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- [00:00]
Sarah Lynch
With the Venture X Business Card from Capital One, you earn unlimited double miles on every purchase and with no preset spending limit, your purchasing power adapts to meet your business needs. Capital One what's in your wallet? Find out more@capital1.com Venture X business terms and conditions apply. I'm Sarah lynch and you are listening to your Next Move audio edition produced by Inc. And Capital One Business. Today's episode comes from the youe Next Move vault and is a conversation between Tom Foster, Editor at Large at Inc. And the co founder and co CEO of Harry's Inc. Jeff Rader. He's also the co founder of Warby Parker. Their conversation goes deep on topics like brand building, e commerce, bouncing back after setbacks and billion dollar valuations. Here is Tom's conversation with Jeff Rader. Enjoy.
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Tom Foster
Jeff, welcome. Thanks for joining us.
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Sarah Lynch
Thanks for having me. Great to be with you.
- [01:01]
Tom Foster
You bet. Jumping right in Both Warby Parker and Harry's, the two companies you founded, were among the first and have certainly been among the most successful of a pretty big wave of direct to consumer companies that really cross virtually every product category you can think of over the past decade or so. I'm curious. One thing I notice about Harry's and about Warby Parker is that they both started in industries that were really dominated by one or two very large incumbents. That's certainly not the case in a lot of other categories in which D2C companies have risen. What are sort of the dynamics in your experience that have been really important for finding success with that kind of a launch?
- [01:42]
Sarah Lynch
So the way I would think about a lot of the companies that have launched is that they're really launching consumer brands and that direct to consumer launching those brands on your own website and then having people come to the website and getting to interaction with the brands is a really wonderful way to launch brands. You get to learn about your customer, engage with them directly. You stop becoming a monolithic brand in the world by a company and a group of people who are actually willing to help you and when your customers call out your CX team, for example. And so I think there have been amazing brands that have been launched almost in every decade over the last 50 or 100 years. And there are amazing brands that have been launched in the last decade will be launched the next decade. I think the tools by which you might launch a brand, the way you can engage and learn from your customers and how you do that in direct to consumer, are different. And I think starting brands that way for me at least, has been a really wonderful experience, get to know our customer, learn from them and then try to create better and better things for them. I think as it relates to sort of the conditions under which you might be able to launch a brand that gets traction. For me it comes down to sort of having, for me philosophical come down to having a personal pain point, you know, an unmet consumer need with, with me as the consumer where I felt like I would want something better. And so, you know, I think for Warby Parker, you know, I, you see I wear glasses. You know, at the time I was a student and I didn't want to spend $500 for a new pair of glasses. And I felt like there was an opportunity to make bold and well designed glasses that you know, would say something about me that I'd be proud to wear every day, but to do it for last. And then also obviously trying to have, you know, positive impact not only on me, but on the community broadly. At Harry's it was similar. You know, my co founder Andy had an experience where he went into a drugstore and he waited in line for, to you know, someone to unlock the razor case and paid 25 for razor blade and some shaving cream. And he didn't feel great about that experience and um, didn't the brands didn't resonate with him. And so he called me and I completely resonated with what had happened to him and said, you know, there is an unmet need here that we should solve for ourselves and if we can solve ourselves, we can solve for a lot of people. And so I think that that not just in consumer but I think across the board is probably the thing that matters most. Then you think about the ride sharing businesses. Someone was probably sitting, you know, standing on the corner of a street in the rain trying to hail a taxi. At some point being like, this is not a great experience. If I could just click a button on my phone and have a car come pick me up, that would be way better. And so, boom. You had some of the most successful tech enabled startups happen because they were solving something that was unmet. And so I think of that as the conditions now I think in our industries one of the reasons why there were significant unmet needs was because there were only a couple of large incumbents and they were in some ways I think focused on maintaining market share and building a very profitable business and maybe not as focused on innovating on behalf of the consumer. And so therefore there was sort of a wide open space for us to go do something that would be better for us and better for people everywhere. That could be a condition that sort of enables brands to launch successfully. But there also just may be things that even a hundred competitors or a hundred people in the industry aren't thinking about where you can differentially meet a need and, you know, create a big and exciting brand and company and do things that are good for people.
- [04:58]
Tom Foster
You mentioned that direct to consumer companies, broadly defined, have been happening every decade for a very long time. The wave most recently over the past decade has been powered by the existence of the Internet. A really different way to try to reach people at scale quickly. I'm curious, as that first sort of took hold, say a decade ago, what has changed in the conditions out there between then and now that make it either easier or harder to launch and grow a direct to consumer company on the Internet?
- [05:36]
Sarah Lynch
I think that's a great question. I think that the thing that probably has changed most, for better and worse, is that there's more of more direct to consumer companies getting launched. And so in some ways that means that consumer behavior has shifted so that they want to buy more things online, which is great. You know, when we build, we're building Warby Parker 10 years ago There was a huge question of would people buy glasses online and how would that work? And that was just like something that a lot of people said that never going to happen. And now I think there's broad based acceptance that people are comfortable buying lots of different products online and learning about brands online. And so that's a good thing. I think. I think on the flip side, if there are a lot of companies launching all the time, like I think you have to be clearer and bolder in who you are and how you're different in order to cut through. And you know, the media landscape has changed a lot too. You know, there are now individuals with larger platforms than entire media companies. Whereas before, you know, Facebook was a very early thing when we were starting Warby Parker and no individuals had platforms that were like that. And so that's changed a lot too. And so how do you build influence with the right people who should authentically talk about your brand in interesting ways. And so I think that those are probably some of the major shifts. I think the thing for me that has been a constant and it's kind of been fun. So, you know, at Harry's we launched Harry seven years ago. We launched Flamingo two years ago. We helped some great founders to build a brand focused on cats called cat person with high quality, high protein food and other Sort of treats and toys for cats to try to create healthier and better experiences for cats and make it better to be a cat person in the world. Um, we had a bunch of people on our team. We're super excited about that. You know, they launched that brand six months ago. Spending time with them on it. We're learning so much what cat food do different types of cats like, and how do we sort of serve that up. Knowing what type of cat you are to the right parent and what's the right way to sort of get to, you know, sort of follow up with cat parents about their cats and what information do they want that's helpful from an education perspective and what's not? And you just learn so much from these communities in a way that is so impactful. I remember at Warby Parker, early on, I was doing customer service, and an older gentleman called us, and he was trying to measure his pupillary distance with a ruler. And we're like, there's gotta be a better way to figure this out. And so we started to create guidelines for on our site and then, you know, partner with opticians and build our own optical labs. Eventually, you know, stores. Eventually within our stores to be able to do things like that. And so you just get these incredible insights from consumers and conservative better. And I think that's the constant for me that is so powerful about dtc.
