Founder and CEO Mark Constantine discusses early direct marketing lessons, global expansion and the value of staying close to the customer.

By Vitisia Paynich (Photo of Mark Constantine by Stephen Hyde)

Imagine walking down a London street while passing a row of storefronts. Suddenly, you stop dead in your tracks, as an enticing aroma beckons you to turn around and enter one particular shop. It's a feast for the eyes as you scan the colorful display of what looks like harvested fruit, wedges of cheese and creamy desserts. However, just before your mouth begins to water uncontrollably, you realize as you get closer to the display that your senses have been playing tricks on you. Those wedges of cheese and creamy desserts actually are bath soap and skincare products made of natural ingredients. However, not unlike your local bakery or gourmet foods store, freshness is key to this cosmetic company's success.

Established in 1995, Lush rose from the ashes of a failed mail-order cosmetic business started by Mark Constantine and his wife Mo. The couple opened the first store in Poole, Dorset, just outside London. Today, that one store has grown into a multimillion-dollar business comprised of 470 retail stores worldwide--with 78 stores located in the U.S.

Electronic Retailer magazine caught up with Constantine, founder and CEO, to discuss the genesis of the Lush business, how direct marketing and the Internet play a vital role and why he aspires to be a role model to other businesses.

Electronic Retailer: Your career in the cosmetics industry began in the mid '70s. Were you always interested in that field?

Mark Constantine: Yes, I became pretty obsessed with it when I was about 14. I never really understood why when I look back on it, but I really got into how people looked. I [eventually] got involved with doing theatrical makeup for the local schools when they were doing plays. When I was in my early 20s, I met Anita Roddick from The Body Shop and started to make products for her. At that point, I was already involved with what was then the fastest-growing cosmetic company in the world. I was very, very lucky.

ER: In the late 1980s, you launched a mail-order business, Cosmetics to Go. What did you learn from launching that business?

Constantine: I learned that it's not wise to lose a dollar on every transaction you do. There's a famous quotation, "The way to make a small fortune is to start with a large one." And that was certainly the case. We sold all our rights on the products to The Body Shop [for £6 million], and we invested the money in Cosmetics to Go. Basically, what we were up to with Cosmetics to Go was we were trying to buy sales. We were trying to build the business even though we were losing money with each transaction. It was exactly the same stuff that everybody did in the dot-com period, but obviously it was before that. I felt pretty foolish at the time, but I felt a little bit better knowing that everyone else was going through the same thing only it was four years after. It's a fairly simple lesson: Don't lose money on every transaction and certainly don't believe that if you grow the business, it will stop losing money. You've got to have a good working model from the beginning.

ER: Coming more from the product development side of the business, what challenges did you face in trying to take on the additional role as marketer?

Constantine: I don't think there is a better learning place than in a mail-order operation, because it's just so straightforward. One time, I spent £100,000 (or $200,000) on putting catalogs into the little bags that you receive when you have a baby, working on the principle that people should be relaxed thinking about getting themselves back on their feet. And, I believe we sold about four products. Obviously, if we had placed an ad in a maternity magazine, we would never have known [the response]. So the thing about any kind of direct marketing is it's such a good lesson. You know exactly what works and what doesn't because you've seen the results come in, and every single order is tracked. You can see exactly what's happening.

ER: I understand that the concept for Lush came from a London cheese shop. Why did you decide to fashion the company that way?

Constantine: The reality was that we had lost everything. We had a little shop and once the business was gone, we were still stuck with a mortgage on the building. Although we were considered a great innovative group in the cosmetics industry, nobody was really offering us any jobs. So, we just started to make stuff upstairs, brought it downstairs and then sold it. It was very rudimentary. That was extremely good from the beginnings of Lush because it meant that we had to work out a model that was very straightforward and could make money. We couldn't indulge ourselves in the stupidity of losing money per order. And because we bought the permission to use the old mailing lists, we just took 1,000 people from the list, created a [flyer] from a computer and sent it out to those 1,000 people--and they all responded. Everybody was so pleased to get us on our feet again, which was really nice. And so Lush just slowly evolved out of that. The reason it looks as it does was not really by design, but it was just a happy accident. It was a way that we could produce the product easily, because one of the problems with Cosmetics to Go was it was quite heavily packaged. We determined that we weren't going to do that for several reasons: one was environment and the other was primarily cost. It was too expensive to produce the product in that way. So, although inspired by the cheese shop, it was more reality than it was inspiration.

ER: Many people might be surprised to learn that Elizabeth Bennett, a customer from Edinburgh, chose the "Lush" name. Why did you leave the name up to others?

Constantine: We did a competition with those 1,000 customers we originally wrote to, saying that they could have one of everything in the shop if they could come up with a name for us. She came up with "Lush Garden" and we shortened that to "Lush." It's worked pretty well for us. On our web forums, we have a lot of extremely fanatical people who love the products and who make it their job to advise us. If you go onto either the North American forum or the British forum, you'll see lots of people with very fierce opinions--very critical and challenging. So, it was quite typical for us to go to customers for the name.

ER: What makes Lush's business/retail model so unique?

Constantine: We invent the products ourselves and we do the fragrances ourselves. So, there's next to no cosmetic company that makes their own fragrance. I don't think there's another cosmetic company out there with people who develop the product round the clock. The actual product is made in relatively small factories by hand and then shipped into the stores so it's fresh and it's handmade. And, we can keep that up the same way as a bakery does; that's extremely unusual. That enables us to have a lot less packaging, because we don't have to protect products once in transit, and it also allows us to have much fresher products. Because it's handmade, it's very difficult for others to emulate, unless it's a small business. Those aspects all create quite an unusual business model.

