Considering the size of Macy’s Inc., the addition of Bluemercury to the portfolio hasn’t done much yet to move the needle, revenue-wise.
Down the road, greater impact will be felt as the $25 billion Macy’s steadily opens freestanding Bluemercury stores around the country, and establishes additional Bluemercury shops within the four walls of Macy’s department stores.
“We are really happy with how those 20 Bluemercury shops are performing in our doors. It’s been a real success,” Jeff Gennette, Macy’s chairman and chief executive officer, told WWD. “We got double-digit comps in 2018 and we are getting double-digit comps in 2019. The plan is for more, but we are not announcing on the expansion.”
The in-store Bluemercury shops average around 1,000 square feet each and are in such locations as Macy’s in Kenwood, Ohio; Oak Brook, Ill., and Memorial City in Houston.
It’s also clear that Macy’s is happy with the freestanding Bluemercury shops. When the retailer bought Bluemercury, the beauty chain had only 60 freestanding units. Now there are 184 and 10 more locations are opening in 2019. Macy’s purchased Bluemercury in 2015 for $210 million, marking the company’s first acquisition in a decade since buying May Co. in 2005.
“What we saw as so attractive was how well Bluemercury did operating multiple stores in individual neighborhoods. That gave us a line of sight to expansion,” Gennette explained.
Blumercury’s “cluster” approach to opening shops began with the launch of the first Bluemercury shop in the Georgetown neighborhood of Washington, D.C. The second opened on Dupont Circle, also in the nation’s capital. “Washington, D.C., was an absolute test tube for a lot of the markets that can have multiple Bluemercury units,” Gennette said. Bluemercury has nine stores in the D.C. area within a five-mile radius, and executives associated with Bluemercury believe there’s no cannibalization between stores.
In major cities where there are Bluemercury stores, generally shoppers live within a five-mile radius of a store. In the suburbs, it’s usually no longer than a 15-minute drive to the nearest Bluemercury.
The deal, aside from bringing Macy’s into the specialty store business, gave the department store access to several high-end and niche beauty brands it didn’t carry before, and exposure to a different service and treatment dimension. There was very little overlap between what Bluemercury sold in beauty and what Macy’s sold. High-tech skin-care and makeup artistry brands are a hallmark of Bluemercury, including the Laura Mercier and Trish McEvoy color lines and skin-care lines such as Darphin and RéVive. And most of its freestanding locations have spas.
“If you look at the top five brands of Bluemercury, Macy’s didn’t have established businesses in four of those,” Gennette observed, citing La Mer, Trish McEvoy, Laura Mercier and Bluemercury’s private M-61 Powerful Skincare brand. Bluemercury’s owned Lune+Aster Cosmetics line is also important.
Many viewed the acquisition as a strategy by Macy’s to compete more effectively against beauty specialists Sephora, owned by LVMH Moët Hennessy Louis Vuitton, and the publicly held Ulta chain. Sephora and Ulta have been taking market share from department stores.
In addition, the cosmetics industry has been getting increasingly promotional, posing a greater challenge on the Macy’s organization and other retailers to stay competitive.
For Bluemercury, Macy’s provides the resources to steadily expand its brick-and-mortar footprint, and the e-commerce business through Macy’s advanced web and fulfillment capabilities.
“It’s been a great acquisition for us,” Gennette said. “Bluemercury, I would argue, is the premier specialty beauty retailer in America.”
As Gennette suggested, Macy’s isn’t too big to learn a trick or two from the smaller guy. He sees Bluemercury as instrumental in transforming Macy’s beauty areas, which have been adapting certain Bluemercury best practices and formats, i.e. open-sell environments, training associates and compensation. Associates are trained to be knowledgeable in multiple brands, helping to provide better and more efficient service. Beauty is one of Macy’s six “destination” areas; the others are dresses, fine jewelry, big ticket, men’s tailored and women’s shoes.
“If we can get the beauty formula right at Macy’s, that definitely moves the needle,” Gennette said. It’s about “infusing learnings from Bluemercury into the overall beauty strategy,” he said. “They’re huge.”
Bluemercury is also a factor in helping Macy’s better satisfy the needs and wants of a slice of its customer profile that wasn’t being sufficiently addressed.
“Bluemercury has a good mix of demographics, though there’s definitely a better customer, a more affluent customer,” Gennette observed. “We have a number of doors with better customers that lacked the product provided by Bluemercury,” Gennette said, citing the brand’s high-end skin care and high-end color products, candles and other products.
The younger consumer in Macy’s beauty departments is targeted with Impulse Beauty sections, which were rolled out in 2010. Impulse Beauty is really marketed at the Millennial consumer, but it’s not stocked with the prestige consumer brands that are in Bluemercury. Impulse Beauty has the more affordable options including smaller, contemporary brands that work together in an open-sell environment. Bluemercury is more service-based.
“For the past 20 years, we have challenged the traditional perceptions of beauty shopping with our unique and innovative approach,” said Marla Malcolm Beck, Bluemercury’s ceo, who founded the brand along with her husband, Barry Beck, who serves as chief operating officer.
“Our mission has always been to bring luxury beauty products and skin care to our clients and to be the best in the world at giving beauty advice,” added Marla.
The couple came up with the name Bluemercury to reflect the attributes they wanted to convey. Blue suggests trust and loyalty, and Mercury, the god of information, reflects the 20-year-old company’s efforts to provide expert advice.
The Becks have a reputation of being independent-minded entrepreneurs and not shy about hyping the business. “As we expand our nationwide fleet of 184 stores, we continue to be at the forefront of every major beauty innovation since our inception,” Barry boasted.
“Although we operate in a glamorous business, we are data driven and are always able to quickly connect the dots to see the trends and what’s next. We are widely recognized as the pioneer of main street beauty shopping in America today and we know we will continue to thrive during this disruptive time in retail history.”
But now they are operating under the Macy’s corporate umbrella.
As Gennette explained, the Becks still manage the business and its stores, both the shops inside Macy’s and the freestanding shops, and have P&L responsibility. Macy’s Inc. does not break out the sales or earnings of any of its divisions, which include Macy’s, Bloomingdale’s and Bluemercury. The sales volume of Bluemercury is included in Macy’s Inc. overall sales.
“The Becks report to me. I give them guard rails they operate within,” Gennette said, referring to giving the couple clear financial and operational performance goals.
“But they are fantastic partners. I am not looking over their shoulders. They run their ship — the stores and those within Macy stores. They have the autonomy to do what’s right for the customer. That’s why this ship runs so well.”