This is the complete interview I had recently with the highly engaging Jackie Applebaum, CEO of Privé Products. It is a long interview but there’s lots of good stuff here. For a condensed look, see my article on FastCompany.com.
Jackie Applebaum: This is a new product [Concept Vert rejuvenating pure shampoo] that we launched last year, (maybe August or September.) It is a new concept in the delivery system. This 6.7 ounce bottle is the equivalent of 32 ounces of shampoo. It is not concentrated, it is a system called nanotechnology. For my hair, I would use about this much (approximately the size of a quarter.) You will see when this starts to foam and expand.
Drew: Is it good for your skin too?
Jackie: Yes it is, men should shave with conditioner, because it conditions the skin. Take a look how that feels.
Drew: That feels good.
Jackie: It feels very, very rich. This is an unbelievable shampoo, but never before has this been done in a can.
Drew: If I were to put this on, I’d be worried that it would stay on too long and it would be hard to wash off
Jackie: This comes off just like normal shampoo. The delivery system is how it is delivered in the can. We were so successful when we launch this, when we shipped it to Taiwan, they sold out. They had a shipment of over 500 units. It was blowing out the door. It is the most successful launch that we have ever had on a product. Immediate, it just moved out the door. So we are now shipping this to everyone that we show it to, Italy, France, England, Taiwan. That was the first of two products we launched.
Drew: What is it called?
Jackie: Concept Vert. It means Concept Green. The interesting thing about this product is that the products are paraben and sulfate-free, which means they are perfect for color treatment, and as you know, that is a huge percent of the market. This is the second product we launch, and we are thrilled. It has also received great acclaim. This is the equivalent of 8 ounces of mousse, but no aerosol. Every mousse you have today has aerosol but take a look at this. Right before your eyes it becomes a mousse and it doesn’t take any aerosol. So this is the second product in the Vert concept line, and the third is in company to these. This product is also blowing out the door. I was in Boston last night, for the opening of a salon customer of ours. On Tuesday we get a call to fly all this stuff in. They sold out of everything. To fly in aerosol and house-ment products is not inexpensive. We flew in approximately $5,000 worth of products. That is a lot for a single salon, but they love you for that.
So the thing that we are doing in terms of marketing is focusing on really interesting, new products. And the assignment I have given the lab is that I do not want “me too” new products. We now have cutting- edge products with a cutting-edge delivery system that the market is responding to. That is the path we have to continue to take. We have been working on product development along the lines to add in to our concept, and I’m going to be testing those products in the next few weeks. This is totally interesting marketing. You know the first time they came out with hairspray, it was a new product and a new category. When they came out with mousse, mousse was a new category. This is a new category in shampoo, a totally new category.
Drew: Will this mousse come is a larger size? It doesn’t feel very “salon-sized.”
Jackie: This is the equivalent of an 8-ounce bottle. What could be better? Talk about the environment. Talk about being Green. No can, no aerosol, and we are selling this at $24-$25 and they are blowing out the door. The Salon people love this because they love how it performs, and has an environmentally aware edge. We had salons, when we first launched it, we had sold out all our stock, and they were taking back orders from their customers. These were orders in advance. It was great- we loved it. It has been very successful. So to add to that, we came up some other very interesting promotional ideas, including converting our salons into exclusive salons, meaning they carried other lines before, but now only carry our products. We had special outings for them in LA and even have over for dinner at my house (I’m a great cook.)
Drew: What percentages of your salons are exclusive?
Jackie: We just started the program and we have about 20 now, and by the end of the year maybe 50. We just got a new one today. These are the salons that carried one of our big competitors like Bumble and Aveda. We have converted Bumble salons to our product. We are excited about that.
The second program we have done is very exciting. It is hot of the press. Called “cash for clunkers”, the promotion started last week. We had a salon called Trillium, in Indiana, and their customers brought in all their old bad products and got 20% off new products. They sold over $4,000 [worth of products]. We have another salon running this program starting next week. Senator Harry Reid heard about it and was so impressed that he wrote a letter to the salon.
Drew: Let’s go back to the exclusive program and explain to me what the offer is.
