The year is 2013 and Ju Rhyu, a Korean American, is part of an expat program working for Samsung’s credit card division in South Korea. Samsung employees in Korea are required to be at their desk by 8am each morning. The company obsessively tracks employee key card usage and will demerit employees for being even a minute late. Each morning Samsung has ‘Samsung TV’ which all employees are required to watch. Staff roam the aisles with clipboards to ensure that employees are watching the program. Demerits are given to employees who check their phone or email during the program. Ju describes this experience as like working for North Korea.
Her path to Samsung was a winding one. She graduated from Brown into the 2001 recession and from Columbia business school into the 2008 recession. Along the way she worked for a web analytics startup, a non-profit private school, Kraft foods, and American Express. Her father is an entrepreneur, so the idea is in the back of her head to start a business, but she hasn’t found an idea worth pursuing.
It’s in Korea, while working for Samsung, that Ju finds her idea. The stress and unhappiness from working at Samsung causes Ju to break out. She goes to a drug store to look for solutions and finds hydrocolloid acne patches. She realizes the Koreans she has seen walking around with stickers on their face are not making a fashion statement but treating acne blemishes. She goes home and tries the patches and overnight her breakout improves. This plants the idea in Ju’s head that something like this could work for the US market.
She goes back to the drug store and buys every variety of acne patch that she can. In Korea, brands are required to list the manufacturer of their product on the back of the products box. She cold emails and calls all of the manufacturers of acne patches and pitches them on the idea of her selling the patches in the US. Most don't respond. Of the dozens she reaches out to, only 2-3 respond. By chance, one of her emails lands in the inbox of the person who is responsible for international sales and Ju’s pitch to sell the patches in America resonates.
What she envisioned was an acne care 2.0 brand that brought innovation and newness to the category. She wanted to be the new Proactive or Clearasil and bring innovation and gentle solutions to US consumers. Hydrocolloid patches existed in the US but were sold in the band aid aisle for bed sores. The same technology that sucked puss out of bed sores also worked on pimples. Her idea was to take the patch out of the band aid aisle and brand it as a beauty product and put it in the acne care section.
Ju orders samples from the supplier who responded positively to her pitch and iterates on the product with them. She comes up with a brand name. Hires a designer. Develops the packaging and is almost ready to launch. Then she gets cold feet. She starts to run the numbers and realizes it's going to be a large investment to get the business off the ground. Between the minimum order quantity (MOQ) with the supplier and website development costs, she thinks the new venture will be prohibitively expensive to self-fund.
For a lot of entrepreneurs, this would be the end of the story. But 3 years later, in late 2016, Ju picks the project up again. Between 2013 and 2016 the K-beauty (Korean beauty) trend started to take off in the US. US consumers started to realize that Korean beauty companies were ahead of the curve when it came to skincare. They liked the gentle approach and advanced ingredients used by K-beauty companies and started to buy K-beauty products en masse in the US.
The development took a year. She got samples. Refined the samples. Landed on the name Hero. Incorporated the business. Got her EIN number. Got the legal docs in place. Brought on co-founders Andy and Dwight Lee. And twelve months later, in September of 2017, she was ready to launch.
The playbook for DTC companies at the time like Away, Glossier, and Allbirds was to raise a bunch of VC money and sell direct-to-consumer through their own website. Ju and her co founders eschewed that playbook for a very different one.
Instead, they decide to launch first on Amazon. They want to self fund the new business, and make sure it isn’t a money pit, and they realize Amazon is the best way to test their concept. They knew that people were looking for the product already on Amazon, and it would be the easiest way to test if their product had traction. Their go-to-market strategy centered on Amazon was fast, cheap, and simple.
Ju used the tool Jungle Scout to look at competitors' Amazon listings and help her do competitor research. With Jungle Scout, she could go onto Amazon and look at competitors’ SKUs and get an estimate for search volumes and revenues of competitors’ products. The existing competition at the time was seeing success, but they were Korean brands that weren’t doing much in the way of marketing and education for the US consumer. She thought that she could do 1,000x better than the existing competitors.