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Tom Foster
The distinction you're making, so that I'm clear, is that you can have more of that conversation when you launch direct to consumer on the Internet than you could in any other way, any situation.
- [08:25]
Sarah Lynch
That's right. Yeah. Yeah. So, but Harry's, for example, we knew. So when we launched at Harry's, like, over 60% of our customers loved our razor blade. Said, I like your products. I want to come back. They're great, and they would retain. I said, I think the number was 80% said they loved them and wanted to come back, and 60% did. And then for the 20% who said, hey, like, I want something more from you guys, Love your brand. Want something more from you guys, we knew very quickly what the issues were. People wanted a precision trimmer on the back of their razor blade, or they wanted a grippier handle, or they wanted an audible click between the handle and the blade. Like, we had all these insights, and we went to our German factory, who we'd even bought at that point. You know, we bought a German factory. We went and we said, okay, here's a chart. Here are all the specific opportunities we have to fix to improve the Product. Let's go, here's number one, what's the relevant to number one. And they had never had seen data like that. And then now seven years later we've addressed the vast majority of those things. Our products are performing better in consumers minds because we knew what they wanted and we could then drive it back to create those fixes. And so the ability to get that information quickly and then I think also the je ne sais quoi, the conversations you have with consumers about how and why they feel that way is just so helpful to make their experience better.
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Tom Foster
I want to drill down just a second there because if I 10 years ago or seven years ago, before Harry's existed, if I owned a razor company and it was not a direct to consumer razor company, presumably I would be holding market research sessions. I'd be bringing people into a mirrored room and asking them questions and I'd be sending out surveys and I would have information about the fact that people want an audible click when they click the blade to the handle. How is the feedback you get this way different? Why is it different?
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Sarah Lynch
I have a sample of 1,000 people and I know just of those 1,000 people, how many people want notable click as opposed to having to put people in a mirrored room and ask them all these questions which creates, as you know, all kinds of distortions and how they're going to answer those questions. We have real life examples are helping real life people fix those problems. And then we're building a company where everyone who wants audible click, we create the audible click and then we send them all an email and we say you asked, we delivered. Thank you for being on this journey with us. We really appreciate it and we hope to continue. What else do you want? How else can we improve your experience? And so I think it's, it's those sets of things that, that probably differentiate it. So I think we get there faster, with more precision, clearer on priority. We had 2 million customer service conversations at Harry's. For me that is such an incredible thing to have been able to do with people. And now for 2 million people in the world, maybe we've had multiple competitions with some people so I don't know, call it a million. They don't. Now don't only think of us as this brand, but as a group of people who are there to help them. You know the number one reason people reach out to us, we call customer love to telling us we're great, which we love. But I actually really appreciate the more nuanced feedback we get, which I Love you. But here are three things that would love for you to approve. It's like, okay, great, let's go make that happen and let's understand that better. And if we improve it, can we send you the product to try out and see if we made that happen? Like, I think it's that set of things that is different. And of course you can get all these learnings. I think it's about how fast, with how much accuracy against the specific customer that you're targeting in a real life setting that is just different. And it's really motivating then to go to the whole team and say, okay, now we gotta go improve these things. Cause we're hearing it loud and clear for our customer. And there's hopefully we're doing as good a job as we can, but there's always room to grow and get better. And that's, I think, what keeps us motivated every day.
- [11:41]
Tom Foster
Yeah, yeah. So among the two, I guess there are several. But the primary arguments for the power of building brands direct to consumer. One is what you're talking about, this sort of direct customer relationship. And the other has often been, hey, we're able to better bring value because we're cutting out a middleman. We're not, you know, you're not having to pay for brick and mortar. You're not having to pay for, you know, retail markups. Has that changed? I mean, you know, we've seen some of the financials of these companies at this point and realize that some of them are spending a lot of money on customer acquisition. And it just looks like there's a different middleman, that Facebook and Google are a different middleman. Is that the case? Has that changed in the past decade?
- [12:22]
Sarah Lynch
Yeah, I think it's more expensive certainly to reach people online than it was in the past. And so I think that is a fair overall assessment. I think on the cut out the middleman sort of thing, I think that vertical integration at different parts of the supply chain can be helpful in terms of being able to deliver people better value. So if you can ship directly to customer, you know, at Harry's, we make our own razor blades. And so we don't have to pay a manufacturer to go do that, for example, or reformulate a lot of our own shaving creams. And so we don't, you know, pay their own formulations, then we. I think that if you think about the E commerce sort of landscape and ecosystem, there are costs in getting products to people that are important. I understand. You know, shipping costs are real and Meaningful. And for most products we sell, we offer people free shipping. So we pay those pick pack costs and credit card processing and there's a bunch of stuff that's actually costly in order to get people product. And I guess the way that we thought about it at Harry's is when we sell things through stores, we don't have any of those costs. And so we're taking those costs. And now we're not paying to ship the products to people, we're paying to ship them one time to a Walmart or a Target. And then Target and Walmart are sort of our stores where we can then sell those products. And so I'm not sure that that is like, it depends on the product and the category. But I think that you can still deliver people really significant value through stores, and I think you can deliver people significant value online. And I'm not sure that that cut out the middleman thing, at least in our case at Harry's, has really been the thing that has been most impactful for us. If anything, I think it's actually been the other vertical forward increase, which is owning manufacturing, that's been impactful for us in terms of being able to keep costs down.