Jackie: They get double points meaning every salon that purchases products if they do at least $1,000 a month. They get points and which they can use for their stylist to use at the salon.
Drew: What is your business model? Are any of your products sold to the consumer or are they only used in the salon?
Jackie: They are only used in the salon. We have a very strong anti-diversion program. The fact that we control that is because we sell directly to the salon. We don’t sell through distributors. Our customer is the salon, and our consumer is the salon’s customer, so hopefully all these salons will sell directly to the consumer. We have a program that if a customer cannot find a product because they don’t have a salon in a 30 minute radius of their zip code. They do have the ability to go online and order it online. We ship them and we are starting to pay salons a commission on that. We make it difficult for them because we really want they to go to the salon, and drive that business to the salon. We don’t want to lose a sale all together.
Drew: In non-exclusive salons, how is it that customers come to learn about Privé?
Jackie: Our line is specifically of French heritage, but our real place in the market is our red-carpet line. (Laurent, my partner is a hairdresser who does celebrities.) It is a line that addresses the needs of celebrities, when they need a specific hairstyle to do a specific movie. We do a lot of product for a lot of movies and TV shows. Then the line developed and became more streamlined and more a professional line based on those needs. Obviously you cannot do a line of hair products based solely on a celebrity need–you need to make it consumer friendly. We tested every single product, not only on the celebrities. Tested on celebrities with a specific hairstyle or hair type and developed it. Laurent would say So-and-So has this hair and I need a product that can do this. Our Shining Weightless Amplifier, which is our number 1 product, was developed for a celebrity with very fine hair, Uma Thurman. We wanted a product that would hold and be very light and won’t hang down.
As the line expanded, Laurent said we should be an efficient line, not carrying a lot of product. There are a lot of lines out there that carry 100 SKUs–we have about 28 of which many of those are duplicate sizes. We have some other products that aren’t hair care products. By and large, it is an efficient, streamlined line. What we do is add products. Let’s see what this replaces, because if this is a better product. A car that you run 30 years, may still run but the version today is better, the air conditioning is better, and automatic airbags, and seat belts. The same thing happens in the hair care industr. We delete a product when we have developed a better product. We just deleted our styling wax because we feel clay products have filled that need.
Drew: Who is your biggest competitor?
Jackie: The high-end brands , which are Colourist, Bumble, and ourselves. Colourist is an L’Oreal brand. We started out very well with salons that carry both because that line is very strong on treatment, but not as strong as styling products. They aren’t because of the work that L’Oreal does. We are very strong on styling product because of the work that Laurent does–that is where his heritage comes from. Well Bumble–the new market position that they have taken. Now you can find it at Sephora, CVS, Bloomingdales and other locations. It is clear that they are starting to segue more to the consumer out of the salon, or they are trying to bridge both. We have heard from a lot of other salons, that they are unhappy about that. It is hard on the customer. They are doing a program now where if you buy the product from Bloomingdales they give $20 off a haircut at any Bumble salons. When someone asked how many times can a customer do that…Well as much as they want. So now the Salon has to give $20 off no matter who pays, but they bought the product at Bloomingdales. So now they are not selling the retail product at the Salons, and I think that is a problem. We are getting a lot of salons converting.
Drew: How big can you get without tempting to go mass?
Jackie: Bumble doesn’t consider themselves “mass,” they consider themselves “class” because of the stores they are selling to, except CVS. But if we are able to grow our business and sell directly to the salon and not the distributors, we will not have an issue. We will not see the product sold at Target and CVS because it’s not going out the back door. True to our vision is what we are doing. So we think we can maintain that, how big can we get? I would like us to 2,200 salons. If we had 2,500 salons, I would be very happy. We would have a very nice business. I have a daughter who would love to take over my position. My partner has a son and the people who run our factory have two sons. We are still a family business.
Drew: How did you get started?
