Amy Errett: Founder of Madison Reed and Technology Entrepreneur

Here's something remarkable and not in a good way. Disengaged employees cost US companies almost $1.9 trillion a year. That's a lot of zeros. Why? Because when teams lack the right skills, productivity declines, turnover increases, and strategies stagnate. But it doesn't have to be that way. At Project Management Institute, home of the PMP and globally recognized certifications, your people can learn to collaborate, deliver on time, and actually get things the cost of not upskilling way higher than the investment Project Management Institute. Find the answers@pmi.org.

I'm Guy Kawasaki and this is Remarkable People. This episode's remarkable guest is Amy Ehret. She is the founder of Madison Reed, which she started approximately eight years ago. She's been a mover and a shaker at two venture capital funds, True Ventures and Mavron. Mavron is the venture capital firm of Howard Schultz. You know him from Starbucks. She's also been the CEO of Olivia, which sold charter cruises for lesbians, and she was the Chief Asset Gathering Officer of E Trade.

She has a BA from the University of Connecticut and a Wharton mba.

If you are a woman, you probably know more about Madison Reed than I do. For those of you who don't know what Madison Reed is, it is a total kick ass company. It's doing hundreds of millions of dollars selling hair dye products. In this episode, you'll learn about how she has dealt with the pandemic, how she has created a plethora of business models and the amazing amount of technology her company uses to sell hair dye. Plus how to raise a daughter and how to raise a son. And believe it or not, you'll learn that. Maybe I'll become a spokesperson for her men's hair dye products because I have so much gray hair. This episode of Remarkable People is brought to you by Remarkable, the paper tablet company.

Yes, you got that right.

Remarkable is sponsored by Remarkable.

I have Version two in my hot.

Little hands and it's so good. A very impressive upgrade.

Here's how I use it. 1. Taking notes while I'm interviewing a podcast guest. 2.

Taking notes while being briefed about a speaking gig. 3. Drafting the structure of keynote speeches.

4. Storing manuals for all the gizmos that I buy. 5. Roughing out drawings for things like surfboards, surfboard sheds.

6.

Wrapping my head around complex ideas with diagrams and flowcharts. This is a remarkably well thought out product. It doesn't try to be all things to all people, but it takes notes.

Better than anything I've used. Check out the recent reviews of the latest version. I am Guy Kawasaki, and this is the remarkable Amy Ehret of Madison Reed. Someday, if Madison Reed is bigger than Procter and Gamble, you can say you heard that here. First.

I have to tell you that every, like, my wife and my wife's friends, everyone, I said, yeah, I'm gonna interview the founder of Madison Reed. And, like, yeah, we know her. We love her. I bought this. I bought that. Geez. Had no idea.

Yeah. Hair color is more essential than most people believe.

I would say that many people were more impressed that I'm interviewing you than Jane Goodall or Margaret Atwoods.

No, I'm more impressed with Jane and Margaret. So.

Maybe I should tell Jane that you'll send her samples or something.

Nope. Yeah, I won't go there.

Why not?

I think her hair is mostly gray. I'm pretty sure, but that's okay.

So is mine. And you sent me samples.

Yes. It's true. It's true. It's true.

So my first question and the one actually I'm most curious about is, did you reach out to Nancy Pelosi?

No.

Wasn't that a prime opportunity?

It was a prime opportunity, but I'm a believer that if that was meant to be, she would have reached out to us. So I let that go the way it did.

It could have saved her some aggravation.

Yes, absolutely. But, Guy, it's a good idea, now that you mentioned it.

Yeah. I wish I could tell you that I knew her and I would make the introduction, but I don't. So. Okay. I thought for sure that was a golden opportunity.

It was a golden opportunity.

It's not too late.

It's not too late. It's never too late.

So it's never too late.

Yes.

So one of the sentiments that I picked up on your website and material is that a beautiful woman is a confident woman. So I would like to know how you define beauty.

So it is a fantastic question, and it is the thesis for which the company is based on. And the thesis is one that says that the traditional media has portrayed women a certain way, and they're supposed to be of a certain age and have a certain body type and look a certain way, and it's only youth that's beautiful. And in fact, we at Madison Reed called your ingrowth of gray your wisdom stripe, because we are big believers that beauty is really as much internal as external. And we are in a business where we. Our job is to reinforce the empowerment and that inner beauty and letting women make choices to color their hair on their own. Terms, whether that's at home or whether that's in one of our hair color bars. And I think, you know, that we have this eight free formula. So we think about beauty in safe ways, in ways that aren't toxic. And so, you know, for us, the definition of beauty is, the reason I started the company, named it after my daughter, Madison Reeve, is that I wanted to have a metaphor for the fact that all women are beautiful. You don't have to follow the traditional definition that media puts forth and that we are a company that stands by affirming that beauty and not falling into the other traps. All of our imagery in the company, meaning all of our photographs, are not retouched. They are not airbrushed. They are how women look. Women have some makeup on, but that's who they are. And we think that women are beautiful as they are, and that society, frankly, has created the situation that many of us have walked around feeling less than. And that has implications for lots of parts of your life.

