Stop Competing on Features: Reimagine Your Entire Product Category Instead

0:00It's something that was completely out of the ordinary to ask a beauty retailer like a Sephora to carry our products. Although we didn't ask them, they came to us.

0:13Before T3, there were zero tools at Sephora. Not a single electric device could be purchased online or in stores before Dr. Julie Chung came along. We had$4 million in sales. Sephora, at the end of our first year, calls us. Then we distributed throughout all the stores. Julie and her husband Kent revolutionized the industry. In 2004, when they launched the first premium hair tool, T3 not only altered the hair aisle, but changed the entire beauty industry altogether. If we just made it really beautiful and it didn't work well, we wouldn't be here 20 years later. I'm your host, Adam Leventer, and you're watching Shopify Masters, your companion for starting and scaling a business.

0:54Julie, welcome to the show. Thank you for having me. So let's rewind back to the beginning, 2004. You are not an entrepreneur. you are an eye surgeon. How does this come to bear? I am a third-year medical student, so I wasn't even quite an eye surgeon yet. I loved all things fashion and beauty, but was forced into medicine by my tiger mom, who insisted that I become a doctor. And so I'm doing my training at the University of California, San Francisco, and I meet a guy. And this guy leaves investment banking. And in an early time of dating, he notices that I'm struggling with my hair, even though I have everything else figured out.

1:38My career, my skincare, my makeup, my fashion. But I constantly struggled with my hair, largely because I was using tools that were just not performing. Like hair dryers. Yeah, hair dryers. The one that I happened to have was$20 and I purchased it in high school. And I used it for a good eight years and it was on the fritz, but I continued to use it. And it never occurred to me that I should upgrade it. It never occurred to me that there should be some technological advancement. I was just aware of drugstore dryers, which landed around$20,$25, or quote unquote pro dryers, which you would only buy in a beauty supply store, for example, which landed at around$100.

2:21And those were usually clunkier, heavier, and really didn't look like an end user, like a consumer like me is supposed to use, but a stylist. So there was really no such thing as an elevated, technologically advanced hair tool that was appealing to a woman like me. I would say I didn't have that much in terms of means as a medical student, but I was willing to invest in beauty, but I didn't have the opportunity to invest in tools because it didn't exist. Okay. So the idea is planted, but your husband says, I can develop this for the market? I want to bring this to market? Like, how does this become a real business?

3:00Right. So he was my boyfriend and he grew up in really the salon world. His parents are hairdressers. And so he's very familiar with the salon world. And what he didn't understand was why watching my routine, this wasn't available. And so when he further looked into the space, he realized it was a very stagnant category that really didn't speak to the consumer or the stylist. And there was no innovating and he just thought he could make a better blow dryer because I was primarily drying my hair. So how does he go on to do that? Well, he is a nerd and sort of a tinkerer at heart, had a different idea of how air should come out because I was constantly battling frizz.

3:43Even though I was drying my hair fully, it was coming out frizzy. So he would think, you know, why is it causing this frizz? So let's develop a different way of the air coming out of this device. And on top of that, let's make it lightweight because he was noticing that I'm drying for an hour and my arm is fatigued. Let's make it lightweight and ergonomic. Let's make it beautiful. And then let's package it beautifully and use messaging that women are already familiar with in terms of benefits and speaking to a woman in a sort of storytelling way, and then put it in traditional beauty retail spaces rather than in the home appliance section in the basement of a department store or the home appliance section of a drugstore.

4:26Which historically, that was the positioning of these products, right? Yes. The home appliances section. Yes. And if you go to Asia or other countries, hair dryers and tools still live next to toaster ovens and blenders. So it's something that was completely out of the ordinary to ask a beauty retailer like a Sephora to carry our products. Although we didn't ask them, they came to us and we can get to that part. But for example, being at a Nordstrom and insisting that we sit on the beauty floor next to skincare and colored cosmetics was completely unheard of because it really sat next to vacuums down in the, like I said, the home appliance section.

