613: Why Most Beauty Brands Fail - and How to Beat The Rest | DIBS Beauty Founder

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0:39Just head to omnisend.com forward slash founder without the E to get started. All right, now let's jump back into the show. Welcome back to the founder podcast. What if building an eight figure beauty brand wasn't fancy marketing or a massive ad spend, but rather answering customer service calls on a personal cell phone and literally getting mistaken for a shoplifter while watching customers buy your products in Ulta. Well, today's guest, Jeff Lee, co-founder of Dibs Beauty, the color cosmetics brand that's rewriting the playbook on how to build in an impossibly saturated market. And in this conversation, you're going to discover how to achieve 60 % repurchase rates in 90 days by obsessively focusing on the customer, why entering retail earlier than you think is now essential for beauty brands, and how to pick the right retail partner for your customer and Jeff's exact pre-launch framework to build a 20 ,000 person wait list before launch.

1:33So guys, this is a masterclass in launching a premium beauty product brand in a crowded market through extreme customer proximity and disciplined community building. Hear the stories, learn the proven methods and accelerate your growth and future through entrepreneurship. Welcome to the Founder Podcast with Nathan Chan. You co-founded Dibs Beauty back in 2021. The company's growing super fast, but I read online that you've clocked in 120 hour weeks sometimes. Is that what required to build an insanely fast growing direct to consumer company? It's not about working hard or the quantity of effort.

2:22But at the end of the day, there's simply no way of getting around it. And I like to say that I do work smart and I work hard. And that's probably the superpower that's propelled me through. If you're founding a company, you have to do every single job to some degree or be able to do it if someone else can. And that's what naturally leads to 120 hours a week. But there's also a piece of it, which is you're founding a culture. And I'm pretty unapologetic about the culture that we have here, which is that we are absolute perfectionists when it comes to makeup. It might not be that serious of a product, but the fact is it's a crowded marketplace.

3:02And I don't believe any brand out there, whether it's CPG, makeup, DTC, no matter the kind of slice of the industry you talk about, any brand has any excuse to exist these days in the saturated world of brands. Unless it's absolutely putting in the extra incremental 10 to 25 % above the baseline job. Yeah. So when you launched Dibs Beauty, you had, you launched with two products and you had a wait list of 20 ,000 people before you launched. Your co-founder is Courtney Shields. She's a, you know, well-known personality online, but like, how did you do that? Because that's pretty impressive. Like how did you get 20 ,000 people on your wait list before you even launched?

3:49I think one of the things that's so important about creating any kind of anticipation is to give enough to make your audience feel that they are part of the journey, but also to leave them wanting more. And in this case, we thought it through the same way that we think through any kind of flagship launch nowadays. days. In fact, we just had another product sell out within 45 minutes and one actually amassed 68 ,000 personal wait list, which was that there was an element of excitement, an element of scarcity, but also enough storytelling and how we presented everything that people felt that they were along for the ride.

4:27They knew we were creating something new, something they wanted as part of their lives. And they saw just enough about it to say, okay, I'm willing to take a risk and buy something right through the internet for 38 to 76 dollars yeah okay all right so you know for any founders watching this that are working on a you know a brand in the beauty space it is competitive you know you go to sephora you go to mecca you go to altar there are so many different products you know korean beauty is just booming uh so what advice would you give to a founder to have like an epic wait list an epic pre-launch like what what what what do they need to do can we unpack that really deeply like if you were to give advice to a founder right now what should they be doing yeah your social strategy has to be so on point there is no launch whether it's in a retailer or on DTC as a pure play direct consumer brand without knowing exactly how your content resonates with your audience first and foremost.

5:37And the KPIs of that, by the way, have completely changed since we launched. It used to be all about likes, shares, and even comments. We actually measure a lot of the success of our content now by how much UGC we see inspired by it, how much content others are creating based off of something we put out into the ecosphere, right? So as part of a launch plan, it's absolutely mission critical that you are able to really hone in on what your audience is and how they're going to respond. And by the way, different demographics and age groups react and perform very differently. We are an upper millennial branch.

6:15She's heavily focused on Instagram and remains so kind of counter polarity to the TikTok audience these days. But I also believe fundamentally that you capture the audience's attention within the first two microseconds of the content coming out. Now, it doesn't mean that you go out and create something incredibly offensive, clickbaity, splashy, or brand denigrating. But you have to understand that in this day and age, you are selling in a social first economy where attention is a scarce resource. yeah so how many pieces of content would you recommend that a brand creates for their pre-launch and when it comes to their social strategy like or your guys social strategy like how much do you need to spend on ads do you need to spend on ads if you're first starting out like talk me through that yeah i think you really have to think very carefully about how you're going to relate to your community ads can actually be highly counterproductive especially if you're doing doing spray to play.