If I may be a devil's advocate for a second, if you're saying that beauty is like that, internal, it's about efficacy and power and self image and all that, then one might argue, why does a woman have to dye her hair?

It's a very fair point. We don't believe every woman should dye their hair. We have tons of clients that come to me and say, I want to go gray. And our response to that is awesome. What our business is predicated on is if you choose to dye your hair, we would like you to do it with us because of how we approach this business, affirming the fact that if you want to be gray and not dye your hair, Amen. In fact, we have a handful of products that are for gray hair. It just. Technically, as people go more gray, there can be the effect of hair yellowing versus staying white. And so we have some products that help. If you have gray hair and you would not like your hair to be yellowed, if you want your hair to be yellowed, it is beautiful. We do not say that if you don't color your hair, there's something wrong. We want you to do exactly what you want to do.

Are you also saying the converse that without beauty, a woman cannot be confident?

No, what I'm saying is that I think one of the potential blockers to confidence is a woman's relationship to how she thinks she should look versus how she looks. And I do this thing, which is a little sidebar thing. I don't know why. It started years ago to Come talk to seventh and eighth grade girls. And I do this often and I start the conversation with the following question. How many of you wanted to be a princess when you were growing up? And if there's 40 girls, 33 of them raise their hand and I say, oh, okay, what was the, what were, you know, did you want to wear a tutu? Yes. What was the color of the tutu?

Pink.

And I say, okay, well can anybody tell me why they think that is? And you know, these girls are awesome and they're smart and here's what they say. Because we watched movies where, you know, being a princess was the ultimate role that a woman should be in, somewhat subservient to the prince. A role that is about being beautiful, thin, wearing a tutu that's pink. And that has a direct correlation with then me asking him the following question. 7th and 8th grade, how many of you think you're good in math and science? And out of the 40 hands, very few go up. And I believe there is a correlation with believing that you're not smart, that you can't do things, that you supposed to look like a princess, that your life has a predetermined factor about self worth. And that's what I believe. The Madison reed is now 17. And you know, there's a lot of conversations in this household about a spot that women can do what women and men should be able to do whatever they want in life without any internal judge, as I call it, that is constantly sitting on one of your shoulders questioning your decisions in life based on a lens that Disney set forth when you were three. And this is why up until recently, with all due respect, none of the princesses were of color and you know, just go down the list, right? So it's not personal towards Disney. Disney does a lot of very cool things, but we all get these messages and when we want to talk about things about why aren't more women funded in Silicon Valley. I personally don't believe that men wake up every morning and think, oh, how could I not fund a woman today? That is not what most men think. But there is a system and the system comes from if I didn't come out of finance or I wasn't, you know, there are certain predictable paths to become a vc, like I was a vc, but if you weren't a founder that had a big outcome or you didn't come up through finance in a certain way, and these are, it's a self fulfilling prophecy. And so I want to be a company that, number one, affirms women's beauty on their terms. Number two sets an example. As a female founder, with 80% of our team members being women, close to 50% of people in the field being of color, I want to set an example that these things are possible. Not easy, really hard. But that's how the system changes. If we strive and achieve, the system over time will change. Long winded answer.

Sorry, that's what a podcast is for.

Long winded answers.

So if you were to apply this line of thinking to men, yes, much of it would be a waste of time. But would you say that a handsome man is a confident man or men don't care or society doesn't care what a man looks like or whatever deserve. What's the corollary?

I don't know. I'm not a man, so I don't. I. I would only be positing some theory here. I'm a woman, so I have some viewpoints. My. If I was a guessing person or maybe have lived long enough to see some pattern recognition here as I call it, my guess is that men, some men have some confidence issues too. I would be silly to assume that this is only a gender thing. But my guess is that if we were looking at a percentage of men and confidence and a percentage of women in confidence, my guess is there's a higher percentage of men that are inherently confident versus a percentage of women. Now I don't know why that is because I have a daughter, not a son. My guess is it has a lot to do with how potentially roles get played out in families or roles get played out in relationships or where what I would consider to be majority of workforce in certain professions have skewed in one gender. And I think that women have this sort of all encompassing role, right? And that all encompassing role is the, with you know, all due respect, the mom and the partner and the worker and the daughter and the friend connector and you know, just go down the list, right. And the therapist and. And so I think that just when you look at society, the ability for a man to have more access to their success pattern is there where a woman's got a lot on her plate that is maybe broader in scope and more just if you just look at where do many women have to make a choice? I choose to have a kid and so I don't go back or I'm out of the workforce for some period of time, right. Like these are all things that I don't in any way. I don't want anyone listening to this to believe that I Am not respectful in any way. But what I want to say is that these are questions that we should at least ask and ponder. And they are somewhat related to why I started the company. They're somewhat related to, look, I'm also an out gay person and am very out in my life. And I get this question all the time guy, which is, do you think you've been discriminated against because you're a woman and you're gay and you're an entrepreneur and, and here's my answer. Probably, but I don't care. What I care about is participating in the world in a positive way. That's my role in the world, is be positive. Future belongs to optimist. I'm going to create things out of nothing. I'm going to create jobs for people. I'm going to get up every morning and be the best mom I can be, the best friend, the best daughter I can be. And if other people discriminate against me, then it's like, oh, that's interesting because it doesn't affect how I feel about me, but it took me a lot of years to get there. Right.