5:05Neither of you have previous entrepreneurship experience. So this is your first crack at this. Is that correct? Yes. Yes. And so you develop what? A business plan, a plan to go to retail. I mean, you had an incredible first year. I think you did$4 million in your first year. And that wasn't planned. So it was really just baby steps. He developed this idea of soft air. He looked for a manufacturer. We couldn't afford China. It was way too expensive. And the first order would have to be in the$10 ,000. Found a small manufacturer in Korea through a consultant who helped us find one. And were able to do a small run of this dryer, this idea that he then developed with them, with their in-house engineers.

5:50And of course, tested extensively and then spent$50 ,000 in product. And we decided we're going to try to sell this. And if it doesn't work, we'll keep the$50 ,000 worth of hairdryer in a warehouse somewhere and just sell through it and cut our losses. But we really felt like we had a product here. The first prototype that was in my bathroom, my boyfriend at the time put it there without telling me what it was. I dried my hair in 12 minutes. I mean, normally it takes like 45 minutes to an hour. It dried incredibly fast. I didn't quite grasp what was happening because I was running off to class.

6:25But what I didn't do after I dried my hair is put bio silk in my hair, which at the time was this oil, one of the only oils available on the market to put in your hair to sort of try to dampen it if you have frizzy hair. I didn't put any bio silk in my hair. I dried in 12 minutes. I run to class and I catch a glimpse of myself in the hallway and I realize my hair is not frizzy. and it's not growing the way it normally does, like a lion, if I don't put product in. And so I came home and I said, what is that dryer you put in my bathroom? And it dried my hair fast and really controlled the frizz.

7:00And he said, well, this is the dryer that I was telling you about, and let's start a company. I think we have a good product here. And so it was really based off of one SKU and one woman's issue with drying her hair and not getting the styles that she wanted. How did you determine there's a market for this beyond myself? You know, it worked really well on me. I gave it to other friends and family. It worked well on them. The hair category in general wasn't a sexy one and no one really talked about the issues that they have with their hair and the issues that they have with their tools. So to me, it was clear by the response that we were getting from this product, doing our limited research, if you will, was so profound that that That alone gave us the courage, I guess, to try to manufacture this and bring it to market.

7:51The other thing is, is all the tools on the market were ugly. And I know that sounds very, so what? But just even making a beautiful tool and packaging it beautifully in an Apple-esque way, now all packaging of hair tools looks like what we did 20 years ago. It's just standard fare now to have a picture of the tool on the front to make it look very minimalistic with minimal copy. That's what we came out with 20 years ago. I knew that alone would move the needle. I bought my first laptop because it was pink. So I knew the psyche of the woman consumer and the shopper because I myself was an avid shopper.

8:24And I thought to myself, not only does it work well, but if we just made it really beautiful and spoke to women in a way that I'm familiar with in terms of how packaging on beauty products that I consume speak to me, it'll get us somewhere. It was a hunch. I mean, there was no way for us to test this out. We certainly didn't have the money to have focus groups or to really figure out what to do. So yes, it was a gamble. But to us, it was a small gamble. And if it didn't work, it wasn't going to work. But we also weren't going to raise money and try to figure out a whole marketing sort of plan in order to launch this product.

9:02It wasn't really what we were thinking. We also didn't want to be in debt to anyone. Okay. So we'll talk about that first year a little bit more in detail. But when Kent says, you know, we're going to pilot this, we want to test it. If we don't sell through the$50 ,000 worth of inventory, then we'll go on our way. What channel are you testing on? Where are you selling first? I mean, so to go back to that, I mean, Kent's parents were in the import business of hair goods, not tools. They already had established that business. So we knew that we could somehow sell through this, through the connections that they had.

9:38So it's not like we were going to sit on all of these dryers and not get through them. In the beginning, it was Salon Channel. So to go to get a rep, our first salon rep, and then to go to all the major salon distributors and to show them this product. Now, at the time, of course, there's big players in the space, but our product looked so different and was packaged so differently. And then once we got it into the hands of people and they tried it, For us at that time, product is and was king. So as soon as we got it into someone's hand, as long as they tried it, or let's say a salon distributor gave it to his wife, and then his wife would just freak out, which is usually what would happen.

