Processing Your Payment

Please do not leave this page until complete. This can take a few moments.

March 24, 2008

The race is on | A former hedge fund analyst helps Mexicali Blues tame its four retail stores and lively import business

Mexicali Blues has largely left its free-wheeling days behind and entered into young adulthood a little wiser and a bit more refined. "All we used to do was t-shirts, imported stuff, beads and costume jewelry. People would walk by and say, 'Oh, it's just that hippie shop,'" co-owner Peter Erskine says during a recent interview at Mexicali Blue's Newcastle headquarters. "Now we do gemstones and sterling silver."

The scruffy teenagers who used to frequent the shop have been replaced by 30- to 50-year-old women, he adds.

Erskine and a friend opened Mexicali Blues in Portland 20 years ago to sell items like peasant skirts, hemp merchandise and Grateful Dead souvenirs (the store takes its name from the title of a Dead tune). But the store in the last three years has quietly changed, investing in new technology and adopting a scientific approach to managing inventory and sales.

The need for a makeover became more apparent as Mexicali Blues grew and became increasingly unmanageable, with inventory packed into each store. Erskine realized that managing a shop in charming disarray would be the undoing of him and his wife, Kim, the store's co-owner. No one was tracking items and sales. The company's storage space consisted of attics, garages and 20-foot containers, and there was no database to keep a grip on inventory flow. "We were tripping over ourselves," he says. "We were really fun, but really hippie-ish. It's a double-edged sword."

So the Erskines decided to streamline their business to allow for more significant growth, while holding onto their remnant values of fun and funky. They were older ˆ— Peter is 44, Kim is 40 ˆ— and had matured, and the store needed to evolve, too. "If we wanted to grow, to brand our label, we had to change things because we wouldn't have been able to control it," Erskine says.

Erskine turned for assistance to a friend and former hedge fund analyst, Topher Mallory, hiring him as CEO three years ago. Mallory studied both business and art at the University of New Hampshire, and after working for six years in finance for Nicolas-Applegate Capital Management in California and Prime, Buchholz & Assoc. in Portsmouth, N.H., decided to step away from his career for a lifestyle change. He moved to South Bristol with his wife and focused his business acumen and management style on redefining Mexicali Blues, so it's no longer just "that hippie shop."

When the two friends talk business these days, Mallory will regularly throw in terms like scientific management, point-of-sale, departmentalization, pricing strategy and inventory control ˆ— policies that were far from habitual in the shop's early days. But there is one rule Erskine will not change: ties are still not allowed.

Help on the way
Erskine, a Maryland native, opened Mexicali Blues in Portland in 1988 with his friend, Eric Lipkin of Kennebunk. After graduating from Gettysburg College in Pennsylvania with a sociology degree, Erskine spent months backpacking around Europe. After his trip, Erskine wanted a job that gave him freedom and wouldn't force him into a suit. "I was out of college and I just wanted to have fun," he recalls.

The store was successful, making $40,000 its first year in sales and growing every year after. Erskine started to get a knack for selling. Though he self-deprecatingly says he's "not detail oriented" and only knows to "buy low and sell higher," Erskine over the years has learned the art of buying wisely in a diverse range of cultures. "What I do best is be on the road and find sources," Erskine says.

He met Kim as she browsed the store's offerings; he thought she was "a cute hippie" and they married in 1992. They bought out Lipkin a couple years later and together ran the shop and raised their three children.

Business at the Portland shop improved steadily until Jerry Garcia died in 1995. Then, for 12 or so months after the Grateful Dead musician's death, fans gobbled up the band's merchandise, of which Mexicali Blues had a good share. "That was just a crazy time," Erskine remembers. In 1996, he and Kim opened another store in Newcastle, on Route One.

After a few years, that growth had fizzled. Indeed, 1997 was the only year in the company's history sales didn't grow. "Two years after Jerry died, that changed everything," Erskine says.

To reinvigorate his business, the Erskines started traveling in earnest, spending weeks on the road in places like India, Nepal, Indonesia, Thailand, Peru, Mexico and Guatemala to find families and artisanal businesses selling clothing, crafts and jewelry.

In 2002, Erskine bought a building in Damariscotta to convert into offices and a warehouse. He opened another store in Raymond two years later. By then business was flying, but the Erskines were neck-deep in inventory and the shops were on the brink of mayhem. When Erskine hired Mallory in 2005, he assigned him the responsibilities of branding and growing the business ˆ— tasks that demanded the stores first pull themselves together.

