In a recent episode of the D2C podcast, Ju Rhyu, CEO and founder of Hero Cosmetics, the brand that introduced and popularised the pimple patches, shared how she built her e-commerce business and sold it for $630 million dollars. What's even more impressive is that she bootstrapped it from scratch in just 5 years.
Ju Rhyu provided insightful perspectives on her unconventional approach to the direct-to-consumer landscape. Instead of pursuing traditional routes requiring massive fundraising and the creation of a dedicated e-commerce site, she began by selling on Amazon and working her way up to build Hero as a popular e-commerce and retail brand
During this interview, you'll discover how her life has transformed since those hundreds of millions hit her bank account and so many more insights into running a D2C (Direct to Consumer) e-commerce business.
Q: I'm so glad to have you here! You co-founded Hero Cosmetics in 2017 but didn't follow what was considered at that time to be the D2C (Direct-to-Consumer) Playbook. Can you start us off by talking a little bit about your choices to start the business and how you differed from what was happening in the D2C space?
So, we started in 2017, and back then, it was like the era of Glossier, Allbirds, and many other big D2C (Direct-to-Consumer) brands. The prevailing playbook was to raise a significant amount of money and create your own D2C website using platforms like Shopify. The business model primarily revolved around selling directly to consumers through your website.
However, we chose a different path by deciding to bootstrap our business. It was crucial for me that the business we build didn't become a black hole or a money pit. I wanted it to be a bootstrapped profitable venture right from the start. Instead of solely relying on our own website, we took an unconventional route and started selling on Amazon.
There were several reasons for this decision. Firstly, I already knew that people were actively searching for our product on Amazon, making it a prime channel to tap into. Secondly, adopting Amazon as our go-to-market strategy was incredibly fast, cost-effective, and straightforward. It didn't demand a substantial investment of money or personnel. Additionally, selling on Amazon granted us unparalleled access to hundreds of millions of potential consumers due to the already established marketplace they offered.
For all these reasons, we made the deliberate choice to begin our journey on Amazon.
Q: What data did you need to know that there was market demand on Amazon? Was it just based on other products available there?
There are some other similar products. I mean, there were a few that were somewhat known. But, we also use tools like Jungle Scout, which we had used, and you can use those too. They have cool plugins where you add the plugin into your Google browser, and then you go onto Amazon and visit any product page. It'll show you the data for that SKU, like approximate searches and approximate revenue.
So, all of that was really helpful in terms of getting a lay of the land and knowing what the competition out there was already doing. I knew we could do it a thousand times better, and so, yeah, there was a little bit of data that we armed ourselves with.
Q: And then when it comes to your category, you said there were maybe a few similar products but you knew could evolve the category. But there's also an aspect of category creation with your product, right? It's how you've defined your category that has led to it being viewed as its own sort of category creator.
Yeah I mean we are a category creator because the acne patch didn't really exist in the U.S. until we created it. There were a few foreign products by Korean brands that were sold in the U.S., but they weren't very well-known. Yeah, I mean, a lot of them did sell on Amazon, but they were never good at educating or marketing the product category. That's where we stepped in, and that's what we continue to do. We are now around 80% of the category, being the number one acne patch brand. I think our success inspired many other brands, and now the category has become really competitive.
We see a lot of 'me too' products from big brands that have their own acne patch product. However, what sets us apart is that we essentially created a new category of acne treatment. Before, people were using white creams or pink creams, but we've shown that our Hydrocolloid acne patch is a much better alternative. It's less irritating, doesn't leave your skin red, and is really effective at getting rid of the gunk. So, yeah, there was a lot of marketing and education that we invested in to make this happen.
Q: So, you launched on Amazon, and probably you saw some pretty immediate returns. You noticed that the market is here, and people responded well to the product. What did you guys absolutely nail during your Amazon launch, and what would you have done differently if you were to launch now?
We only had one channel, and I believe that really worked to our advantage. Many other brands launched on Amazon later and struggled to sacrifice other channels, like direct-to-consumer (D2C), for Amazon. However, since Amazon was our sole channel for a considerable period, around 12 months, we channeled all our marketing efforts towards succeeding on Amazon. For instance, when we collaborated with influencers, we directed their audience to Amazon. Our website was essentially a splash page with a clear call-to-action (CTA) leading to Amazon.