10:18Then we would get the calls and then the orders would come in. And then what would happen is if they were able to sell through their small amount that they ordered, they would sell out almost instantly because the word of mouth was very powerful. Drying is our expertise. It is still to this day. And at that time, it was even more revolutionary because it was just an outstanding product. It really delivered. So this is B2B, B2C. Yes. Right. Salon to consumer. And then you partner with Sephora in that first year. So they come to you? They come to us. How do they find you? They found us because we did something very out of the box at the time, which was to use beauty PR.

10:59So we hired a publicist who did strictly beauty, and that publicist went and did desk sites at Vogue in style, Harper's Bazaar. And all of those media outlets were perplexed by why a dryer would come and try to get press with us. But we had to sort of convince them that this is a beauty device. It's not a blow dryer in the sense that you think of it as technologically advanced. It dries hair incredibly well and women end up with silky hair. That's the end result is beauty, beautification. Most people didn't want to write about us. But InStyle came out with the first article about T3 and the title was the T3 blow dryer.

11:42Is it worth$200? It actually didn't even say the T3 blow dryer. It was just the$200 blow dryer. Is it worth it? And a feature on there with a celebrity stylist named Luke O 'Connor who was using it on Tyra Banks. And that's when the beauty PR just took off. Because first of all, it was a totally new topic. And now the other outlets also wanted to know what this product was and write about it. It was the beauty PR that caught the attention of Sephora. Through what channels is the beauty PR happening? So this is circa 2004. Magazines. Yeah, so magazines. Magazines, Us Weekly. Right. You know, we would seed celebrity stylists who at the time weren't really seeded.

12:22This idea of seeding. You seed them, so you send them product. Yeah. And they were never really receiving product. But, you know, for them, they would get their Italian blow dryer from their beauty supply store. And the Italian blow dryer wasn't necessarily a brand that anyone really knew. But they would just go and purchase that. And it was very much their tools weren't branded, really. And so to receive a tool like this and to use it and find that it did dry quickly and in a way that maintained hair health was sort of revolutionary for the stylists as well. So they naturally used it. We had stylists reach out to us.

12:55We found ourselves backstage in New York Fashion Week getting coverage for the hair tools when usually it was always about just the clothes and maybe makeup, but not so much the hair. And it just really took off from there. So Sephora at the end of our first year calls us and they said, hey, what you guys doing is great. Looks great. I'm sure. What are the numbers like? Make us a Sephora branded dryer is what they said. and we were happy they called, but they didn't understand that this was a brand and that we definitely weren't interested in making a Sephora branded dryer. They didn't fully understand.

13:32And so we said, okay, well, we're not going to do that, but we'd love to sell our dryer in your stores. So they put us online first and they said, well, let's see how you do online first. And we sold out immediately. So then we get a call from the CEO who says, you know, we want to put you in, I don't remember the exact number of stores, but X number of stores, we sold out in all those stores. Whenever it would hit the shelves, it would be gone. And so then we distributed throughout all the stores in the US. Can I ask you about that? So for a lot of folks, the idea of taking a direct-to-consumer brand, ostensibly, and moving it into retail, and moving it into a large retailer like a Sephora or the like would require that business to be of a certain size, have a certain level of cash flow, have substantial capital to be able to commit to the shelving fees or the inventory commitments that that retailer would impose.

14:28So for you, as a brand new business, one, as an immature business, two, as a business that has sold some units online but is completely bootstrapped, how do you make this work from a cash flow perspective? Well, outside of Sephora, we had$4 million in sales from the get. So we spent what we earned. And the margin would have been healthy enough to then be able to afford the terms that Sephora was imposing. Did you push back on those terms? You know, we could only offer as much as we could produce, obviously. So there was many a sleepless night trying to figure out how we were going to meet the demand.

15:04So initially, when they wanted a full expansion, we had to slow that down for sure. You know, we just spent what we had. So it had to be a slower burn than what they wanted. Fast forward 20 years, you're still in there. Yeah, so it wasn't all smooth. Okay. We were in brick and mortar for a while and then come along other competitors. And you know, in Sephora, it's all about newness. So unless you are constantly bringing in new product or bringing in new buzz, even if you're doing that, the Sephora consumer expects to discover new brands. So we eventually ended up leaving brick and mortar, staying online.