Jackie: About 11 years ago, I was sitting in Laurent’s chair and he knew I had worked on the Guess hair care business and as a consultant to P&G for about 8 years. He said “I want to start a line,” and I said “okay let’s do it.” So we started with 10 SKUs and there was a show called ICE on Long Beach. It is a show for Salons but a lot of stylists go to that show and do a lot of retail business. We launched the line there and we were very successful. Laurent was a big hairstylist because he did celebrities that everyone knew. So in about 3-4 months I called a friend who was a distributor and he got us a bunch of salons. 10-11 months later there is a knock on our door and it is Graham Webb, and he said we would like to buy us and I started to laugh because I’m a former stockbroker. I said “I have nothing to sell you, we have only been in business for 10 months.” Turns out they had been the loser in a bid of Bumble. They were still interested in the business and were out seeking hairstylist who was working still working behind the chair. They loved Laurent and we said “we can’t sell it to you but we can license it. “ So we did a licensing deal. They are very involved in how the line was put together and they do the packaging. In 9 to 10 months, we have a line that comes out we think it is gorgeous. So we meet with them every month and we think it is exciting and we are getting more business and we are getting some nice royalty checks. We were involved in all the steps for marketing and shows.
So 3 or 4 years later there is a knock on Graham Webb’s door and it’s Wella [the shampoo people] and they have decided to buy, and Graham says “that’s enough money” so he decides to sell.
So we wait to see what happens, and whether or not they have the ability to really embrace this or not. Big companies have a problem really evaluating small businesses that don’t fit into their normal business model. Even though we have a lot of interest in pushing the business and developing and selling it in Asia and Europe, they didn’t really want to figure out reformulation and packaging. They couldn’t be bothered. But the Wella checks are still coming in so [we wait]. Before we had meetings every month, now we had phone calls every two months. Well 2 years come rolling around, and now P&G has come around Wella’s door and they want to buy now. Wella says “that is enough money” and they sell. Well P&G might embrace us because they do sell their professional hair products directly not through distributors. They might see this as taking the small little brand and taking it to the next level. But it was too small– anything under a $100 million is a small brand. Starting in October or November of 2006, mind you we started the business in 1999 and so we have all these sales in about 7 years. So we hear they are starting to run out of product and they say they are reformulating. I say they can’t be reformulating, the lab would have told us, and they say they aren’t. So I talked to my colleague and ask what’s the story. They are going to close the brand at the end of the year. I say “I don’t think you can close it, because you don’t own the brand it is only a license deal.” He says “Let me get back to you…”
We had gentleman’s agreement, and we wanted to have a nice and orderly way so that our salons don’t feel the rug is being pull out from under them. We called every single salon we had which I think was 500 at the time. We took the brand back January 1 2007. So I have to call the vendors and beg for cans because we were out of cans. At the time Coke or Pepsi was introducing a new can. So every can vendor in the country was chocker block full. I had to get on the phone.
But we got the cans and by May and June we were up and running with a full line. Then we started working with a new line of products and product development. In 2008, we launched about 3 new products and 2009 about the same and 2010 maybe three or four. Plus I have decided we are going to launch international. So that meant every single product had to have all new packaging. But you can’t throw away the old when you are a small company you have to wait until you run out. We had to make sure all the formulas were compliant. We spent all of 2009 doing that.
In 2010 we started internationally and now I’m proud to say we are shipping to Taiwan, Australia, England, France, Italy, Saudi Arabia. We are about embark on Russia, Guatemala, Costa Rica, Malaysia, and Singapore just told us yes. This really started to get hot when we started to convert them, selling samples.
Drew: How does a small company extend to all those countries?
Jackie: Distributors, but you have to check that everything is legitimate and everything. So I decided I’m going to hire someone who know the ropes. We hired a consultant. So he knows all these people on a personal bases and he knows which distributors are good, which ones don’t divert. When I was in Europe I visited our distributors in France, England and Italy and saw their operations. It is interesting; it is not technically sophisticated on the backend and don’t have ordering systems online. They aren’t there yet. All of our salons order everything online. Also our system — when I took over I hired a software company. And in November when the guys came I said I wanted a very robust backend business because in the past the order went as follows– a salon would call a customer service person and a customer service person would come and take an order, and the order went to the warehouse. The warehouse gave it to someone who picked it. The picking person would come back and fax it to order department. That system took maybe two or three days. Now all our salons order online and the order come in immediately.
Drew: How many Salons do you have now?
Jackie: 350 salons now. What happen when we took this firm from P&G, we had to fire 150 salons, that were not right for us. So we went from 500.