- [14:00]
Tom Foster
Interesting, interesting. Well, that's a perfect seg because you mentioned Walmart, you mentioned Target. At a certain point, I believe it was around 2016, Harry's began to sell razors, not direct to consumer, in addition to being direct to consumer and online selling them in the real world in a Target store. My sense is that that actually represented the moment at which Harry's kind of graduated to becoming sort of a much larger player in the shave market. Is that an accurate sense?
- [14:31]
Sarah Lynch
Certainly was a major moment for us. So you got your facts right on 2016. That was great. At Target, we actually first started selling products in retail in 2013, right after we launched. So before we launched, Mickey Drexler, who ran J. Crew at the time, was on our board at Warby Parker. And I went to see him to tell him about Harry's and he called me afterwards and said, hey, I like the Brainer Building. I want some goods from Father's Day in your first year in some of our, you know, the Ludlow shop and the liquor store and some of our most aspirational men's stores. And I love Mickey, he's a wonderful guy. And so I said, you know, for you, for J. Crew, of course. And so we did a small run there and we sold out. And for me, that was the first inkling that this brand is more than Just a dt. It's a brand and we should be everywhere and people like buying our products everywhere. Yeah. We then did expand in target in 2016 and I think for us, one, we massively exceeded our expectations in terms of sales and targets expectations. We were 5x our forecast. Two, we grew the category. People were coming to buy products, Target, where they weren't coming to buy them before. And we did the same thing. We launched at Walmart and pretty much everywhere else we've been. When we launched somewhere, more people want to go buy razors at that place. And so we grow the overall pie, which is like a good thing for everybody. And I think three, you know, now our data is public, people can see how big we are. Whereas before, if we were just online, people didn't really know and they were like, ah, we're online, it's a separate thing. And when we went to the stores and the data was public and the impact we were having was public at the scale and exceeding expectations, like, it was very visible. And so I think probably in people's minds then they were like, whoa, Harry's is bigger and more impactful than maybe I thought it was before. And so it was a cool moment for us. And for us, we got to reach millions of people who otherwise we wouldn't be able to reach because they didn't want to buy online or didn't know about the brand yet with partners who were, you know, had been great partners to us. So it was really a win, win for us. Yeah, huge moment.
- [16:21]
Tom Foster
I want to talk a little bit more about that because there's something about going into, beginning to sell in Target, in Walmart, in Walgreens, in those kinds of stores, mass retail, where you are taking to another level the attack against some of the biggest, you know, incumbents one can imagine. You know, when Harry's started, the men's shave market was dominated by two companies. One in particular, Gillette owned something like 70% of the market. Gillette is owned by Procter and Gamble, which I believe is the largest consumer product packaged goods company in the world. Certainly one of the two or three largest. There's an audacity to going up against an incumbent like that that is made all the more apparent when you show up next to them on the shelves in Target. When you guys started and when you made a decision like to go into Target, talk to me about sort of how you thought about like, okay, we are going up against the biggest big guy there is. What does that mean? Do we need to somehow be sneaky? About this, do we need to go right at him swinging? Do we. How do you do that? Because it's great. Because who are you? You're this upstart going against.
- [17:29]
Sarah Lynch
That starts with the consumer, I think, again, which is. So we said. We looked at retail. Then we said, okay, what's going on in retail? Why is the category not. It hadn't been doing that well at retail. And so for as big and like, P and G is an incredible company. I have a tremendous respect for the Gillette brand and what's been built there over 100 years, that brand. So. But we looked at and we said, it's not that exciting today. It doesn't seem like the category is declining. Less people are going down the aisle. Doesn't seem like there's a lot of new and exciting news. So if we were going to come to the category, how do we reenergize it, refresh it, make it exciting again? And if we can do that, we'll grow the pie and we'll be able to put our own hairy spin on it. So there were kind of two insights that we had. The first is that you need to signal new news in a big and exciting and important way and do something in a way that's different than the category. If you looked at the way that lots of stores had merchandise products at the end of the aisle, it was just like rows of cardboard trays going down, maybe with a sale sign or something. And we said, well, what if we did something different? What if we put a giant orange razor in a big Harry sign over and said, harry's is here. It's exciting. It's a new brand. It's like, stop you. No one has seen a giant orange razor at the end of an aisle before. You know, the first meetings we ever had with Target, we literally pitched them an end cap. So the end cap is thinking at the end of the. Had no product on. It was just a beautiful art picture with an orange razor. We said, you should do that. And they were like, you know, we sell product here, right? And we said, well, one time Apple did an end cap with no. And they said, you're Apple now. And we said, okay, fine, fair. Like we'll put some product on it. But we still. We put product on it, but we wanted there to sort of be a moment where people could stop and notice the brand and notice something new. The second thing is we spent a lot of time in the aisles and we had a couple insights on our online business that were helpful. So in our online Business. We convert very high rates relative to other e commerce companies in terms of people come to our site and want to buy. And one of the reasons that we do is because we have a pretty easy experience. We have one razor handle and a couple colors. One other razor handle that's metal, one razor blade you can get in a four count, eight counts, one shave gel, one shave cream. It's like a pretty basic and straightforward experience. And what we try to do is make the best single product we can in every one of those categories. The best shave gel we possibly can make, the best shave cream, the best razor blades, the best razor handles. And you contrast that to our competitors in a lot of different models. You know, like if you just think about Gillette, it's you know, Fusion and Proglide and Proglide Power and Pro Glide Flexball and Pro Shield and Pro Shield Chill. It's like, it's a lot. And so what we recognize is that people walking down the aisle, they were confused. They didn't know which product they should buy, why the prices were different. Things are on sale all the time. And so one day it's priced one way, one day it's priced the other. What are they supposed to believe? We saw people in the stores assorting them in the wrong places because they were confused. And so we said for us to sort of be different here, we know that being clear and straightforward converts and it's the right thing for the customer. So we're just going to be Harry's and we need four feet. We need to build a little kind of area in the aisle that's going to be super simple and super clear. We're not going to have a ton of extra skus, extra products. We're going to take some of that space, actually tell our story, which we think is important for people and we're going to kind of go to market in that sort of, in that way. And what we found is that people like felt that was like a deep breath. They walked down the aisle like, oh, it's simple. I know what I can get one product. You know, it's the same price every single day. We don't discount or promote. I know what to expect. I know the product, simple, it's clear, I can get it. And for us that was a consumer driven insight that then gave us a roadmap to how to sort of go to market in a way that we felt could be different and exciting for people. Which then I guess gave us the sort of confidence that what we do would work and that's what we should go do to go sort of. Yeah, you know, be in the same aisle as the biggest CPG company in the world and feel like we could compete, but on a sort of, you know, in a unique way.