15:42and I would say that was for maybe about eight years, nine years, online only. And then most recently in the past two years, came back into brick and mortar with our Air IQ, which was the 20th anniversary dryer, and then our curling straightener, which is another product that we just launched with. And now we're sort of back and fully on with Sephora now. So you've not taken any venture capital. The business is 21 years old at this point. And I mean, you've done incredibly well, but is it ideological? Like you said from the beginning, we're never going to take outside funding. Is it because you don't need it?

16:23Is it because you don't want it? Yeah. What's the thinking? You know, that was a decision my husband made. I think he's always wanted to be in full control of what we do. In full control. It's not that it's not on the table now or wasn't on the table before. We just never found the need for it, if that makes sense. I mean, we could always take a bolus of money and do a massive marketing campaign and grow faster. For my husband, maybe it is an ideological thing. He really values being 100 % owner. It's definitely given us control over the type of product that we put out and how quickly we put it out.

17:03We don't have the stresses of having to grow the number by X percent every year or to expand in a way that doesn't make sense to the brand and what we stand for. Are there expectations imposed by the retailer in terms of like the pace of growth or the sell through? do you have to meet certain demands in order to stay on the shelves? You do. Yeah, of course. So we very much have to use the marketing levers that they want us to use, either on their website and through their marketing. You have to meet those demands, because if you don't, then you'll be taken off the shelf for sure. And that did happen with Sephora.

17:40And the only way we were able to go back was because we were bringing innovative products that with this heritage of a very aesthetic looking line that's geared towards women. And so they brought us back in. But yeah, I mean, you have to sell through and really be able to make it worthwhile, the shelf space. Are there certain characteristics or qualities that a retailer has to have for it to be a good match? Like, do you think about a retailer as a partner? Like, given the fact that they're fine, they're not an investor, they don't own a piece of the company, but is there such a thing as a good retail partner, an average retail partner, or not so good retail partner, and what makes it so?

18:20I mean, retail partnerships are good when things are going well, right? So a great retail partner can be great for a while until, you know, things are rocky because you're not selling through on whatever skew you have on their shelves. So it really depends on how you're doing and how your company is functioning, whether or not that relationship is going to be good or not. In the hair tool space, there's only an X number of retailers that you can really go to. The two major players are Ulta and Sephora, and they're great for two separate reasons. Sephora is very important in the beauty space because everyone sort of looks to Sephora for the latest and greatest, and they do the same at Ulta.

18:59And Ulta, not only do you go there to discover brands different from Sephora, they have a huge hair tools category. So if you want to be in a retail space, Ulta is a great place to be. So there's not a ton of choices. And then you have department store like Nordstrom's been a great partner. And it's a good place to be given that it's a luxury department store. It gives credibility to the products and their trust of our brand. The relationship really also depends on who your merchant is, right? So you can have a good retailer. And if you have a great merchant, thankfully, we've had good merchants representing our brand to the main retailer.

19:34So it's been great, but it sort of depends. So long answer to say it really depends. Let's talk about the category itself. So you carve out this niche. You're sort of first to market. You do an amazing job of moving this product sort of out of home appliances in a way. Fast forward a number of years, there's now a few big home appliance players that are developing similar products. Dyson, Shark, to name a few. What impact has this had on the business? You know, as a smaller business and really a family business, in the beginning, you know, it was intimidating to compete against a billion-dollar company.

20:19We were certainly concerned. We had faith in the products that we were developing, but to compete against the sort of marketing prowess and the global brand name recognition of both of those companies, It was daunting, but I will say it actually, them coming into the category actually boosted our business. I think sort of all ships rose. Because they raise awareness. Yes, yes. And it gave permission to women. And Dyson's an incredible company. I mean, very technologically advanced home appliances. It gave women permission to spend in the hair tools category. And the prices were crazy, very, very high.