7:14We actually are very proud to be a creator brand. Obviously, Courtney's a creator. I'm very active on social myself, as is most of our community base, whether they're 500 followers or 50 ,000 likes per post or 800 UGC generated by the new metrics I just noted. And one of the most important things to do there is to basically kind of say, look, if I'm going to commit to that kind of strategy, let's just say I'm committing to an influencer creator strategy first, I'm going to actually cheer out the content I'm putting out there before our launch. I've got a tried and true topple the pyramid, significant following and engagement that can act as immediate brand advocates and then legitimacy to the launch.

8:00And then I got lower tiers on the pyramid in terms of, for example, reach that have the potential to go viral that can really kind of build a micro community. And those have to basically by nature be much more of a lottery pool. You're doing many more hundreds of now thousands of cents. So we actually invest a lot more in the creator gifting than we do paid ads. And we invest a lot in the education as well, because you need to make sure that the live person that is selling your product can convey that messaging as if you approve the ad itself. Yeah. Interesting. Okay. So for your first launch, 20 ,000 person wait list how many how many ascends did you do to to like you know in terms of I guess working with creators yes approximately 500 so we did about 500 at the time they were trusted and true folks that we had personal relationships with which really do continue to matter right it's the cost of playing in the creator game has just skyrocketed now people are inundated at every level with gifting and PR and having a personal touch really actually does, you know, put you straight to the front of the line in terms of getting their attention and certainly their follow on enthusiasm.

9:17Approximately that number for initial gifting, but we also made sure that we were activating within communities. So, you know, we started the brand with a focus on Austin, Texas. We invented very quickly there and being there in person on the ground gave a lot of people this kind of anecdotal reassurance like this is a real brand this is not just some internet scheme or a product yeah got you okay and you sent out the product to creators and then they were posting and this the call to action was to join the wait list before you even launched right yes got you so you built a lot of hype and anticipation so then when you guys did launch obviously you moved a lot of product okay interesting and how did you meet courtney well it was almost like a blind date i was coming out from having worked with a rod alex rodriguez legendary yankees player and i worked on a couple cpg companies with him as well as jennifer lopez who he was with at the time.

10:27And, you know, basically the joke there was, you know, I had to do baseball in order to do beauty. So I'm a former corporate lawyer. I have had a lot of interest in beauty. In fact, I'm also a professional beauty pageant coach. I'm one of the best in the world in that business. And I was always passionate about beauty. I met Alex Rodriguez. He said, why don't you do baseball with me? We're doing a lot of beauty ventures on the side. I ended up working on those. And then I was introduced to Courtney through the founders of Tula and Bobby Brown, guys named Ken Landis and Dan Reich. And Courtney had done a collaboration with Tula that had been enormously successful.

11:03So the guys basically said, look, why don't you to meet? We think that there might be something, some chemistry there. And within the first five seconds of the Zoom, it clicked. And I really believed that she understood product market fit and actually matching a customer at where they're at. And I think she saw in me, probably the complementary set of skills needed in a founder. Yeah. Okay. And talk to me about product market fit. How did you guys know that you'd had it? Talk to me around MOQs, how much did it start to launch because you hadn't launched with two products. Talk me through the numbers.

11:39People really want to understand that stuff. Yeah. Well, first of all, in cosmetics, your standard MOQ is 5K. It can rise to 10K if you really want to do it well. And that's actually, I hate to say this for those who are really bootstrapping their enterprise, it's a fairly low barrier of entry. So the manufacturers, the CMs have a very tight lock on new brands are not well funded, or don't have a clear idea of what they're doing. And it's very easy to launch in the US in particular with 5000 SKUs of a white labeled formula that's not highly differentiated in any way. The manufacturers do size you up.

12:16First of all, no one owns their own manufacturing here unless you're at the level of a lotter or you're a highly specialized medical or science backed brand. Most every color cosmetics brand here works with the top contract manufacturers. And, you know, we brief them on the formulas and the specs and the components and then they create the product. They size you up right away. And in our case, because I'm a veteran in the industry, they had seen me do a very large launch in Sephora and a very large launch in Ulta, both highly successful. I had the credibility. And in terms of understanding the product market fit, Kourtney has been talking about doing her own makeup to a million people across this country for 10 years now.