Everything was geared towards driving traffic and sales on Amazon, including building up an email list, press coverage, and affiliate revenue. We noticed that press releases performed exceptionally well when linked to Amazon due to high conversion rates and strong affiliate revenue. This approach significantly contributed to our success.
Additionally, we followed best practices by optimizing our images, SEO, keywords, and employing sponsored ads to enhance our product strategy. However, the key factor that truly propelled us to victory was the fact that Amazon was our only sales channel. This exclusivity allowed us to optimize our performance extensively and maintain a laser focus on winning on the platform.
Q: So, Amazon was a big success and had a lot of traction. Once you were scaling on Amazon, what was your next move with the brand?
So, immediately, we went into retail. This is why I always say that we are a digitally native brand, but we did D2C in a reversed way. We started on Amazon, then ventured into retail, and finally launched our official D2C website in July 2018. We initially launched on Amazon and, at the same time, I began pitching retailers. The first one that said yes to us was Anthropologie. We launched with them in January 2018, conducting an 80-store test. Within a week, the performance was really strong, so they wanted to expand nationally.
Additionally, the press coverage we received resulted in a lot of inbound requests from other retailers. I remember we had an article in 'Into the Gloss,' which was the content arm of Glossier at the time. After the article, I started receiving inbound emails from all sorts of retailers asking for our samples. Retail specialty stores, such as Neiman Marcus, and Urban Outfitters, played a significant role in our 2018 strategy, giving us street cred and validation.
Eventually, we launched D2C, providing a bit of a flavor of how we did things totally in reverse, but surprisingly, it still ended up working for us.
Q: So, when you moved to D2C, what did you have? It feels like you knew exactly what you were doing because you nailed the product and the brand so well. Your brand story is great, and you had a lot of success on Amazon. You also had a really great hit with retail. Now that you've transitioned to D2C, what was your launch process like? How did you approach D2C marketing?
We launched around a holiday known as Acne Awareness Month in June. When we discovered that June is designated as Acne Awareness Month, we decided to offer free samples on our website. This strategy received extensive press coverage and turned out to be brilliant. We set up our Shopify site, and though I can't recall if it was shoppable or not, the primary idea was to distribute free samples because we were confident that once people tried our product, they would love it.
By associating ourselves with this themed month dedicated to acne awareness, our message focused on normalizing acne, and we aimed to help by providing free samples of our Mighty Patch products throughout the month. The promotion received overwhelming press coverage, and many outlets picked it up. Consequently, we experienced a significant increase in website traffic and redemption of the free samples. The promotion lasted the entire month, and it allowed us to gain exposure, build our email list, and put our product in the hands of potential customers.
After that, we officially launched our Shopify website in July. All in all, the campaign was a resounding success, and it played a crucial role in establishing our brand and generating positive momentum for our business.
I have to say, media for us was always a huge strategy. In the early days, when an article went out and linked to our page on Amazon, I saw a significant bump in sales. So, we quickly doubled down on press because it was a big way for us to start selling pretty quickly.
Q: So you were laying the groundwork for D2C (Direct-to-Consumer) with all this great stuff. When the rubber meets the road, was it Facebook Ads that you guys launched first? How did that go?
In terms of continuing to acquire new consumers, yeah, I mean, we tried to find an agency, but we didn't really have anybody who knew how to run the ads. So, we worked with a few agencies that didn't work out. But, to be fair, I don't think our business was set up to acquire consumers or users profitably because we only had like two or three SKUs (Stock Keeping Units), and our Average Order Value (AOV) was really low. At that time, the AOV was around $15. So, you can imagine with Customer Acquisition Cost (CAC) and all, it was really hard to make the economics work. Despite the challenges, we still kept trying, and eventually, we brought that role in-house, so we could have someone dedicated to it 100% of the time and also manage other things. Over time, as we started launching more SKUs, the AOV went up, and the economics started working a lot better.
We did a lot with Meta (presumably referring to Facebook or a related platform) back then, and we also worked with influencers. In 2019, we began posting and collaborating with TikTok influencers, well before it became popular with everyone. I remember when we launched at Target, we ran a split campaign between Instagram and TikTok, and surprisingly, the TikTok campaign performed way better than the Instagram one. The TikTok influencers back then were relatively cheap. For instance, we could pay someone with a million followers around a hundred dollars for a post or two. However, I don't think you can get those prices anymore. Nevertheless, we definitely saw positive results and decided to double down on TikTok pretty early on.