- [21:12]
Tom Foster
Yeah, that's great. One of your competitors there was another razor company that launched around the same time as you, that was a direct consumer company, Dollar Shave Club. They were purchased by Unilever for a billion dollars a few years ago, as I mentioned at the outset, you guys. Recently, last year, a company called Edgewell personal care offered $1.37 billion to buy Harry's. Congratulations on that valuation, by the way. My sense is that one of the reasons these large companies are willing to spend that amount of money buying a direct consumer company making the same product they already make, essentially, is that you have very successfully built a large audience of young consumers of a very desirable demographic. And I'm curious if you have any insights you can share about how to successfully market to millennials?
- [22:04]
Sarah Lynch
Yeah, so we actually think about our customer. It's a good question. We think about our customer segments at Harry's slightly differently than just age. There's a segment of guys who we over index with, do well with, who we build a lot of products and experiences for, who's a guy who's very involved in sort of grooming in general. He's the guy who likes to shave, and there's a lot of guys who don't. Who enjoys the ritual in the morning, who uses hair styling products and likes the way that. Who appreciates body wash with a better scent than maybe some of the ones that existed and wants to feel clean at the end of a shower, as opposed to like they kind of just lathered, you know, ascent on them. And so it's probably more involved and that guy and someone we know really well and we focus on him now, he skews a little bit younger, but I think for us it's about starting to understand him, what he wants in products first and really trying to deliver him. Like, this consumer segment is more knowledgeable than any other consumer segment by a lot on products. And so first and foremost, we have to make great products that he's going to believe in. Second is like, we can go find him, but it's almost always better if he finds us. And so how do we put it? Give it to people or put it in, get it out in the world in a way where he's going to discover it as opposed to sort of pushing the message at him. And now that could be finding a Target now or Walmart, because Shop's there, and then explaining the proposition of the product in a clear and unique and sort of straightforward way. To him, it could be having folks write about the products and sort of that he trusts and it could be a friend of his posting on social media, you know, and I think for us, what's been exciting is we now have a community of millions and millions of people in our direct to consumer experience. And so what we do is when we launch new products, we try to talk to that community first, you know, say, hey, we're here for you. We hope you've asked us a lot of you've asked us for these products. Here's what they are, here's what they do, here's how we think they're better. You should try them and check them out and then hopefully those people use them and tell other people we can start to get some sort of natural spread. But that's what's best with that consumer. Now, once you figure out that kind of product proposition that I think works best for them, we kind of know what it is, but sometimes it takes a little while to figure out how to explain it. Then I think we can start to advertise it, but in a way, again, that we feel like needs to be authentic to him. And so maybe it's finding a podcast host that he listens to and saying, hey, do you like this? Try this product. Do you like it? How would you talk about it? Oh, that's cool. Like, yeah, talk about it that way to your audience or things like that that create more authentic messages.
- [24:33]
Tom Foster
So is that something that's specific to shaving or men's shaving, or is that something that is a little more broad in that perhaps there's a generational acceptance or sort of curiosity about discovering new brands that maybe is different today than it has?
- [24:50]
Sarah Lynch
No, I think it's 100% generational thing. We have a brand called Flamingo that's focused on women's hair removal and body care that started a couple of years ago. And I think it's probably even more so the case there. We lead a more engaged audience who is super focused on finding ingredients and products that are going to work for them in exciting ways and have personal care and beauty routines that are very involved. And the consumer that we speak to there is incredibly well educated about products. We just launched a new body lotion line in Flamingo and spent a lot of time talking to consumers about squally, which is an ingredient in the lotion that has moisturizing properties. And, and so we want to help people understand why the products could work for them and then let them make good choices. But I think that you're right. There's certainly a shift to people being smarter about products and making good choices. And part of that is I think there's so much more information out in the world now. Direct to consumer sites can create content and put information out there that is just sort of much more robust than it was possible doing before. And people consume information so quickly and so therefore you just have a more educated consumer base, which I think is great that people can make good choices for themselves. We're going to take a quick break and be back with more from Tom and Jeff. Here's a little tip for growing your business. Get the Venture X Business Card from Capital One and earn unlimited double miles on every purchase. Plus, the venturex Business Card has no preset spending limit, so your purchasing power can adapt to meet your business needs. And when you travel, you'll have access to over 1300 airport lounges. Just imagine where the Venture X Business Card from Capital One can take your business. Capital One. What's in your wallet? Terms and conditions apply. Find out more@capital1.com Venture X business I've.
- [26:41]
Tom Foster
Alluded a couple times in this conversation to the fact that last year Edgewell personal care offered 1.37 billion to acquire Harry's. That acquisition ended up not going through. Can you walk us through quickly what happened there? I would like to follow up and talk a little bit about what you guys learned from that experience because wow, what a crazy experience.