13:00So there was a very clear understanding that this is a customer that was very much in the heartland of America, that loves makeup, that wants ease and has specific problems that we can solve in a differentiated way. That let us have the confidence A, to raise the seed round and B, to fund more differentiated products than we might otherwise have launched with. And our initial MOQs were still conservative. We didn't think we would have that kind of a wait list. So honestly, I ordered like 10K on the first round and then immediately was scrambling to fire up the factories. And even nowadays where we have vastly outstripped that, we just celebrated a million sold of our hero SKU, the Desert Island Duo, it's an imprecise science.

13:47We can benchmark against the industry and everything, what we think our customer wants, but we're sometimes surprised, often pleasantly. Yeah. So look, the brand is growing super fast. You launched only in 2021. So that's only four years ago. Can you give us, for the audience and community, just an understand of like understanding of how fast dibs is growing and and like what top line revenue is i've got here that you guys have grown 700 year on year yes i mean that was you know mapping against the last year prior this year is going to the the growth will slow down a bit by nature just because you know we have also started to enter retail so um you know we really you know have We were actually just recognized as, I have the trophy right behind me, the 11th fastest growing consumer company in the Inc.

14:445000. Overall rank, we were in the top 219th, but 11th in consumer goods. And the retail expansion actually has been even more important for us because I can't share with you the exact number, but I can tell you that we've broken out of the pack of comparable color brands. We are well into the mid eight figures there. And one of the things that's been so important for us is to transition from a three, three years of being pure play DTC into a true omni channel brand. For the founders listening, I don't know that you could do that today. If you were trying to enter beauty, I think that back in 2021 being a DTC brand directly give you a lot of runway to grow to the size that we had into the muscle into retail if you're entering color cosmetics or beauty in general I think that there's a lot more pressure to enter retail earlier in your cycle now there's some change there's some DTC brands that really managed to hang on and then the alternative is really to go Amazon.

15:50But in the US, being a DTC brand, a pure play DTC brand alone is still doable, but incredibly hard. And for a brand like ours, which requires people to see color and really feel it and experiment with it, my feeling is that the retail channel has really only added fuel to the fire for the overall company. Yeah, got you. So look, impressive growth. I know you you can't talk exact numbers, but mid eight figures in four years, that's pretty impressive growth. One statistic I've got here is you guys really prioritized the recurring customer. And your 90-day repurchase rate goal in the first year was reported to be exceeding 60 % in 90 days.

16:40Is that correct? And how did you do that? It's correct. Yes. And actually, I believe it's still holding as of this last quarter, which I'm pretty impressed by. So how'd you do that? She's a stable customer. And I think first of all, the core items are cycled on a 90 day replay. So we do test and size our makeup so that it will last your average user 90 days. I'm very happy to see very little trading out, which means that we're playing defensively, some of the existing customer very well. We have a constant pipeline of newness that is all designed to excite and innovate in different ways. The brand is what we call made for more in the sense that there's always an additional surprise and delight or value element, whether it's two ends, two colors, two functions, hidden aspects of the product that make it more than a simple lip gloss.

17:36So the customer has basically come to understand us as constantly surprising, delighting. We pay a lot of attention to our CRM, to the customer retention funnel. At the end of the day, even CX, I hate to say this on a podcast with this level of viewership. my personal phone number is still floating out there um and i get about 12 to 20 customer calls about their orders still like it somehow routes to my personal phone and they're answered as in like you know like they're i immediately take the notes and send them over to our team similarly both courtney and myself receive dms all the time i like the joke she's the first person in customer service and I'm the second.

18:24And whether your order got eaten by a dog, your husband accidentally burned the Christmas presents along with the tree, that's something they do in Idaho here in the US, or a car ran over your delivery, all real things that have happened in the last year. We will answer. Sometimes we personally will answer the founders and that's never going to change and i think that that's something that you know people very much feel um connects them to the brand and encourages that loyalty yeah that's really that's really crazy and i think when it comes to scaling your business as you scale you add more people you add more resource you can do more things and you get further away from on the ground i'm curious do you are you effectively saying that founders need to be as close to the customer even if you're growing super fast and they should still have access to speaking to customers every day if possible even at your level i mean that is you know i was speaking with melanie wellin you know who used to be the ceo SoulCycle and she said that was one of the most important things that the company ultimately lost track of during its tough days was the distance between itself and the customer.