Q: What about Google? Are you guys actively involved in owning and expanding the brand on Google?
Yeah, well, I remember one of the first things I did was start to write blogs for SEO. So, one of the initial articles I wrote was about hydrocolloids and their functions. For a long time, whenever you searched for 'Hydrocolloid,' my article would appear as one of the top results on Google. I'm not sure if it still does, as I haven't checked recently. We invested a lot of time in SEO and blog writing. We hired blog writers to produce around three to five articles per week.
So, the SEO strategy played a crucial role in our marketing efforts. Additionally, we also used traditional methods like SEM (Search Engine Marketing) and Google Shopping.
Q: It seems like one of the choices you made, or at least that's what I think I read in one of your tweets, is not to put yourself directly in front of the brand. Many founders I talk with love sharing their founder stories, which are often critical for the brand's identity. They put themselves out there as the face of the brand, creating content like TikToks and such. It appears that you made a conscious decision not to do that. I noticed lately that you're stepping out a bit more and becoming a thought leader, especially through your Twitter presence. However, in the past, you didn't prioritize putting yourself first and foremost in front of the brand. Was that a deliberate choice?
So, I have a personal philosophy on this. I do think the founder's story is important because it gives the brand more soul and history. I think people can relate to it. For me, when I visit a new brand's site that I'm not familiar with, one of the first things I do is go to the "About Us" page. I want to know how it was created and who came up with the idea. It's really interesting to me.
However, my personal philosophy is that when you are the brand, it actually increases the risk for the products and the brand you are marketing. Especially in the age we're in, I think we've seen the risk and downsides of it.
So, if a brand is really tied to one person, it becomes a question of whether you should become the brand. Some cases have shown that when the founder becomes the brand, it increases the risk. Also, when I see brands so intertwined with one person, I question the longevity of that brand. What happens if that person goes away for some reason? Will the business suffer?
Therefore, I prefer to help share the story and tell the brand's narrative, but I don't want to be the brand myself.
Q: So, I've been doing some research here, and over the years, you took in a total of $16.2 million across three funding rounds. On the other hand, my business has been bootstrapped and profitable right from the start, or at least very close to it. Could you please elaborate on your decision-making process regarding seeking funding? What were the specific reasons that led you to consider taking funds, and what were your motivations for wanting to secure investment?
We were profitable right from the very beginning. Since year one, we didn't need the money, but we wanted to raise funds for strategic partners. We knew we would eventually exit this company, but none of us had prior experience in selling companies. Therefore, we wanted to make sure we were well-prepared and doing everything correctly.
We sought people who could serve as our business coaches, guiding us through strategic decisions. Our investors proved to be invaluable during the exit process. They knew which bankers to approach, which lawyers to work with, and how to craft a compelling story. They even handled economic aspects that I personally didn't fully understand, and they negotiated and secured better economic terms for everyone involved. So, having what I would call "business coaches" really helped us optimize everything for a highly successful outcome.
Q: First of all, congratulations on your successful exit and achieving such a smashing result! I would love to hear more about the process and what it was like for you to exit the business.
Yeah, it's a lot of work. It was really stressful and required a lot of effort. Exiting a company and selling it is not easy. So, I mean, it really starts with deciding that you want to go out. For us, we were often asked by other founders how we knew it was the right time to go, and for us, we always had the $100 million dollar revenue mark as an internal milestone. Once we hit $100 million dollars, we knew it was time to explore options. We reached that milestone and then began having conversations.
Not just that, we quickly saw our category becoming highly competitive. Earlier, we talked about how we were the category creator, but now Johnson & Johnson has launched two patches under Band-Aid, and Neutrogena and Biore also have their patches. Competitors were coming after us, so we wanted to dig in our heels and defend ourselves. We believed it would be better with bigger resources, so that was another factor.
The process starts with hiring a banker. We chose the Raymond James Financial Firm. There's a lot of prep work involved, as you need to provide them with a comprehensive overview of your company so they can present it best to potential buyers. This involves various market research studies to validate our story. Next, we start meeting with potential acquirers in private, invite-only meetings before signing the NDA. Then we go out with our management presentation and materials.