Drew: How did you go through that process?
Jackie: By the order, we can see that they aren’t right for us. We went through systematically and dropped salons
Drew: How many people are in your sales force?
13, maybe 14. That’s what I talk about when selling direct to the salon. When they walk into a salon, that person represents us. With distributors, they represent about 7 brands, with us, they only represent Privé. It is a slower business model for growing the business but it is a more intimate relationship with the Salon. At the end of the day, I think that is the way that relationships stay strong.
Drew: What else do you do with the Salons apart from provide a great product?
We have a concierge program where we have them appoint someone in the salon, who comes to our training program. It runs for a whole year for each of the people, and that person is intimately involved in product rep almost as if they were a sales person. They learn how to use the product, how to sell it, how to market it, and merchandise it. We give them the tools like “cash for clunkers.” We have about 7 of the salons that are doing this now, and we have one starting Monday. Now we have these things that we can convey via our training program but also directly to the salons because of the Internet. Every article that comes out–we have a lot of press. Immediately all our sales people get a copy, Women’s Wear Daily, Vogue, Harper’s Bazaar, et. Our sales folk get those stories immediately. We don’t wait.
Drew: How do the salons get their promo materials?
Jackie: Everything is available online. I’m very efficient I don’t believe in using any more trees than we have to. In the old days they used to send posters. So if you had 1500 salons, you would have 1500 poster and not only the poster but also the cost of the rolls and the labor to put it together. How many salons do you think used those poster? Maybe 10% and 15%. Why? -Not the right size. Now we have an online tools section, with 20+ images and they can pick the image, download it and put it on a DVD. They can take it to Kinko’s and print out any size they want.
Drew: How much time do you spend talking to Salons about products & marketing?
Jackie: Our exclusive salons are involved in that process, and even that process is an online process. They get the product sent to them and it tells them to go online and do the evaluation. They pick 1-10. If they really want to see something, we have a marketing meeting on the phone.
Drew: What are you doing in Social Media?
Jackie: We have other people who are overseeing that. We are doing Twitter and Facebook.
Drew: What lessons can small businesses learn from you?
Jackie: Have your house in order. One of the critical issues is trying to expand before you have enough of a base underneath your feet. It is probably one of the biggest problems that small companies have. Initially when we started the fact that I had a back-end business allowed us not to have five extra people in staff. For those 5 extra people that is a lot of cash flow going out. You need to make sure your sales are completely ramped up to support a change [in staff count]. So the efficiency of running your business tight before [you expand], is very important. We always spend our money on having good PR and good products and the rest will fall into place.
You have to make sure you have a sound base to get your products out the door efficiently. Specifically in the hair care industry, I don’t know whether it works in the fashion industry, the biggest issue is having enough product. If you have enough components, floor, inventory, that is the biggest problem to solve it, in being about to produce the products quickly. So in my labs we have stock on 25 000 of those cans inventory all the time. So if I need to turn this order around, because I got an order from a distributor. If Taiwan wants 5,000 I can turn that out.
Drew: Do you make it on order or do you have inventory?
Jackie: Inventory, I have 25,000 cans empty and 25,000 filled.
The cans are on 25/ week delivery now. If you don’t have those in stock and you wait until you have 5,000 to refill, you will not get the cans in time. For example, when you get the new distributors in Europe, maybe the first time they don’t want to commit to the line. We just had this happen in France, the guy commits and he is an important distributor, but he doesn’t order a huge order. They were out of the order in two weeks. They are now flying there to be displayed on Monday. It is a huge order going by air. Do you know how expensive that is? But he has to have it for his customers, because he didn’t order enough to begin with.
Drew: It is rare in business for things to run smoothly? Can you give us a story when things go wrong?
Jackie: Oh it always goes wrong. We were producing a product that was going to be on QVC and when the air date came the truck got high-jacked in Chicago and they found it in Texas. Tell that to the buyer that has time booked for you.
AH the boat strike, certain things are made in China, and you can’t fill it if you don’t have the component. That’s why I said you have to make sure you have floor inventory.