- [27:03]
Sarah Lynch
Yeah, yeah, it was a. It was a wild experience. A great learning experience, I'm sure. Take a step back and think about this journey we've had at Harry's. I feel like we've learned so much and I feel like we almost learned in dog years. You know, we've been doing this for seven years, but feels like 50 or something. Like you see you accelerate learning around so many dimensions in a way that is really enriching. Great. Part of the joy I think is just being on this journey. So the way that the Edgewell sort of deal came about was that we were spend some time with the folks. Edgewell, we're obviously in the same industry but they have other brands outside of shaven sun care and feminine care, male wet ones, other brands like that. And we spent, you guys know the CEO well. And the setup was that they would not only buy Harry's but that they would then sort of enable My co founder Andy and I and our team to run their entire business in North America, which was all their brands. And for us it was super exciting to have that opportunity. You know, now we didn't go and get to have impact around Harry's and Flamingo, but across a set of brands and a set of categories on millions of households and brands that, you know, a lot of you had heard of. And maybe we could sort of leverage some of the learnings that we've had over the last number of years to improve in some way on behalf of consumers. Think about the impact you could have there. What a fun professional challenge that would be. That's why we ended up doing it. We weren't sort of, I mean it was, we have investors and obviously need to get liquidity for them at some point in time. But it was really, I think the exciting professional opportunity we had and it was in line with the vision that we had as a standalone company, which was to try to build Harry's into a next generation CPG company, have multiple brands under the portfolio. I mentioned a few, Flamingo and Capperson are working on others right now. And so edgewell sort of accelerated that vision. So we did a deal and it announced that they were going to acquire us for $1.37 billion. And then the way that it works in there is you have to go through a process to get the deal approved by the regulators. In our case it was the FTC and they look at antitrust. It's a pretty involved process, it has multiple steps. But I think we early on didn't think that there was going to be a super significant regulatory challenge to the deal. I think because fundamentally we believed, and still do believe in our core to this very second, that it was going to be great for consumers that we could leverage some of edgeworld's capabilities to do better things for our consumers at Harry's and that we could bring a lot of capabilities to EdgeWorld, enable us to do better things for consumers. And our whole mission as a company is to create things people like more. It's literally written on the wall when you walk into our office. And so the fact that we would do this deal and then do things that were anti consumer just like was so deeply antithetical to our beings and why we exist in the world. And we're like, of course this is going to be good for consumers and let us tell you the hundred ways that we think it will be. But you know, I think the regulators probably have a different perspective on, you know, two Companies in the same industry coming together and the, you know, a more established company buying a disruptor and that having the ability, you know, having the potential to make the disruptor less disruptive. And I think that was fundamentally their, their significant concern. And even though we were taking over, continuing to have control over Harry's and taking over these other brands with the intention of making them more disruptive, I think ultimately they decided, the regulars decided that they should sort of sue us to block the transaction, which is how that works. And at that point Edgewell backed away from the deal and we sort of said okay and went on our way as an independent company. And it was an intense process for sure. And I learned a lot about the regulatory environment, how decisions get made and a great learning experience for me. And I think the good news is that we did this to deal out of position of strength. The company was doing great. As we were talking to Edgewell about deal we were doing and we emerged, I think having learned a lot about not just the regulatory process, but how to think about contemplating running a next gen CBG company. You know, literally sitting there and saying, we're going to have to run seven brands on this close. How do we do that? How do we structure the teams? How do we think about where we're going to make investments or not? How do we think about the role of DTC and the role of brand, how we partner with retailers? And man, that was really exciting and I'd sort of seen some great things and mistakes that they made. And so that sort of exercise, while applied to what would have been a different context, was incredibly helpful as we thought about our own future and wanted to go build and buy brands and bring them under a sort of operating platform and enable them to be super successful. And so that's what we're doing now, which is, which is fun and exciting.
- [31:21]
Tom Foster
There's something almost funny, ironic about the FTC sort of saying, hey guys, essentially saying, you're so successful at being a disruptor that this deal can't happen. And it's almost like you almost have to look at that and say like, well, I guess in a way that's a compliment that we've succeeded at being such good disruptors.
- [31:42]
Sarah Lynch
Yeah, no, if you read their opinion, it's very flattering to Harry's like, this is the most destructive force ever in the world. I was like, oh, thanks man. I think that's true. I'm saying if that approach is broadly applied, it's going to say M and A, then it's not Really a viable path for anybody because a lot of new brands that get built are disruptive and so in some way they're meeting unmet needs. And if you meet unmet needs, you are disrupted. That's the XY variable.
- [32:11]
Tom Foster
And M and A is one of the very natural outcomes of venture funded brand building, right?
- [32:18]
Sarah Lynch
It is. It also, I think can be really good for these big companies. Like, you know, in one of the processes someone asked us, the CEO, well, why do you have to buy Harry's to get all the talent and the perspective and disruptive ideas? Why don't you just hire these guys? We're not for hire. We have our own company. It's doing great. But if you buy the company and you bring us all over, you can have both all the infrastructure we built and all the ideas. We have to go try to transform your company. And that might actually be a good thing for this industry. And so I think that that's an important sort of consideration as, as sort of the broader set of conversations unfold around these things.
- [32:54]
Tom Foster
Well, so one of my follow up questions here then is to the extent that they say, like, okay, you know, you've been so successful at being disruptive that we, you know, we need you to continue being disruptive as at the same time you said, okay, then we're going to go out and build a wider CPG company and launch more brands that can do this. How did going through that experience change what you perceived as the value you were bringing at the ways that you could be that the things you saw in Harry's that were disruptive and successful, that you could then bring to other brands you would launch or acquire. Did it shift your understanding of what was working?