19:46And that's actually, I think you can see that charted across the history of great brands is that the second they lose that proximity to the customer, it all goes to hell. The fact of the matter is you need to avoid, in my mind, a couple of mistakes. One is to think that you are the customer. I am not our customer. Our customer is an upper millennial woman who generally lives in what I call the 50 states, meaning I am a California kid who lives in New York City, not in my geographies. She's living in Arkansas or Louisiana, which is where I was last week. I'm headed to my 49th and 50th states next month.

20:26But I am not our customer. I don't live near her. I don't, you know, I am certainly not her, but I do everything I can to understand her. The second piece is to never let your children, for example, go out there and dictate, you know, what is cool or interesting to you because you might be from a different generation. I'm very proud to be a millennial. I think I just turned 40. And, you know, I might not be of the TikTok crowd, but I'm certainly not going to go out and ask kids what they think of it. I'm going to ask people who are doing it correctly how they're approaching it. And the third piece of it is to never use surveys as a substitute for substantive conversations with your customers in the store.

21:12Because you can ask the question and the customer can answer, and neither of you might be arriving at the proper truth of the matter. And there's actually no substitution to A, having the conversation about her lifestyle and how your product fits into it. even more than do you like this pink or do you like this gloss or do you like this format but understanding her lifestyle but also and i'm going to sound like a total stalker here like watching her in her natural shopping environment so one thing i do when i go into store is i'm not the one standing there beckoning you to the end cap saying here i am i'm the founder, please purchase something.

21:54This is amazing. I'm frequently the guy like around the corner peeping at you, trying to see how you walked towards a display. If you brought your mom or daughter, what caught your eye, what you tried on and what you put down. And I like to joke that in Ulta, there's a saying called Nora. We have a Nora, which is need officer right away. And I am pretty sure I have been identified as a Nora in at least 10 stores across this country. But there's no substitute to those pieces of data and understanding on top of the ongoing conversation and relationship with the customer. To understand or watch how she buys in Ulta, how does that help you?

22:39Because it gives you a great idea of not only what your competitors are doing, but how she sizes up your product, even the way that she approaches and whether or not she's, you know, for example, picking up a blush from the top or the third shelf in the format and seeing her expression can tell you, is this a customer who is familiar with this format and likely to quickly purchase it if given more options in this kind of similar vein? Is this a customer who's discovering something stepping out of her shoes and needs more education so your marketing has to change or maybe you do you know tone down your assortment and there are all manner of different pieces of that information you can gather and that's part of this whole exercise i've been doing of visiting every fit every state in this nation which is that customers obviously all behave very differently but customers within communities and demographics tend to have similar their patterns.

23:42So even understanding that an upper millennial is very likely across this country to bring in her mother or her daughter with her and to shop in a conversation with those two generations has been enormously disposited to our brand decisions. Yeah, okay, interesting. And so you have said that you guys are a 50-state brand. What do you mean by that? You know, I was very lucky to actually be very close friends with Alexandra Keating, who is the daughter, I believe, of a former Aussie prime minister. She just launched her body brand, UNI, in the U.S. And, you know, I think it's jarring for her living in California to see a Texas customer and how they approach things, right?

24:27And like, this is a country that is very, very politically divided, that we all know, as is the rest of the world. But we are also a country that loves makeup. And when you get beyond the California, New York customer who's highly devoted to a Sephora, often a minimalist makeup look, and you get inside of the country, this woman loves to use color. And when we talk about the 50-state customer, it's understanding that there has been a gigantic majority of this country that has not had a brand speak to them, cater to them, design for them. and there are a million people in New York and LA that have brands that they can pick from every single day but not women in Nebraska or women in the Dakotas and we view them as just as important if not more so than the coastal customers.

25:22And talk me through the retail piece you talked about it before and you said that you know times are changing and more than ever retail to really bolster growth is important. You guys, you know, entered Revolve in July 2022. We interviewed the founders of Revolve actually about four or five years ago. It's a long time now. But, you know, why did your projections exceed, you know, like going into Revolve? Talk me through that? Well, we shock and awe wherever in anything we do, right? And we go all the way. So when we went into Revolve, we went with the whole idea of this is the first time we're ever going to sell outside of our own.com.

26:12So let's go in, drive massive amounts of traffic by having a gigantic week-long series of influencer and creator and community events in Miami, which was a high value customer base for Revolve and continue to drive across the board. And we also put these SKUs and promoted them. We would, for example, sell out of one shade. It was of our hit duo and then drive people towards revolve.com. I believe at one point we were actually recognized in their SEC earnings report as like a top three SKU in the whole company, which is rare for makeup when it's a heavily apparel sized business. But one of the most important things is that you have to pick the retailer that's right for you revolve customers love fashion and they want it quickly and it made an enormous amount of sense because this is a customer that loves to go to revolve and follows the revolve girls and those influencers are our community they're congruent with us it would not have made sense for us to go to a violet gray or a cause bar for that relationship and you know it was a great dress rehearsal for um you know the even bigger things have been coming yeah Yeah, I see.