20:57And so all of a sudden our products seemed like the affordable luxury. So we found that our business grew as well, leaps and bounds. And so although we were intimidated in the beginning, it became clear that we were all going to benefit from this. But having said that, it has also made us double down on telling our consumer what the founder story is and what our mission is and where we came from and why our products are different. And we've really had to hone that part of our branding and our marketing, if you will, to separate ourselves from these two home appliance companies. We're a people and a place, I like to say like beating heart, flesh and blood, where we really feel like we're making an impact in women's lives and in the lives of stylists because we're very close to our community.

21:47And I was, like I said, the first case and we solved my pain point. That same ethos has continued on over 20 years to really see what it is that women struggle with and how can we bring ease and healthy styling to their everyday styling routine. What do you think about this idea of historically commoditized categories going premium? This isn't the first that's done it. Feels like there's been a wave of these examples. You know, Harry's Razors comes to mind. it's a very mundane category they put a creative spin on it i sort of feel like warby parker did the same thing with eyeglasses in a way sort of this element of design aesthetic and re-energizing a category do you feel like you were an early pioneer were you watching other examples of this prior to launching t3 like was there an inspiration that's really insightful i hadn't really thought about that.

22:40I just like beautiful things. And it didn't make sense to me that on my vanity, there are beautiful skincare products and lotions and potions I spent hundreds of dollars on. And then right next to it is a clunky black dryer that looks like it belongs in the garage. So I guess I was sort of, you know, now we're obsessed with all things aesthetic, you know, even on social, everything's like the flat lay and everything just has to be perfect. to your point, right down to like the mugs that you're using now have to look a certain way. The candles that you have lit in your home have to look a certain way.

23:14I guess we were kind of unintentionally at the forefront of just making something really beautiful. But if we just made it really beautiful and it didn't work well, we wouldn't be here 20 years later. So I'm all for changing the aesthetics and really revitalizing or reviving a category based on the way the aesthetics of that product is. But there should, in my view, be some sort of technological advancement that really delivers on said result. Otherwise, that can only take you so far. Now, in the case of Warby Parker or other brands where the functionality maybe isn't quite, you don't have to demonstrate that as clearly.

23:57For us, we really have to deliver on no hair damage, no heat damage, and fast and easy results. And if we don't get that, it doesn't matter how cute your product is. People are, at the end of the day, not going to recommend that to their friends. Where does the name T3 come from? When we first started this company, the ionic energy was produced through tourmaline, which is a semi-precious stone that we used crushed up inside of the dryer to produce that ionic energy. So the T came from there. And the three was just a lucky number my husband chose. We also didn't want to put a name on it. Thinking about international business, we were, I guess, kind of forward thinking.

24:38We didn't want it to mean anything inadvertently. And just at the time, you know, he grew up in Silicon Valley. And when the tech boom was there too, and he wanted it, he thought that it would sound very high tech. And although it was a beautiful beauty device, it was also the most technologically advanced. So he just wanted it to have sort of a tech feel, hence the way that it looks and the T3. Got it. How do you carve out time to practice medicine as a surgeon and grow this company? What's the division of labor between what you're doing and what Kent is doing and what's been challenging? So early on, when I was in training, I was very much involved in sort of the creative side in terms of what the packaging looks like, what the product itself looks like, and messaging.

25:30My husband was very much involved in the finance side and the operational side of the business. So I really didn't involve myself very much in that because I was in training, ophthalmology training. He and I were very involved for the first five years, And then we brought on a CEO to professionalize the organization, if you will, and took a step back, stayed on the board, and were involved sort of from at a higher level where we're looking and seeing what products were coming out, making sure the messaging was in line, but took a step back for about 10 years. And during that 10 years, I was practicing private practice in Beverly Hills three days a week while trying to start a family and running this business on the side, but largely hands off.

26:12In the last two to three years, my husband and I have become very, very involved with T3, with the onboarding of a new CEO. And that has really taken up most of my time. So I'm one day a week now at UCLA instead of private practice. I think private practice is a lot harder. It's very demanding. Most of my patients had my cell phone number. I was very hands-on with them. And although I'm very hands-on at UCLA, it's a little bit more protected, my time, when you're in an academic institution. Do you think of yourself as a physician, a surgeon, an entrepreneur, all of the above? All of the above.