You started your company funded basically on a brick and mortar salon business?

No, it was funded the D2C business.

Direct to consumer in any manner.

The business, all of the business up till three years ago was a direct to consumer subscription model with boxes of color coming to you in at, to your doorstep.

Oh, so I, I was mistaken. I thought you started as a salon business.

No, we've gone into the salon part of the business because just a little bit about the industry, there's almost a 50, 50 split between women that color in a salon and color at home. And so the basis of our business was a D2C business that is very big. And we added the part of using the same color, our color, in our own hair color bars because we always knew that we were missing half the total addressable market.

Oh, I stand corrected. And was Dry bar like an inspiration in this?

Yeah, I mean, Drive bar was an inspiration to the notion that you could disrupt the cottage industry of salons and that you could create a situation that convenience time technology through booking and things like that could create a good sized business with four walls. So, yeah, that was the genesis. And there was never anything in the hair color category that emulated what drybar was doing in the dry, you know, blow dry category.

And would you describe what happened in March and how. Yeah, the perfect storm happened.

Yeah. So first, like, I'm so humbled that women, primarily women a Lot of men turned to us during that moment of time where they were in their houses and not doing their normal salon routines. And just to add that if anything was true in the pandemic, it's how important it was to service people. And we couldn't have done this without our extraordinary team. Wednesday at home orders began in March. We needed to close the stores we had. So we had 12 stores that were open currently. Today we have 25. So we've actually opened 13 during COVID which has been a fascinating experience. We took all of those team members and we moved them to our D2C call center because our call center has always been certified licensed colorist. And they were the same profile as that. And so we never had to fire anybody and we never had to furlough anyone. And we had massive customer demand. We were selling a box of hair color every five seconds. And our business, there were months where our business was up 12x in increase of new customers. Just as a rule of thumb, like in February, we were selling a box of color every 25 seconds and all of a sudden it was every five seconds. We make our hair color in the Lombardy region of Italy. And if you remember, northern Italy was the hardest hit region compared. I mean, now it isn't, but it was compared to, you know, next to Wuhan. And so we had to keep our hair color coming in to meet inventory needs. And the only way we did it was that we convinced the Italian government to allow us to make hand sanitizer at the same time that we were filling tubes of color on lines, 24, 7, 8 filling machines, 24, 7 filling lines of hair color. And then we had to air freight it all in. We had, when we started about 14 weeks of inventory because that's pretty standard. And we were just blowing the doors through that day after day. Like it was just. It was sort of crazy. And then where our stores stayed closed, they reopened in July. We start. We reopened our stores just with the thought process initially for the first four weeks of retail only because we were very concerned about safety. We've since opened every store in what we call level two, which we're allowing two chairs to be opened at once for application of hair color. No one gets shampooed next to each other. So there's a lot of safety protocol. Our team members are safe, everyone's masked, everyone's in gloves. And our demand on the online side has continued. It's not every five seconds, but it's the brand tipped in terms of the virality. And I think the other thing that happened is a lot of people that never would have colored their hair at home started coloring their hair at home. Seeing the product was awesome and how easy it was. And they were like, okay, why am I spending $200 every six weeks? Right? And so we've just held on to a ton of those customers. And then in the midst of all of that, we launched the men's hair color line in late June and one new product in mid July. We have been busy at Madison Reed and again, I'm very humbled by this because I would much have not preferred a pandemic, to be frank with you. We have been one of the businesses that's had a positive outcome from this. I would trade not having had this pandemic for the world versus that. I think that we had built a lot of brand recognition for many years and we had a big business before that and I think it just tipped. And if people were going to have to color their hair at home, they came to us and we've earned the right to keep them. So it has been for our team members, it has been an exhilarating and exhausting year and we are a very close knit community and our office has been closed and, and we're like anybody else struggling through how to keep that community connected in a hard period of time. We're hiring tons of people. We've never met them in person. Like, these are unprecedented. I know that word is completely overused. These are times right now where every leader is just saying, there's no playbook, there's no, like, how do I onboard somebody that one's ever met? Zoom is zoom, but it's not the same as the chemistry or the feeling of a cultural fit or the eye contact in a different way. There'll be a moment when we'll look back on this, I believe, and we'll say, geez, what were the big learnings here? But I'm seeing depletion across the board, not just in our business, but in others. Parents that have kids at home. Like, there's a lot going on for people, no matter how well your business is doing.

What do you mean by depletion?