27:21And so the thing that I'm hearing, Jeff, is you guys are really kind of getting close to the customer. Retail's been massive for you guys. Partnerships has been massive from a creator standpoint and community building. A lot of founders, you know, they want to build a great community. Who doesn't? Right. But in the early days, you guys really doubled down on community. So what advice would you give to founders that want to build a community early days with their brand without paid marketing? And how would you do it? And how did you guys do it? You have to be so judicious with your time because community requires enormous amounts of input from yourself.

28:06You have to be in constant communication, whether it's with your purchasers, with your influencers, your affiliates. and if you're a founder, you're strapped, even if there's two of you. You cannot be in constant communication with everyone that wants to talk to you. You cannot physically be with everyone that wants to be with you. But you have to be picking shoes in a lot of ways, the moments and the people that do count while making sure that you're touching everyone. One thing that's key, for example, is to have someone that's dedicated to that function in your team in some way, shape, or form.

28:40Their title might not be community manager, but having a person that helps you Rolodex and index every touch point and having the backend system to do so is incredibly important because the worst thing to do is to have, for example, 50 people come to your launch event, grow, and then come back to the city and then lose track of those connections and have those bridges be burned because you've slided them out of lack of bandwidth from your end. so I think that there does have to be some level of judiciousness in on top of the meticulousness that it takes but building a community is fundamentally it's I you know people always I think take this part of the conversation to say authenticity and I always like love to say that like that is the word that drives me so crazy if we were truly authentic we would not have brands because we would just be saying all the crazy crap that comes into our head how we're feeling how cranky we are, we would be turning people off with the lack of a filter because that's how I view true authenticity to be.

29:45And maybe if you're Barstool Sports, that works for you, but not for most CPG brands where you have to sell something aspirational. For me, it's actually more of the concept of maybe comfortable in authenticity, which is that you are getting the slice of yourself that allows people to connect with. You're giving them enough where you both feel that comfort level without truly being so authentic. And, you know, we're in this age of performative authenticity, the LinkedIn post, I cried to my, my, you know, daughter, you know, by the side of the road, like, you know, like, space, space, click for more, right?

30:24It turned out that like the monkey over there was the boss that was going to interview me, right? Like, soft story. I love that, like account, best of LinkedIn. I'm prolific on LinkedIn. I, but like, Like for me, my LinkedIn is just like, here's what I did. Humble brag or not humble brag. Me, me, me, me, me. Like, here you go. Enjoy, engage with it or don't. But I think that that's so tough to navigate these days because people are smart. They can pick up on it. And don't even try. My view of it is don't even try to chat GPT your way around it because, you know, those things, those interactions drive me crazy.

30:57Similarly, right, there's an inauthenticity even in social media that we see now, right? people feel the urge to cry because they fired people that ceo who said i wouldn't even call him a ceo right like he was just kind of like this guy who was like oh you know i it was the worst day of my life i had to lay off like the people in my company and crying selfie um i just have a lot of derision you know for that honestly because it takes that calculus all the way to the edge right like you're trying to be authentic and in in a way you're actually you're not like you're not ever able to give people true snapshots of your life.

31:35Even someone like Courtney who lives her life like an influencer under a microscope, she's really only giving you about 10 minutes of her life that she chooses to share with you, but you can connect with it because you're seeing 10 minutes and you feel like you've lived the whole day with her, but really you only saw 10 minutes. And I will say that that's the truth of entertainment and brands going back to the dawn of time, right? People love the great entertainers because they present, they can cry on command, they can make us feel emotions, but they're still only presenting slices of themselves, even if they come off as so authentic and real and down to earth.

32:14And so for founders building community, you had to do that on a microscopic level frequently with people one-on-one. I do believe in practice, comfortable inauthenticity. You know, it's probably a quote that would bite me in the ass, it was taken out of context. But there has to be an understanding of what you present and put out there. And you talked about you as the founder. You guys hired a community manager early. Why? Because from day one, we viewed ourselves as a brand that was going to be built by creators and influencers at every level. And by that, I also mean that as the person who has, you know, 50 friends in her Facebook group that doesn't post anywhere else on social media or the advocate to her local community who can bring in more people into a store than an influencer.