ER: When it comes to product development, where do you get your inspiration?

Constantine: Inspiration is everywhere. It's really a combination of small ideas--something that is said or a piece of music that is heard. It even might be a meal or a specific dish I might be having in a restaurant. It's usually multifaceted; it's never sort of one thing.

ER: How many new products are produced in a given year?

Recently, the cosmetics company created "Retro Lush" on its website, which enables devoted Lush customers to vote on favorite products that had been discontinued. If there are enough votes for a particular product, Lush will make it especially for them.

Constantine: We discontinue about a third of the products every year. And then we replace them. In fact, we've just done something very new in the last couple of weeks in Britain. We [launched] something online, which we call "Retro Lush." And because we discontinue so many products every year, a lot of the customers get fed up because their favorites get discontinued, even though they weren't selling particularly well. So, if you go to our UK site [and go into] "Retro," you'll see that customers can rank all of the products. If 50 of them get together and say they want them, then we'll make it for them especially. So, we just re-introduced 50 old products on the website, and people have been buying them. I have to say, it's been extremely popular. That's a big aspect of the electronic side of the business that we can't do on the brick-and-mortar side.

ER: What is a mafia meeting?

Constantine: The mafia is a marketing group made up of people who are pretty outspoken, and they set the tone for the business. We call them the mafia because you wouldn't want to meet them in a dark alley when you're on the wrong side of them. So, in a mafia meeting, we would decide on the discontinued products list and the new products. While these meetings are primarily held in Europe, different people come and join them from different places.

ER: How would you describe the average Lush customer?

Constantine: Much older than people imagine. I think young at heart is how I would describe our customers.

ER: When did you decide to expand globally? What is your biggest market?

Constantine: We were only going to open shops in London when we first started. And then a couple of Canadians came to us and gave us a particularly bad time and said that wouldn't do. They just kept on us until we agreed. But, because we knew we wanted to manufacture close to the place we were selling, anybody who came into the business with us had to learn how to make the product. So, if you could imagine us making baked goods, we weren't going to ship the bread from Britain to Canada or to the States. Mark Wolverton, who was one of those Canadians, was the first one who took the challenge and learned how to make the products here. He is now one of the three prime members of the company and runs the North American business as CEO. Our biggest market is Japan, and our fastest expanding market is North America. In fact, the North American website and mail-order operations are the largest in the world for us.

ER: In terms of revenue, how large is Lush?

Constantine: When you look at the overall category that we're a part of, there are a series of companies rather like us that have a website and a shopping site like The Body Shop, Bath & Bodyworks or Mac--companies like those that have similar-size operations. We have revenue of £144 million ($288 million), so while that makes us a reasonable-size business, there are lots of businesses that size that aren't global. But the nice thing about being global means that you can have strength in other areas. For example, Japan doesn't have a Christmas peak. This is fabulous because anyone who is in retail in either Britain or North America is going to experience the problems of a Christmas peak. In Japan, our mail-order business is breathtaking. In fact, 17 percent of our business in that country is coming in from people using their mobile phones to scan barcodes and place orders immediately with our mail-order fulfillment. That's just in the last 18 months. I'd never seen anything like it. It's one thing having the technology in your country; it's another thing to embrace it and make it work for you. In North America, about 10 percent of the business is derived from online sales. Although that doesn't sound very big, it's quite impressive when you see the speed of growth of the actual retail stores.

ER: It's apparent that the company takes a multichannel approach to marketing the brand by utilizing e-commerce, e-mail marketing as well as its e-newsletter, Lush Times. Can you tell us a little bit about those?

Constantine: I think everyone is looking for their information from the Internet. If you were a vegan, you probably would shop with us, because we're interested in telling you exactly what ingredients we use through our [e-newsletter] and website. And if you are a really keen environmentalist, you probably would shop with us, too. And you would be that kind of customer who wants to know, in considerable detail, everything about the product. You want to know about ingredients, if we do animal testing, and you want to know exactly where we got those ingredients. For us, the ability to be able to stream videos, to put out buyer's reports, and to be able to create such transparency for those customers using the Internet is a very big deal for us. So, from our point of view, it's essential to what we're explaining to the customer, because we know those people, in their own time, will browse through the products before they make the purchase. Now which channel they choose to make their purchase through, that's up to them. But, they're going to use the Internet for their information.

ER: Lush is known for its devotion to organic ingredients, animal-free product testing, eco-friendly packaging, as well as its philanthropic endeavors. That type of company philosophy, in general, is contrary in nature to the "big business" philosophy. How are you able to maintain those principles and still compete with the big cosmetic companies?

Constantine: If you had asked me that same question five years ago, I would have said, "Yeah, we're pretty lonely. What we're doing is not really mainstream." Now I look around and I'm really impressed by what the other large companies are doing. With the threat of global warming and everyone really getting the hang of the importance of the environment, it's really a nice feeling of being part of a big, broad movement, rather than a tiny company on its own.

ER: What does the future hold for Lush?

Constantine: We would like to set an example, and we would like to be the sort of company that other companies starting out would aspire to be. We're trying to make sure that there's some kind of model out there in which a business that wants to supply the ethical consumer can look toward Lush and say, "Okay, there's a good model. That's who I'd like to be."