I think that if you are a social person or a person that, you know, I'm a culture junkie and I'm somebody who believes that, yes, you have to have a great product and you have to have great technology and you have to have great service and all those things. Check, check, check. But the secret sauce of running a great company, I think is having great people that care about each other and that buy into values. And then those values are lived every day and they are the North Star for how a company operates. Those are hard things to do remotely. And so the behaviors that I would have to come into the office and you know what I call like just the Monday morning schmoozing by somebody's desk, like, how was your weekend? How are you? How are your kids? Right. That is very hard to do. We're using technology a lot to try to emulate that. And I think the combination of the depletion of not getting that kind of energy to refuel the battery, not like I'm a long hour worker, I am working more hours than I've ever worked. Because here's the thing, right? Like you have a glass, this is the way life is. And some of us are wired this way. And you fill the glass up and then all of a sudden you decide like, maybe I just want to, I want a bigger glass. And so you fill that glass up and then you got a pitcher and then you got a gallon. And the issue here is if you're not commuting, right, and you're not like having the nat, what I call the natural break of some rhythm of leaving your office, going to get lunch, everything just gets smushed together. So you're literally like working. You know, I start at like 6:30 in the morning and at 6:30 at night it's like I haven't had 10 minutes to myself because I think psychologically you feel like, oh, it's just easier to be home. Actually, we've done a lot of things. We've gone to half day Fridays in the company I instituted in the summer. It was a great relief. And I thought productivity hasn't suffered. Why would I change this now anyway? I think depletion comes on an emotional level for people. It's just, I'm sure it's like hard to not have the life that you knew. And with all due respect, yes, vaccine will happen, there will be life again. But it's not like we can bank on a date, right? Nope. And then on top of it, we've had an election that's been emotionally draining for many people and a lack of leadership. With all due respect, and those of us that are leaders sit and ponder and think. This is the time when people do need a North Star in hope and strength. This is in the time where we're going to let ourselves go off and each form another opinion about how we execute something that, you know, needs to be delivered in -84 degrees and two shots in three weeks of each other for 300 million people. Hey, let's go at it. We need, we need a plan.

I would say that Joe Biden has shown more leadership in the last week than Donald Trump in the last four years.

But, yeah, yeah, it's. It. What is astounding is this just comes back to and like you. Look, I know a good amount about you. I've done my research. You have an extraordinary background and I mean it. And I have such deep respect for the things you've done and you've invested your time and energy and a voice and, and leadership is not a theory. It's, you know, hope is not a strategy. Right. It's like blocking and tackling. And I think you, you know, it's like art. Good. You know, when it's good, when you see it, when it's bad, you're like, whoa. And it's so we need to step up.

Oh, my God.

I've had, I don't know, 50 guests so far. And you are, I would say you rank number one in the ability to sidetrack me from what I want to ask.

Sorry. Okay, sorry.

That's high praise. That's high praise.

Okay.

So I'm gonna get a little bit back on track.

Okay, sorry.

I want to know, don't apologize. How do you deal with basically overnight 10x growth? Most companies can't handle something like that. What did you do?

You know, I had hired well ahead of a curve. And what I mean by that is I have always been a believer that you could never have too many great people. And so we were getting to be a good sized company through our own growth for the first five years. And I had hired a great senior team like Rockstar Team, a team that can take this company public. And we were ready. The truth of it was, who knew this was going to happen? But we had had the, what I would consider to be past life DNA to deal, you know, never waste a good crisis. And so we were ready and we met the opportunity with, I think, optimism and positive energy and we just got at it. So now, having said that, our company guy will grow 128% this year. And now in the aftermath and we're still growing, the volume is still way up on a daily basis. But like, we've had to retool. Now my example is we went to bed on March 13th and we were probably a 6 year old with all the 6 year old behaviors, and we woke up somewhere around July 15th and we were like 11 and all that natural stuff that happens between 6 and 11, it just never happened. And so we're like, what do we do in this body?

Right.

And systems infrastructure, bringing some new people. Never had anybody that ran global supply chain. I mean, we're shipping half a million units a month, but you know, we're just like, yeah, I guess so. You know, we've put a lot of stuff in place. We've had the good fortune of being able to both afford that and have the time to do that. This fourth quarter has been all about catching our breath and building an infrastructure that can support this volume. And we have big aspirations for the company. Right. So this isn't the end. This is just earning the right to get to this harder place. Right.

This is a, as we say in the venture capital business, this is a high quality problem.

Yeah, this is a high class problem to have.

So you mentioned something that caught my interest about 10 minutes ago, which is your colorists are certified and licensed. What does it take to be a colorist?

So every state has a licensing process that is specific to the state, but you must have a cosmetology degree. So you have to go to school to become a cosmetologist. And it's usually about an 18 to 24 month program. Many people do it part time. Yeah, there's cosmetology licensing in every single state in schools. And so you have to be a licensed. Your barber, your esthetician, your massage therapist. Yeah, they're all cosmetologists and have to be licensed by the state.

Your industry has a more rigorous examination and certification process than the White House. My God.

So I won't comment on it.

Okay. I was just seeing if I could bait you into that. But okay. You also mentioned that Madison Reed is eight free. And I think that many people don't know what that means. So can you explain that?