With Amazon, Ju wouldn’t need to build her own website or find a 3PL. Amazon would take care of all of that for her. Amazon already had hundreds of millions of customers on their site, and all Ju would need to do was put up her product listing page and see if the product resonated. The Amazon product listing page was essentially a one page website for Hero. This would help solve the massive distribution problem that most new DTC companies face.
Ju signs up for an Amazon seller account, creates the product page, adds her product images and writes the copy. She focuses on the copy to ensure the product headings and descriptions are SEO optimized for Amazon.
The original plan was to price The Mighty Patch at $9.99, however, in order to qualify for Amazon Prime at the time, the product had to be priced at $12.99. Ju went with the higher price to qualify for Prime. That price stuck (it remains $12.99 as of this writing) and had huge benefits on gross margin.
She orders 10,000 units from her supplier (the MOQ) and launches with one hero SKU (pun intended), the Mighty Patch, on Amazon in September of 2017. Within 3 months, Ju has sold through her initial 10,000 units, and she knows she is on to something.
Ju and the team had to focus on being profitable from day one. They couldn't take big salaries, or spend too much on design, or afford fancy PR agencies.
Ju personally emails 50 media people a day about the launch of Hero. The first big story they land is in Into The Gloss (Glossier’s media arm and predecessor) and sales spike. The team is still solely focused on Amazon. All influencer efforts and media outreach point customers to their Amazon page. Media and influencers like this because of the affiliate commissions they can earn through their Amazon links.
Soon after the launch, Ju started pitching to retailers in November and December of 2017. The pitch was for a new acne care product that was selling really well on Amazon. Anthropology was the first retailer to bite on the pitch and offered an 80 store test in January of 2018. Within a week the Anthropology buyer emailed to say the sell-through was really strong and that they wanted to launch Hero nationally to all 200 of their stores. With the success of Amazon and Anthropology, Ju knew that they were onto something and the momentum was strong.
2018 was the year of launching in specialty retail. Free People, Urban Outfitters, Riley Rose (filed for bankruptcy), Neiman Marcus, and Goop all agreed to carry the product and sales were strong in each of the retailers. The company used Amazon to generate cash to fund their retail growth. Amazon paid out every 15 days whereas specialty retail typically had 30 day terms (when they eventually launched in Target terms were net 65 😬).
Almost a year after launching on Amazon, the company launched their own DTC website in June of 2018 during Acne Awareness month. During the month of June, instead of having products for sale, they gave away free samples with messaging around Acne Awareness month. The press loved this, and a bunch of media outlets covered the launch. This drove tons of traffic to the website and put samples in customers' hands. This also helped build the email list and get the Hero name out there. The website officially launched with products for sale in July of 2018.
As soon as Ju launched the website, she started writing blogs for SEO. She wrote an article titled ‘What is hydrocolloid and what does it do?’, and it became one of top search results when you typed in hydrocolloid acne patches. She hired blog writers to pump out 3-5 articles a week for SEO. She invested time in SEO and blog writing and reaped the benefits of free search engine traffic.
In late 2021, Ju decides to sell the business. She has always had the internal goal of getting sales beyond $100M, and the company has achieved that. Along the way the company raised $16.2M over 3 funding rounds, and Ju wants to find a way to get liquidity for herself and her investors.
The acne patch market was also becoming more competitive. When Ju launched the business, Hero was the only US based acne patch company. In 2021, there was lots of competition. Johnson & Johnson, Biore, and Nuetragena all launched competing products. Hero still owned 80% of the acne patch market, but Ju knew the competition was only going to get more intense.
The company hired the investment bank Raymond James to run the sale process. The bankers downloaded the story of the business from Ju, so they could best present the business. Ju met with potential acquirers in private invite-only meetings. This gave key potential acquirers an early look at the company. The bankers created a book of materials and hosted fireside chats with potential acquirers. Those interested put in initial offers, and the list was narrowed down to a handful of serious bidders. The acquirers did their due diligence work, and the list of potential acquirers was further whittled down. Ju and team negotiated on terms and ended up signing an offer from Church and Dwight, the CPG company with brands including Arm & Hammer, Nair, and Trojan.
Five years after founding Hero, on September 6th, 2022, Ju sold it for $630M.