Another story, one day a woman comes into the Salon and it is a day before the Academy Awards. She wants to get her hair done, an older woman, and someone did her hair and someone noticed after she left, that she didn’t pay. So it is after 5 pm and Laurent gets a phone. The person says he is Johnny Depp, no really. And he says you did my mother’s hair today, and she liked it so much I would like you to do my hair for the academy awards tomorrow. He goes to the house the next day and sees the mother. And he gives Laurent $500 for his mother hair. Isn’t that a good story?
Drew: Do you do all your manufacturing here?
Jackie: Yes- California, right outside of LA.
Drew: What is Laurent’s role in the brand?
Jackie: He is a working Hairdresser, who is behind the chair. He is the vision for the product. His wife is the vision for how everything is in the creative- color, packaging. But in terms of the product is going to be used, sold–that’s Laurent. He uses it in the field before he takes it to be reproduced. He has probably tested it for three, four weeks. When this came out [Concept Vert], he said, “what is it supposed to do?’ Because it was so different. When he understood the benefits, he knew how it worked–he saw the difference. It will then take about 4-5 months to get the fragrance and color right.
Drew: Is that fast or slow?
Jackie: We can develop products faster because we are a smaller firm.
Drew: What is your annual growth?
Jackie: I would to say that we would be up by 30-35% this year. In 2009 we went up. In 2009 we were happy too because we spent a lot of money with repackaging, because we had to redo everything for international.
Drew: Did you have concerns about going international?
Jackie: Actually it was a nice feeling with our salons in the USA. [They responded positively], “Oh gosh Privé is expanding.” Secondly it added great efficiencies in our cost of goods. Because we were ordering more, our costs go down. So for the salons, it allows us to give more to marketing and advertising. Because in every program there has to be a financial plan, even with our “cash for clunkers.” We need to support that discount for their next order so that money has to come from somewhere.
When we went online, people were pessimistic, “The salon’s aren’t used to it.” I said we should offer a free gallon of shampoo for salons that order online per week. We started spreading the word. Also regarding the points you get if you order so many bottles over $1000 [per month]. You can only do that if you order online. There is no other way, because the efficiency of doing that has cut down our staffing [requirements].
Drew: Is the sales force involved?
Jackie: No the customers do it. The salon’s do it. For new products they get it for free to try it. That is another cost factor but we feel better if the salon actually gets it, uses it and tests it. All we have to do is get the sample in their hands, they use it, love it and buy it. That’s it.
If the product is good and has authenticity, it will sell. If it delivers what it is supposed to deliver. We also do a webinar and invite all the salons to come online. The webinar shows how to use it, and allows them to ask questions. Plus we use videos on our website to show how to use it. And every new customer gets a DVD with those videos.
Drew: How many people log on to a webinar?
Jackie: Well we had about 90 on the last one. We have to have it on a Monday when most salons are closed. And some people are somewhere else because that is their day off. Also the DVD is sent out to everyone. Now that same educational DVD, we have done in French, Italian, German and Spanish. So when we get our distributors, we have those ready.
Drew: I noticed on your website you support a lot of charities…
Jackie: I’m a breast cancer survivor of 20 years. So that is something we support. I lost my sister to cancer so I’m particularity involved in that. I think it gets diluted when added to marketing. One in every two women in this country is going to get breast cancer. In October that is when all the marketing comes out for Breast Cancer Awareness Month. If you are a small business I think you get lost. What we do support is what the salons do internally as well. Many salons do a fundraiser for breast cancer and we support those with extra product as well.
Drew: How involved is the consumer in the choice of shampoo?
Jackie: When you go to the doctor, you listen to what the doctor tells you because you seek his advice. This same is true with the hairdresser–the hairdresser has the confidence and the trust of the consumer sitting in the chair. It is one of the few services in which it consists of an hour and a minimum of half–hour of undivided attention. That person recommends what he believes is appropriate for you and your hair. If you want to replicate this hairstyle at home these are the types of products you need. That referral it is stronger then anything else.
Drew: What is the secret to your success?
Jackie: Integrity, I think we are a great brand with integrity with our products and staff. I think our salons value our integrity. We are only as good as our word. We have great integrity in our products, and our vision and staff. We spend the dollars to the greatest products.