Yeah. We've taken out eight ingredients that we think are the harshest chemicals in hair color. And they are ammonia, parabens, resorcinol, ppd, phthalates, gluten sulfates. These are all things that are in traditional hair color. And we've taken them out because it's just a little known fact. I don't expect you to know. 15% of women would tell you that they have a severe allergic reaction to hair color. And one of those reasons is a reaction to some of those ingredients. Many women I know say, oh yeah, I get my hair colored, it burns, it itches. And I'm like, well, that's not normal. And you know, but all in the name of beauty. Right. We thought it was a good idea to take those things out. And then we've put some nutrients into the hair color so people experience it as the same. Great coverage, no odor. So I don't know how much you know, but if you went and bought a box of Clairol today and you looked at the instructions, the first thing it would tell you, open a window before you start. Can't make it up. Yeah. When I started the company and I thought, this is a big idea and nobody has done this. A prestige hair color brand with better ingredients, I went and I bought 30 boxes in Walgreens of just stuff randomly, like crazy entrepreneurs do, and brought them home. And my wife is like, what are you doing? And every single instruction started with the same thing. You know, noxious fumes, open a window before you start. And I'm like, what is happening here? We just took those things out. It took us about a year to formulate the color. Started with 19 shades. Have close to 60 now. Yeah. And then the other part is, if you go to a salon, you actually have no idea what product they use, and you have no idea what ingredients are in that product. Right.

Okay.

So the next step is, how do you test and maintain Leaping Bunny stat?

We have had leaping Bunny status for the last four years, I believe took us two years to get it. We are constantly monitoring every single ingredient that we use and whether any of it is tested on any animals anywhere. And the answer is, it's not. And we will never include even a component of our ingredients that's tested on animals.

Right there. Jane Goodall will start using your product.

Okay.

Okay. I learned another interesting tidbit.

What's that?

You get tons of user generated photos every day. So how many do you get?

My guess is a day, probably three or 400 photos a day of women that primarily have used the color and want to share that with us. It's been a great advertising tool. We go back and we ask, would you like to be in our ads? And they're thrilled to be doing that. But I think what it says to us more is that they're so proud of how they look in themselves. There's something about a DIY product where you have some level of, I did this myself. And I think that's. That's the best part. Look, our business, our at home color kit gets a 65 net promoter score. That's like way high. Right. In a high beta category, as I call it. If somebody doesn't follow our Recommendation, which we have a sophisticated algorithm. After you answer these 18 questions, if we could tell you, put Bolzano Brown. This is the swatch we recommend. Somebody goes and selects something else, which it's hard for them to do, but you can do it. 65 is a very good net promoter score. But we strive, frankly, like the kind of quality and service, 100% money back guarantee. We mean it, we stick by it. So, you know, look, this is very different than, as I call it, like if. If I say if I'm Zappos and I say you a box of shoes and you open them and they don't fit, maybe you're irritated. You're like, I really love those shoes. I really wanted to wear them. Now I got to send them back. But you're, for the most part, you're like, yeah, that was a bummer. If I screw up your hair, that is not Guy in the bummer category. That is in the I would like to kill you category. So, you know, the stakes are very high for us. And so that is the reason why we are obsessive about quality.

You already mentioned Raw Photography.

Yes.

God, I wish. I hope you're familiar. There's a picture on your website where there are six women shoulder to shoulder.

Yes, sir.

Curly hair, blonde hair, red hair. Curly hair, black hair, red hair. Okay.

Yeah.

You're telling me that that photo has not been edited?

Correct.

Wow.

Those people are just in makeup. They just have makeup on. There is no airbrushing whatsoever. That photo was a photo that we did at a photo shoot a couple of years ago. One of those models is now 71 years old.

Yeah.

That'S age diversity, body type diversity, hair color diversity, ethnic diversity. Everybody is welcome. And our photography has to be inclusive of that.

Because I looked at that. I said, maybe she meant Raw Photography.

No, no, nothing.

Except on our website.

No, no, not one of those things is airbrushed. We won't do it.

Wow.

Okay, next question. Yes, Your use of digital technology is very impressive. So I want to talk about your hair color algorithm, your virtual hair color tool, your visualization, your ar, your zoom house party. Walk me through all that, because that stuff is so cool.