Start Small to Grow Big 🚀
Ju’s advice for new entrepreneurs is to start small. If you want to launch something, create a prototype and sell it. Then create 10 more units and sell those. With entrepreneurship, it’s easy to get intimidated. Break up the big goal of starting a business into smaller steps. This will get you started and build momentum. Sell 10 units? Great, go buy 100 and sell those. Tons of people have great ideas but don't take action. Turn your ideas into action. The most important thing is to start and starting small is the easiest way to start. The beauty of a DTC company is that it can be started with very little up front investment. If the product is resonating, then sales will come. If it isn’t, you can always pivot.
Amazon > Retail > DTC 💡
The classic DTC playbook is to launch your website and then use that traction to launch into physical retail and Amazon. Ju reversed that playbook at Hero. By starting on Amazon, she was able to quickly and cheaply test if there was a market for her product. With millions of people already using Amazon, it's a great place to test an initial market hypothesis. People are already on Amazon looking for products to buy. By launching on Amazon, you don’t have to build a website or find a 3PL. On Amazon, all you have to do is create a seller account, upload some photos, write the copy, and ship your product to Amazon’s warehouses for them to fulfill. Ju was able to parlay the initial success she saw on Amazon into her pitch to retailers. Once the brand had been established on Amazon and in physical retail, then the launch of the website was much more successful. It would have been more expensive and slower to prove out the initial demand for her product on her own website.
Also, the economics of the product would have made launching any other way near impossible. Like a lot of other companies, Hero launched with a single SKU the Mighty Patch. At the time their AOV was around $15. With customer acquisition costs this model never would have worked by launching their own website and running paid marketing. If you have low AOVs, don’t be afraid to launch on Amazon first before building out your product range and increasing AOVs.
Channel focus 🔍
For the first year of the business, Amazon was the only place that you could buy Hero products online. Hero benefited a lot from this focus. Other brands who have multiple channels are afraid to go all in on Amazon for fear of cannibalizing their .com business. The channel focus on Amazon allowed Ju and team to put all of their marketing efforts towards Amazon. Their paid budget went towards Amazon ads. Their website was a splash page with a CTA that linked to their Amazon page. Press and influencer mentions went to Amazon. Their emails sent people to Amazon. All of this effort had a snowballing positive impact. One of the key ranking factors on Amazon is product velocity and number of reviews. By going all in on Amazon, they were able to dominate the top search results for acne patches on Amazon. To this day, Amazon is Hero’s highest ROI marketing channel.
Don't Let Founder Become the Brand 🙅♀️
Ju made a conscious choice not to become the face of the brand. She would pitch the brand and her story, but the brand very much stood on its own. When the founder is the brand, it increases the risk to the brand.
Part of this idea stemmed from a conversation Ju had with the founder of Sun Bum. The Sun Bum founder created a mascot for the brand, a cartoon ape Sonny. They said that Sonny was great because he could never get a DUI or say the wrong thing on a podcast. When founders become the face of the brand, the performance of the brand will be tied to the founder for better or for worse.
By not having the founder be so closely tied to the brand, Ju also created a brand that was more attractive to potential acquirers. Potential acquirers know that one day the founder will be less involved and will worry that sales will drop when that happens. Founders who are the brand get on a treadmill of constant social posts to promote the brand. The playbook lesson here is that there is a fine line between promoting the brand and telling your story and becoming the brand. You want the brand to be able to live without you.
Strategic Product Expansion ↔️
When Ju launched Hero’s website, they used a couple of agencies to run their Facebook ads because they didn't have the capability internally. Unfortunately, none of the agencies worked out. At the time, they only had a couple of SKUs, and the AOV was only $15. This AOV just couldn’t support paid acquisition on Facebook. The economics would never pencil out. Customer acquisition costs were simply too high relative to the low AOV.
Instead of giving up, Ju strategically launched more products to increase AOV. They launched products to treat the entire acne lifecycle. Their hero product, the Mighty Patch, treated the initial pimple, and they launched products for after the pimple went away to treat redness and hyperpigmentation. They found that when they launched new products, it expanded their customer reach. 70% of customers buying new products were net new customers. Product launches were a great way to acquire new customers. Customers who didn't suffer from acne found the brand for other skin issues like hyperpigmentation. Launching new products also increased their AOV which eventually allowed them to market profitably on Facebook and other paid channels.
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