- [33:31]
Sarah Lynch
Yeah, I think it starts with like, how do you set up teams to be successful? And I think you're taking a step back. One of the things that has made Harry successful and that we, I think came to really appreciate is that we have like general managers running our businesses. Like we have someone who's a GM for Harry's in the US and a GM for Harry's in the UK and a GM for Flamingo and new, new brands we're launching, we've got, and they have a ton of control and autonomy. They're on their own entrepreneurial journey. And my job is not to get in there and tell them what to do this specific day or that day or you know, opine on a creative line or something. I will if they ask. And I, I, you know, I was the GM for Harry's to start. So I, I love it. Um, but my job is to create an ecosystem for them where they can be successful, to find the best people in the world around them, to help them maximize the success of their brands by doing what's right for the consumer. They're close to the consumer, they'll make the choices, they'll own the P and L and they'll do. And we will sort of give them the mandate. We will measure how high consumer satisfaction is, how much the brands are growing, and then we will help them with the best product innovation in the world and best R and D, the best design capabilities we possibly can, best performance marketing capabilities we possibly can, the best sort of PR and brand building capabilities we possibly can, the best retail relationships we possibly can, the best backend infrastructure. But that's my job, is to create an ecosystem around them where they can spend all their time worried about the customer, the product, how we do better for people. And so I probably wasn't that clear on that going into this. And then I kind of saw all the conflicts and I was like, okay, you got to be really clear on how this ecosystem is going to work. That's now what we're much clearer on, which has enabled amazing people on our team to step up and have incredible experience. Is going to run these brands or pieces of these brands.
- [35:15]
Tom Foster
Was that set of insights partly driven by what you saw at Edgewell or were there other insights you derived? Because there had to be some element of like, hey, we got an up close look at sort of how the other half lives and what were the big learnings there.
- [35:32]
Sarah Lynch
Yeah, I think what is hard about big CPG companies are just insane. They're very complicated. You were trying to build brands with multiple products across the world. So you got multiple stakeholders coming in and saying, you know, I want this and I want this and I want this and I want this. And then you got multiple retail relationships and all the, and those retailers have specific perspectives on what they would want from the brands and how that works. And then you got all these organizations kind of matrixing in and it, it just becomes a very complicated organism that maybe is a bit harder to move quickly against. And so I think part of what we sort of said makes it okay. We see the future and how complicated it is and the complexity, some of it is necessary. Like, you know, if you have a big complicated business, it's just going to be there's more complexity today in heritage than there was when we were 10 people sitting around a table for sure. But how do we then create small teams that feel like they've got a ton of autonomy, run fast and an ecosystem around them where it's really clear how people are docking in. And there's really clear decision makers that are close to the customer on how they're going to move these things forward. And I think that that is probably a point of view that we had going in, but was one that I think as we saw levels of scale that were sort of higher than where we are larger than we are today, we could sort of be thoughtful about and say, okay, whoa. If we're not careful, these other things could creep in in this way. Like, let's actually be really deliberate about the model that we create so that we enable that sort of entrepreneurial autonomy and decision making and fast move that's close to the consumer in a way that's really powerful.
- [36:55]
Tom Foster
So you've had quite a year. So the FTC decision was on, I want to say, February 3rd. And we all know what happened about a month after that when everything changed. I'm curious for you guys, how has this year, how has Covid shutdowns and everything affected your business? I know a lot of people grew Covid beards, right? What has happened to the Harry's business this year?
- [37:18]
Sarah Lynch
So our business is actually doing awesome. And I'm not just saying that we are beating our plan both in revenue and on profit, which, man, if you asked me that in March, I would have told me that in March. I would say you're crazy. And I think that the reasons are that we built a much more diverse business than people might think. While men shave in the US was down, we have a business in Europe that was doing pretty well. While our retail business struggled a little bit because people stopped going to stores as much for a little while, our online business took off. Then we have other pockets where people don't appreciate, but that have become meaningful pieces of our business. So, you know, we sell shampoo and body wash and because people were traveling less, they were showing probably more concerned with hygiene, they were showering more at home and they wanted products that, you know, to treat themselves in a luxurious way that had amazing ingredients. And so those parts of our business started to take off. And then we sell body and face wax for Flamingo. And in many instances, you know, women weren't able to go to, you know, the salon to get wax the same way they were used to. And so they were doing at home wax more. And. And we created really great at home wax products and ton of education on how to do that successfully. And so that grew a lot. And so it's been cool to see different pieces of our business pick up, even as sort of some of the other pieces of our business may have had some headwinds this year. And I think that that's been fun to see and I think we'll only continue that trend. The other thing we've just seen is like so much more adoption of products generally online, whether that be. And that's what I'm saying, whether they're ODDC sites or Amazon growing or the dot coms of our retailers growing. And that's a place where we should be well set up to win and have invested a lot in terms of being able to sort of serve customers in pretty unique and exciting ways.
- [38:57]
Tom Foster
What was the biggest mistake you guys made during your Covid changes and what did you learn from that?