So coming from Guy Kawasaki, that's a. That is a. That's a big statement. So I'm just going to let myself take that in and let my cto, when he listens to this, do a little chest pounding. Okay, now we'll move on. The way to think about Madison Reed is that we are a product company. We make our own product. But we are a technology enabled business. And what I mean by that is our thesis was that the average woman is living with her cell phone. That's the way that she does her life. And so that we needed to create a technology environment that was going to do three things. One was get her color right. And that is the number one vital few of the company. We have five vital few of the company. Number one is always get our color right. And that is why the 18 question quiz, which is the algorithm that you talked about, is incredibly sophisticated. What it does just kind of geek out for a second. It is emulating what a stylist would be looking for if they were thinking about what is your natural hair color when I'm looking at you? And then what do you want as your desired result? And then the questions that they would be asking themselves to get you to that desired result, if that makes sense. And that algorithm has about 17 million hair profiles in it now. So it's gotten pretty damn smart. You know, it's got a continuous feedback loop. And so we are pretty clear that when we're saying use one of these three shades that we're going to be within shooting distance of something that's going to work for you. Now it's been very good. We are constantly working on the logic. It's not like you build it and then as you know, technology does not get built and then it's just evergreen. You are constantly updating it, looking at it. And so let me give you a real life example. When we started, there were nine questions, then there were 12 questions, then there were 14 questions, and now there's 18 questions. There's probably two more that are going to get added. Right. Because the, the calculus in our business is your starting color, which by the way is the hardest thing for a woman to answer. If she's been coloring her hair for 30 years, she actually doesn't really know what her natural color is. Right. And so there's. So this is where the photo recognition gets to be important because the photo recognition is looking at her roots rather than her self diagnosing her roots, if that makes any sense. Right. And so, and there's this one factor which is how gray you are actually matters in your desired result. Because gray hair is the hardest to cover. And so you need to actually, we actually need to know how gray you are so that we can give you a desired. We have a separate line of shades that are for anybody that's over 50% gray. Right. And so there's this. Yes, you're Raising your hand, there's this. So what I'm saying is this is not. People think hair color is art. It is science. It is science. You are opening the root follicle of someone's hair at the root and you are depositing color and then you are closing the root follicle without damaging a strand of hair. And so in order to think, just think about this from science. If you have outgrowth, right? The only thing that changes in your hair when you have hair color is the new hair growing in from the scalp, right? If that hair is, let's say there's two inches of outgrowth, right? But the rest of your hair is another color because it's got color on it. What we have to do is get all the color to look the same. And that seems. Oh, that's simple. Not so much because I have to color what's at the 2 inches and I have to make it look like what's in the rest of your head. This algorithm is very sophisticated. It's very hard. There is personalization that goes with it. It gives us all this information about a client which then frankly helps us create a system for them which is like, you should use this hair color, this gloss, this shampoo and conditioner, this styling product, because color treated hair can't just use regular products off the shelf. So having said all of that, that's the algorithm of the ColorAdvisor, the color quiz. We added this AR tool about a year ago. It's been a game changer, which is the tool that is allowing somebody to take a selfie and then see their natural color on one side of the photo and then all of our shades as they swipe right. Now why is that important? That is less important for our diagnosis, but more important for the client to see what they would look like in that color. And that is critical to build the efficacy that allows someone to believe, okay, that's going to be all right with me. That looks good against my skin tone, or it looks good against my eyes, or that's the color that I used to have that I want to emulate again. Or better yet, that's the color that matches the other side of my head. Having said that, we've needed to do that, we've done it well. I will tell you that people that use that virtual try on tool have a 30% increase in conversion.

Wow.

Astounding number. Right? And we are. So that's kind of an important factor. And then the last piece of technology that we've used is we have a Chatbot that basically does selfie photo recognition. So if you took a picture of the top of your hair, actually the photo would analyze all the questions that are emulating the 18 questions in the color quiz. It's the same algorithm, but it's basically saying the photos doing all the answers to the questions, and then if that color recognition is off the photo, the chatbot then asks you a series of questions that prompt you to answer some things that maybe the photo didn't pick up. Now, it took us 17 months to train the photo, right? To train the color recognition. Right. Like in the beginning, you just need tons of photos to be able to train it. The long and short of it is, on the surface, we seem like a nice company that is an E Commerce thing. And underneath it, we're doing, remember, like, Guy, if you go buy Clairol, there are eight shades on a shelf, right? That's it. There's no technology, no advice, nothing. You come to us and we're asking you these 18 questions. We have an algorithm that's giving you a match. We then you have customer service and certified license colors. If you want to about talk, talk to them. You can fake, you can FaceTime them, you can actually text them a photo and they'll analyze it for you. So we've rolled all this technology for the sheer fact that the quality matters, the convenience matters, and then on top of all of that, you can hit the text button and get your new box delivered on any date you want and all that other junk.

Amy, until 10 minutes ago, yeah, I was so impressed with Warby Parker, where you could see what you look like with different glasses. But now I realize what truly, truly can be done. Oh, my God. And now walk me through this Zoom house party.

Yes, it's been.

I love that idea.

Yeah. Every look. I suspect most founders will tell you that out of nowhere, there's this. What I could like a gift, like a eureka moment. And it's usually when somebody else says something. So I have a friend during the pandemic who used to go to a salon who's texting me like, you're kidding. Okay, I'm going to take the dive. I need to buy something. I look terrible on Zoom. And she says, but I don't know, between these three shades, can you get me to FaceTime with one of your colorists? And the lights went on for me, and I'm like, oh, my God. How about if we ran education sessions that helped women actually learn how to color their hair? Because it's not just the color that I choose. But the application process is scary for many people. So what would happen if we had a live model who colored their hair in front of you? Zoom would allow us to have hundreds of people, and then we could have a live chat going on that was a combination of questions and then people asking verbal questions and then two other people, experts. And we, within two weeks, ran the first one. I cannot make it up. We had 700 people, and we were like, holy moly. And now we're running them weekly. They have hundreds of people in each one. These people end up guy. It starts on the hour and you watch it. And 59 and a half minutes later, they're still on. And women are writing notes. Some women color their hair with us. So the issue is, what it showed us was the deep emotional connection to getting this right and learning how to do it. We've also are starting a YouTube channel where all of this content is on there. We are now going. You'll see in December, for the first time, you will be able to literally click and be able to get a live consultation face to face with one of our colorists. And you will, by the beginning of next year, be able to get a education session sort of one on one. And the best way I describe it, and it's not because everybody, everyone's the peloton of something, right? Like, that's the new wave. But, you know, in some ways, you have to understand that most women's relationship is with their colorist and the trust. And if we can emulate that from a virtual environment, wow, that's a big idea.

