600X, which at 650 MHz, 64MB of RAM, and with a 12GB hard drive, is much faster and more robust than Malcolm's current machine and lighter than Beck's 9-pound Dell model.
Final Choice: IBM ThinkPad 600X, about $4,000
LASER PRINTERS: Bluemercury wanted black-and-white laser printers that would spit out at least eight pages a minute. The company bought one printer for each of the seven administrative employees and one for each store. (It went that route because initially it didn't network its computers, although it plans to do so soon.) In a pinch, it can buy a snap-on accessory, also from HP, for low-volume scanning or copying.
Final Choice: Hewlett-Packard LaserJet 1100, $399 each; accessory, $149
CELL PHONES: The office staff uses basic Nokia cell phones from AT&T Wireless Services. The phones weren't the cheapest available, but Malcolm likes them because they allow staffers to get E-mail.
Final Choice: Nokia 6160, about $200, plus monthly service fee and call charges
The Gear She Skipped
DIGITAL CAMERA: Bluemercury pays a professional photographer to produce images for its Web site. But if Malcolm were to succumb to temptation and buy a camera, she'd purchase the Kodak DC215, just to keep a digital camera handy. "It's one of the cheapest, it's Kodak, and it's in the top-five ranking of bargain cameras on CNet." Saved: about $299
SCANNER: Malcolm lusts for a flatbed scanner to use for promotional materials, but adds, sighing, that the expense seems like a luxury. And besides, Bluemercury already owns a cheaper scanner that she's never used. Saved: about $300
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