- [39:06]
Sarah Lynch
This year has not just only been Covid, that has created just sort of intensity of personal experience for people in the world. That's been a huge driver. It's also been sort of, I think, an important and necessary focus on racial equity in this country. The election that we just had, there's been a lot of things that have happened externally in the world that have been emotional, distracting, hard for people to work with, work through and deal with. When we went remote, I also think we underestimated just the importance of personal connection, human connection to our team. We're such a collaborative culture and being not together well, we were able to kind of get a lot of work done. It was just hard. And so we felt people just really struggling on a personal level, like we weren't there to support each other in the same way that we could in person. And we just were feeling people. A lot of the sort of ambient things in the world were hard for people. You know, we had parents who have dual, you know, where both parents are working, they've got kids who have, you know, at home because schools were closed. And how do they manage? There's just a lot of stuff in the world. So we care a lot about mental health. In Harry's, we've given over $5 million under the Harry's brand, organizations that support men's mental health. And so we said, you know, we've always tried to live that internally and support the mental health of our team. And we thought that now is more important than everyone. So what we started doing is creating these mental health days. And here's first what we did. We said, everyone take two days a month. You have to take it off, take Whatever you want, have a mental health day. And then what we learned is that you can't really do. It's harder to do that kind of one off because if your whole team's working, you're off, you're still kind of checking in and like. And so then we created company mandated mental health days. And our head of people literally emailed our whole leadership team. She says, we can see your emails. We know if you're, if you're still working today, if you are engaging people on the team, I'm going to have a conversation with you about why shut it down. This company needs some rest. Like we need to give people time off. And so we started mandating those across the company. And then we gave people a week off at the end of the summer in August, and then we gave people a few days off around the election. And so I think just giving people time and space to process has been really helpful for folks. That's probably the thing we learned the most. It's just the expectations we can have of each other right now are just different. Given that we're living in this world, it's important to adjust those and to really check in with people. That's probably the thing that we've evolved the most.
- [41:26]
Tom Foster
That's big. Do you expect that you will ever go back to everybody being in an office all the time, or do you think that some level of remote will remain kind of an interesting new part of the reality?
- [41:40]
Sarah Lynch
This is a great question. Before we were 100% remote, we enable people to work remotely in certain places. We had certain folks who didn't live in New York City or our offices who would work remotely a week or two a month and then be in the city a couple weeks a month. We have a bunch of people who preferred to take a day, a week outside of the office. And so we are pretty flexible sort of on a person by person, team by team, based on what we let people do. We will only probably lean more in that direction as we come back to are you able to sort of not be fully remote anymore? With that said, I think what we've also come to appreciate is that being in a space together is really important. The human connection matters a ton in terms of people's feelings and emotions, people's ability to be successful, be innovative. I have three kids and one thing that one of the teachers of our, one of our kids said recently, she said, you know, happy students are better learners. And I think that happy employees are better, sort of more productive, more inspirational, more innovative employees and being together in person, I think was a huge driver. Lots of the happiness of folks on our team. And so I think we certainly believe that we'll have an office centric culture, but I think also want to create a lot of flexibility for people if and when and how they want to work remotely. And the devil's in the details there. And I think that's what we're still working through right now, is how do we create the right balance so that we deliver both of those things. And I think we'll learn a lot better as we go into this about ourselves and from others. As a lot of companies navigating, I.
- [43:04]
Tom Foster
Like your example of the mental health days as a very specific sort of tactical thing to do to help people in this time. I'm curious if you have uncovered things that have worked to sort of create, to create happiness, to create culture in that way that you're talking about where, you know, how people are interacting, how people have, you know, moments of spontaneous inspiration together. All those different things that make a place sort of feel like it's gelling. What have you done to make that work in this environment?
- [43:38]
Sarah Lynch
I kind of have to pump myself up here. This might not sound like a perfect answer, but I honestly think it's about the attitude of leaders. Going into meetings. If I'm, like, frustrated and upset and down and walk into a meeting, ask seven hard questions, and crush a team who's just worked overnight to, like, do something that is really good, and I find the seven things that are wrong with it immediately, like, oh, God, that's so demotivating for people. And sometimes, like, I bring my own frustrations out. The same things that are happening in the world that everybody impact me too. What I literally have, like, written down. I write myself notes. I'm like, you gotta pump up the team. Like, this is time for you to be positive and inspire creative thinking. And, you know, there's a great sort of phrase in improv which is, yes, Anne, like, I agree, and let me build on your idea this way. And so how do we sort of go as leaders into meetings and conversations in a way that is sort of building on people's ideas and making them feel valued for their work, checking in with them, and setting a light and fun tone. There's, like, little examples of us, you know, coming to meetings with shaving cream on or dressing up on Friday. Like, there's all like these. Everyone's got their own culture and ways that they're gonna do that. But I think fundamentally, it's about Leaders setting a positive and collaborative tone in the day to day. You know, we used to have amazing team events that were so fun like, and we did a lot of that early on. It's now honestly, like it can be hard and we, and we still do zoom happy hours and you know, time together, etc. And we've been encouraging people to get together in person where possible, outside obviously, you know, safely. But after like staring at the screen all day, people don't necessarily want to stare at a screen anymore. And so I think it's about making the time that you're together really productive and uplifting and being there for people and then I think spending a lot of time just checking with people one on one. I spent more time doing one on ones in the last nine months than ever before. And I literally, I've asked my assistant like if I've got free 30 or 15 minute block, like here's a list of all the people that I think I should be checking in with, like help me find time with them just on sort of an ongoing basis. So I can just say, hey, how are you? What's up? What's bothering you? How can I support you? That's what that was. If people have other suggestions, I'd love to hear.
- [45:44]
Tom Foster
I think that's a great answer. I think that's a great answer. And as you noted, there is this sort of second level to it which is like finding your own way of pulling that off. Because it's sort of just saying, hey, be cheery can come off as phony unless you're figuring out your way to do it.
- [45:58]
Sarah Lynch
Absolutely.
- [45:59]
Tom Foster
Who is the disrupted brand that has launched since Harry's that makes you think, man, I wish I'd done that.
- [46:06]
Sarah Lynch
Well, good question. I think, I think, man, there's so much I admire about sort of different brands. One brand that I love and I am a consumer of and a closer friend of mine started is Allbirds, which is a brand in the sort of shoes and apparel space now making like incredibly comfortable, highly sustainable shoes. And I guess what I love about their brand is the product is awesome. Like it's really comfortable and sort of, I think has a unique style, it's really well priced and so it's a great consumer proposition and they stand for something in the world. Like they stand for environmental sustainability in a way that I think is really important and it's clear how that course through everything that they do. And so they're having much bigger impact than just their own brand on the world. So that's Maybe an example outside trying to pick something outside of shave and personal care or whatever.