And is all of this free?

That's all free.

Wouldn't people pay for that?

Yes, but we have to get it right and make it be extraordinary before we do that. And we've had tons of salon goers be like, amy, I'll pay you $100. Just get this right, get the boxes coming to me on time, and I'm good to go. And my response to that is, sure, that sounds great, but I am a quality stickler. And what I won't do is throw something together that isn't world class to give people the right consultation with the right people. I have a peloton tread and a peloton bike. If I got on the peloton today and the person that was teaching me didn't look like they know what they were doing or they weren't fit, I'd be like, whoa, this is weird, right? And you know, I have to get a whole. My colorists that I have that are in the call center are awesome. They're great. But we now need to rise up and have a concierge level which is very different. And so we're going through hiring and training and a new platform. So lots of fun things to come. But we're not a company in this category that's just going to throw things out before we get them right for people.

So that brings me to the next question which is as impressive as your tech is to me, I am equally impressed with the diversity of your business models. So can you tell me all the ways you make money?

Yes. Our direct to consumer business is a subscription based business. So that's clear. The average customer is ordering every six weeks. They have long term high LTV to CAC ratio. The gross margins in the product part of the business are greater than 80%. 8. 0. For the product side, 0%. Yeah. And on a gross margin basis, 60%. So we have high margins in the business.

You have better margin than Apple.

We're not in hardware, so that part's really good. So that's the D2C stuff. And you know that that's based on retention, continuity, increasing lifetime value, higher order average value, increasing gross margins. That's the name of that game. Then we have a very only one wholesale relationship which is with Ulta. Ulta publicly traded company. We are in all Ulta stores, so we're in 12, 18 stores. We're the only permanent hair color in ulta and in Ulta.com that is a very good business for us. We have less shades in there just based on 14 linear feet and we have 58 or 59 shades online. And I think at Ulta we have 30. But it is a profitable high margin business, believe it or not, not as high as the rest of our business. But because our product margins are so high, we can be in a wholesale business. It's great marketing. It's actually accretive. We make money on it and it gets efficacy. Like when you're in 1200 stores of a big retailer and people walk in and you have a beautiful 14 linear feet kiosk, everyone's like, wow, they're for real. Right? So that's great. And then our hair color bars, as I said, we have 25 of them now open, 28 by the end of the year. They are four walls. They are not particularly expensive to build out. The highest part of the cost is the plumbing. Right. Because you need sinks and water and electricity. They look beautiful, but they're not overly expensive to build out. And the Average order value there is 3x what it is. People will pay more than they will for the actual box. And that is a four wall model that's predicated on good real estate deals. We're getting real estate 30% less than we ever got it in this market. So we are gobbling up great real estate deals. An efficient labor model like four walls is all about labor efficiency, real estate efficiency. And we have built all that technology as well. I didn't get into that, but we have built our own algorithm for appointment stacking and our own algorithm for inventory management for the colorist to have a SLA to get somebody in and out of there in 75 minutes. And we have built our own system that effectively doesn't segregate retail. That happens in the store. Information from E Commerce. So, for instance, if your wife went into a color bar, we know what we put on her hair. And when she comes back to madisonreid.com, she's met with, hello, whatever your wife's name is, thank you for visiting the Corta Madera color bar. We put Bolzano brown on your hair. Would you like to purchase it? Click right. And so, and then in sms you told us you color every six weeks. We have these three appointments open six weeks from now. So we've built a technology stack ourselves around that. So those are the three parts of the business. It is really an omnichannel business. You mentioned Warby Parker. That's probably the closest analog that we have. And look, we're excited about where we're going. I will tell you that. I think this is going to surprise a lot of people how big this is, how much value we're creating. And, you know, it's a sleepy category that nobody cared about but us.

Do you need a chief evangelist?

Absolutely. We need a spokesperson for our men's product guy.

Here I am. I got gray hair.

I know you're gonna. We sent it to you. I got. I'm betting on next time I see you, you're a little less gray.

I was gonna ask you about that.

Okay.

Two more questions and then.

Yeah, okay.

Yeah, I bet a lot of people would like to know.

Yeah.

Your advice on raising a daughter.