One of the new CEO's most pressing projects was to establish inventory controls. This past winter, Mallory says, the business completed its "first great annual inventory." Each of the four stores closed for a day between Jan. 15 and Jan. 23 and a warehouse manager, hired by Mallory in 2006, accounted for every item. To guide this massive inventory undertaking, Mexicali Blues has invested $80,000 in the past three years in a Retail Pro system, which includes software, hardware, scanners, registers and a database for all four stores and the website. "There were things we had way too much of, and staples that we didn't have enough of," Mallory says.

Thanks to closer attention to the stores' inventory, Mallory says they've identified 200 top-selling items ˆ— from mukluks to Peruvian cotton blouses ˆ— that make up 25% of Mexicali Blues' total sales. Now they must ensure they never run out of these.

Another project Mallory undertook was revitalizing the website. Erskine built a site 10 years ago, but let it stagnate somewhere off in the dim reaches of the Internet. Today Mallory updates the site daily and lists between 600 and 700 items for sale.

Building an online retail site is slow work: Less than 5% of Mexicali Blues' total sales come from the Web. But Mallory hopes to build up the website so that it's pulling in equal sales to the stores in two to three years. He's advertising the site locally with papers, as well as online, on Google and Facebook. "We're concentrating on e-commerce," he says. "We hope to keep this nice growth rolling, with the website doubling every year."

Mallory has grown braver about asking for customer's e-mail addresses to expand the store's contact list. "The e-mails help us," he explains. "When we send it out, we notice more sales."

Soon after he was hired, Mallory also printed an employee handbook that spells out the store's mission and ethics, as well as encourages staff to learn about the provenance of the objects for sale. Beyond fostering good customer relations, the involvement of the sales team is part of a design to increase retention. While many clerks see retail as a fleeting job, Mallory and the Erskines want Mexicali Blues to be a long-term option for employees, or as Mallory says, "A place to hang up their hat and see a career." The business offers health insurance to their 12 full-time employees, and Erskine says he also has invited his staff to accompany him and his family on shopping trips overseas.

Smoothing out the store's business practices has so far worked well. "We had the best February in our records," Erskine says. "We really dialed in what we have. We have this unbelievable potential."

Built to last
On a recent afternoon, Mallory is standing in the middle of the Newcastle store to begin a quick tour. The store is meant to resemble a bazaar. But clothing, instead of being laid out willy-nilly, had been arranged by a sales associate with an eye for pattern. Pink, blue and lavender shirts alternate by color on their rack. Earth-toned pants in mossy green, brown, saffron yellow and purple had received the same treatment a few feet away. "We've moved toward departmentalization, so like items are grouped together in better displays," Mallory explains.

Textiles are together in one area, housewares are in another, and clothing is separated for women, men and children. Traditional masks hang together on one wall. Recently a customer exclaimed she was surprised to see the masks for sale, Erskine says. He explained to the customer that the store had always carried them, but they had been lost in the clutter.

Mallory, who looks tucked in and tidy himself in a light blue sweater and jeans, says the whole point is to maintain the store's feel of richness and lavishness, but not by accident anymore. "We wanted a healthy balance of opulence but shopability," he says.

Now that the stores are in better shape, Erskine and Mallory are focusing more on expansion. Last May, they opened another store in Freeport.

"We have a formula that works in rural Newcastle and Raymond, and in Portland," Erskine says, which convinced them the company could spread. Moving to Freeport in particular was a strategic branding move to be near established stores with polished brands, like L.L.Bean, the Gap, Patagonia and North Face.

The move also was gutsy: Erskine worried that the store might be too alternative for a retail haven that attracts classically understated brands like Brooks Brothers and Anne Klein. But the uniqueness of Mexicali Blues amid the corporate retail culture actually has helped the store, Erskine believes. He expects the Freeport shop to soon outpace his Portland store's sales, which currently is the top seller.

Erskine says, too, that in the next two to three years he plans to open a bigger outlet on land behind the Newcastle store and level the current building ˆ— it's too close to the road and has a cramped parking lot. Plus, he's scouting locations in Maine for more stores, hinting that he would like to be south of Portland.

"This is a totally exciting time," gushes Erskine. "Kim and I are so excited and proud to have something we've worked on for years be poised here and ready to grow. It's coming together ˆ— a tightening of the ship."

Then he changes metaphors, perhaps harkening back to his Grateful Dead past. "We want to take it on the road."

Sign up for Enews


Order a PDF