From there, we have Fireside Chats and receive initial offers based on the materials they've seen and a few conversations. If there are many interested parties, it gets narrowed down through further due diligence work. Eventually, we end up with a few potential buyers and proceed with negotiations until we find the right fit. The whole process took us about a year. And, yes, when it's all done, you celebrate with champagne—lots of it!
Q: I don't know if you can talk about it right now, but are you still leading the company? Can you share whether you have an exit plan or if you're planning to stay? Also, what's it like staying at a company that you have exited but are still leading?
Yeah, I am sticking around, so, you know, Hero's only been around for 5 years, so I think it's really important for everybody that the founders stay for continuity. There's a lot of institutional knowledge that we have that we need to share. Also, for the team, because, you know, I think it's important that we've hired so many great people over the years that we want all of them to stay. So, you know, it's not a really great signal, I think, when the three founders leave immediately. So we want everyone to stay, so we're staying, we're just figuring it out.
Like, I think every acquisition is different, there's no set playbook, so right now we're in a period of getting to know each other in a deeper way. They're getting to know us and getting up to speed on all our plans and our capabilities. So I think it's going to be like that for a good bit.
Q: What are some ways your life has changed since the big win? Have you made any lifestyle changes or decisions as a result of your success?
It's funny because most guys ask me this, like, "Oh, how did it feel when all that money went into your account?" I mean, of course, it's a moment to celebrate, and sometimes I laugh when I look at my bank account, but I tell people that my life hasn't changed much. I still wear the same clothes, live in the same apartment, and have the same lifestyle. I think people assume that once the money comes in, everything changes overnight, but it's not really like that. Money shouldn't change you, and I hope it doesn't change me either.
So, yeah, post-exit, nothing's really different. I have more time on my hands since I'm not so tied up in the M&A transaction. I'm starting to think about how I want to give back, how I want to use my time now that I have more of it, and how I can contribute to the founder and entrepreneur community. These are things I'm still pondering, and I don't have all the answers yet, but they're on my mind.
Q: What do you see in your future? I mean, do you like the rush of building a company to 100 million? Just that sheer growth must have been quite addictive in a way. Where do you see your future? Do you see yourself continuing to write and grow this project as big as it can be, because it still has so much potential to become even bigger? Do you have that hunger to start from zero again?
There's still so much opportunity. We have a lot of retail partners in countries that we're not in yet, and we're not international either. We still have a ton of product ideas, so yeah, I still get excited about the wins at Hero because there's still a lot of growth ahead of us. But at the same time, sometimes I do get that itch of, you know, what's going to be my next idea? I do like the earlier stages where, um, I think sometimes the wins are sweeter because you're up against so many other challenges.
I was having lunch with someone, and he was like, 'But do you really want to, you know, get back to zero?' And I was like, 'Yeah, it's kind of a good question because do I really want to go to the post office every single day mailing out influencer samples? Do I want to email 50 PR people every single day?' But I mean, I'm sure next time, maybe I myself won't be doing those things because I think, from a resource standpoint, I'll have the means to have a bigger team.
I don't know. Maybe one day I'll get back on the saddle and start something different. I don't have an idea yet, but it's still appealing.
Q: What about angel investing? I feel like that is something where you could excel, given your unique story. It could become the new playbook in some ways. I'm sure there are lots of people who would be interested in your expertise, even aside from your funds.
I do angel investing, but I don't think I'll become a full-fledged investor managing my own fund. Many founders create their funds and move to the investing side, but I feel I might not have the necessary expertise for that. Nevertheless, I thoroughly enjoy being an angel investor as it allows me to support other founders and entrepreneurs out there. One aspect I want to focus on is developing a clear investment thesis or framework to evaluate opportunities better.
Currently, a lot of opportunities come across my desk, and I need a more effective filter to select the most interesting ones or to back underrepresented founders, for instance.
Therefore, I aim to work on building a more refined and tighter framework for my investment decisions.
Conclusion
In conclusion, the interview with Ju Rhyu on the D2C Podcast provided valuable insights into her journey with Hero Cosmetics, starting from zero to selling the business for $630 million. We extend our heartfelt gratitude to Ju and the entire podcast team for sharing this enlightening conversation.
Throughout the interview, we learned more about Ju's personality and passion for her work. You can follow her on Twitter, with the handle @JuRhyu, where she now shares her post-exit experience. For those interested in learning more about Hero Cosmetics, you can make a quick visit to their website, HeroCosmetics.com, which offers a deeper understanding of their products and mission.