It's a great question. My advice is to reinforce to her that she can be anything she wants to be and to create the possibilities that she has all the same opportunities and the same struggles that exist in life as anybody else. And I would say that some of what I'm going to say is gender and some of what I'm going to say is just we have a kid that's been raised to realize like she has privilege, that her life is in that she has to give back and that our job is to make her a happy, productive part of society and that she needs to find her calling, she needs to earn her own way in life. That we as parents are going to give her all of that structure. But at some point, like not everything's going to get handed to you. So working. She worked at Madison Reed a couple of different times and we appropriately started her in stacking boxes and packing boxes and packing more, more boxes and counting more inventory because I, you know, I grew up in a working class family. I believe deeply in you earn things in life, that's how you get better. And then the last thing I'll say is like failure is your best friend. And we've tried to teach her that.

I bet people would also be interested to know your advice for raising a son, although you haven't done it, but how would you like a son raised?

I think it's the same in terms of the value structure. I think it's a one little change. And I have lots of friends that have sons and they are raising good men and good men are important in the world. And I think there's a lot of them. We need a lot more of them. And I think that appreciating their role and the power structure in the world in doing their part, part to change some of that is an important factor.

Now. Advice for women entrepreneurs listening to you.

Don'T let what everybody tells you about how hard it is be your story. I have a deep and enduring belief that if you believe in what you're doing and you find your genius in life, you will find ways to. There's a lots of capital in different places. I don't subscribe that every single company should raise venture money. I think there's lots of companies in the world that won't give venture returns. That does not mean they're not great businesses. And I think that if you walk into situations doubting yourself, then the outcome will not always go in your direction. If you walk into situations having a sense of who you are and your competency and standing in that space, if you have a great business idea, people will fund it and they'll get behind you and then get good mentors around you. I've had the good fortune of great people in my life who paid it forward with me and I do the same because I believe that's how the world gets better.

Now Getting very personal.

Yeah.

You can obviously see what my hair looks like.

I do. I think it looks, it's very handsome, by the way. I'm being serious. It's very striking.

Thank you. And, and I was all set to do this and I said to my wife, I got this, let's do this. I want to make this be great angle for the podcast. And she said, but I like your hair the way it is. What would happen if I did it? How would this change?

Okay, so here's the deal. So the men's product is a 10 minute process shampoo. Okay. It comes out of your hair after you shampoo it. So it is not a permanent hair color. It's what's called a demi permanent hair color. So that means that when you wash it after you do it, it will come out and eventually if you never did it again, your hair would look just like it looks now and if you did it more frequently. So what it is, is a gray blending product. So this is not going to take all your gray out. What it's going to do in your case is it's going to actually blend the darker part of your hair with the whiter part of your hair so that it looks like you have a equal amount of gray and white. But it is not going to, you're not going to have black hair. You're going to have a blended process. And the more you use it, meaning if you said to me, well, I want it to be darker, then I would say, okay, every week you should do it. But if you said, I like it just a little bit less white, then you would do it once. And most guys that buy the product do it about every three weeks.

Yeah, because I was afraid I'd come out looking like Wayne Newton or something.

No, you wouldn't be like Wayne Newton. I, I promise you, I'd have to get you in aloha shirt and tiny bubbles or something like that. Was that guy. I can't remember.

Donald?

No.

Wayne Newton is Donkeshe.

Oh, Donkeshe. Yeah. Somehow that I just wasn't emblazed in my musical memory.

I, I don't blame you.

But I, what I can tell you is it won't be radical. Like the whole point of this great blending is that it's not going to be like, you remember that commercial like years ago, hey, guy lost a little weight, been on vacation. You know that after he washed his hair with some crap for Just for Men or something like that. That's not this.

Okay, I will have one more. I'm going to put my hair down here.

It looks good.

I took a picture like that. I am going to have one more reassuring discussion with my wife.

Okay.

I say go for it. You never know.

Absolutely. And if you don't like it, then you'll wash your hair three times or four times and it will be out. Right?

Okay. Life is good. Life is good. All right. Thank you so much. This was just remarkable. It was delightful.

Yeah.

One more thing. So I. Obviously, my podcast is called Remarkable People, so I am sponsored by the Remarkable Tablet Company. So if you've ever had a fantasy of replacing all your paper tablets with something that's digital and feels like a pencil, I'm about to fulfill your fantasy, so you're gonna get one of.

I would love that because I have so much goddamn paper hanging around, you can't believe it and I'm tired of it. I would love it. Thank you very much. Hey, Guy. I just want to say it is. I really appreciate you taking an interest in our story, and you are iconic and somebody that I respect very, very much for your contributions in creating an industry. I really mean that, and I think it's been an honor to spend this time with you. It's been super fun.

I'm Guy Kawasaki, and this is Remarkable People. Amy Ehrett is truly a remarkable CEO. And now you know how sophisticated the hair dye business is. Thank you to Peg Fitzpatrick, who has great hair, and Jeff C. Who has a great beard. They make this podcast remarkable. Until next time, wash your hands, wear a mask, maintain a good social distance, and get vaccinated if you can. Mahalo and aloha. This episode of Remarkable People is brought.

To you by Remarkable, the paper tablet company.

This is Remarkable People.