- [47:05]
Tom Foster
Yeah, we talked a little bit about earlier on that, you know, you, before Harry's, you were one of the co founders of Warby Parker. My understanding is that you are not actively involved in Warby.
- [47:15]
Sarah Lynch
I'm on the board, I'm on the board still and still spend a fair bit of time on it, but not in sort of day to day.
- [47:22]
Tom Foster
Was it a hard decision to walk away from doing that? I mean here you were, you know, you had helped create a rocket ship, right. And you were on it and you walked away from it to do this other brand. Was it?
- [47:35]
Sarah Lynch
Yeah, walk us through that.
- [47:37]
Tom Foster
Because how often, you know, do people get the opportunity to create something that takes off like of Warby and how, how audacious of you to think you could do it twice.
- [47:46]
Sarah Lynch
So the situation Warby was reasonably unique. We, we started Warby Parker when we were in business school together. We literally both launched the company while we were in school, turn the website on once a class and so, so that was like a pretty unique and interesting experience. And it did take off immediately and it was, it changed my life completely. Like it made me know that I wanted to build brands and work on things that were better for consumers, although I didn't realize that right away. So before I got into business school I'd worked at an investment fund with a bunch of amazing people who I was really loyal to and they offered to pay for me to go to business school and come back afterwards and work there. At the time I thought it was a great offer. I love these people and it was a good job to have and so I did that. Then I got to business school and we started Warby and it was growing and doing great and it was time to graduate and I sort of said, hey listen guys. And I was always clear with my co founders that I was going to go back and do. To go back and work in investing because I made a personal commitment to someone and I took that commitment really seriously. And so I said regardless what happens in Warby, I'm going to go back and work in investing for a couple of years at least then maybe I'll figure it out from there. And so when we graduated I honored that commitment. I stepped in from whereby I stayed on the board and then I went back and worked in investing and I think then I had a really big test because I was moonlighting. I couldn't stop working. I was so obsessed with Warby. I was moonlighting there nights and weekends with Neil and Dave who were running it at the time in every detail to the point I was almost too much and I was like. And that felt like fun. And my job, my investor job, which is an amazing job with amazing people for me at least, started to feel a little bit more like work. And that was a good signal for me of like, hey, I want to go do something new. But all the work I was doing at Warby was around building an infrastructure on my co founders who were there and doing an amazing job and hiring great leadership level under them and setting the company up ourselves in the future. It was unclear how I'd plug back into Warby after having left and spent two years not at Warby. And so it was, I think in some ways an easier and clearer path to go do something new. Leveraging all the learnings from Warby. And my co founders at Warby were like the two most important people in helping us build Harry's. I mean they, they gave us so many, so much advice and ideas and points of view. They're some of my closest friends. Like I talk to them all the time about both companies now. And what's cool now is we've learned a lot at Harry's. It's applicable to Warby. Just continue to learn a lot of Warby, Parker Harry's. And so it's this amazing ecosystem that I've gotten to be a part of and I'm so grateful for it.
- [50:03]
Tom Foster
We're running out of time. I want to ask you one last quick question. You've talked multiple times here in this conversation about wanting to build a next generation CPG company. You have three brands now. You have Flamingo, you have Ares, you have Cat Person. Take us forward a couple of decades from now. What does Harry's Inc. Look like? How many brands are there? I mean, are you building, when you say a next gen CPG company, are you trying to build Procter and Gamble?
- [50:29]
Sarah Lynch
We're trying to build Harry's in a way that's going to uniquely meet people's needs, you know. And so if you were building a big CPG company like P and G or Unilever changed today, how would you do it? And I think that's probably where our starting point is. You do it direct to consumer first with modern brands that uniquely people's, meet people's needs across categories that are exciting and interesting for people where we can better for them with products that are not tied down in old supply chains with ingredients that might not be the best, but that are Sort of new and modern and exciting and the opportunity I think to do that exists across lots of categories. And so I mean two decades is hard to know. I think in the next three or four years you could see us double the number of brands we have in our portfolio, easily 6 to 8. I think we'll look to continue to build brands. We'll also look to buy a brand or two that we think is amazing where we can add value and help the founders of that brand continue on their entrepreneurial journey. But take built in our ecosystem which we think is pretty interesting ecosystem to go build a brand. We will focus on brands where we can build and scale DTC first because we'll learn so much about the consumer which is exciting and it's pretty unique to us. And I think we're not going to like, you know, a lot of big CPG companies will say we're going to dominate deodorant and we're going to have six brands in deodorant for every customer segment deodorant and we're going to leverage our retail power and our supply chain and our R and D capabilities to do that. Our perspective is different. Our perspective is we're going to go find the biggest consumer needs that exist. So that's that why we'll end up doing cat food and what body wax. Pretty different categories. We're going to find the biggest consumer needs that exist. We're going to find opportunities to reach consumers directly where we can do that at scale, scale in that way we're going to then want to learn from people in a really unique way and then build these brands that connect differently. And I think if we're able to do that, I guess that's kind of what next gen CPG means. It's a different way to build brands that are fundamentally, you know, everyday consumer brands that we hope will give people better experiences. And I think we've learned a lot in Harry's built a lot of capability and infrastructure so that we can sort of then do this on top of and it'll take a long time. It's something we're really excited about and I think if we can, I guess our impact equation is if we can reach more people with more products and make their experiences better and better like that's good impact in the world. So that's what we're focused on.
- [52:45]
Tom Foster
Thanks for being here Jeff. Thank you again for everything. Congrats and good luck.
- [52:50]
Sarah Lynch
Thank you so much. Great to be with you. That's all for this episode of youf Next Move. Our producer is Matt Toder. Editing and sound design by Nick Torres. Executive producer is Josh Christensen. If you haven't already subscribe to your Next Move on Apple podcasts, Spotify or wherever you listen, your Next Move is a production of Inc. And Capital One Business.