Hello! Who are you and what business did you start?
Hello, my name is Ishan Dutta and I am the founder of Ugly Duckling Los Angeles, a hair products company catering to stylists and colorists.
I started the company almost five years ago because I wanted to provide people with better quality hair color and hair care. I decided to go into hair color in particular because I could see that the color market was really taking off, with more and more women going for very fashionable looks.
It wasn’t the grey hair coverage and the safe balayage that salons were used to. People were going for stronger looks. Roots to end platinum blonde.
I felt that the internet was another reason to start a beauty business, Stylists were just getting used to the idea of purchasing their product needs online. No one was really responding to that as far as I could see.
We take in anywhere between 600 and 900 orders a month, with a conversion rate between 1%-2%, and an average cart value around $60 and trending higher.
What's your backstory and how did you come up with the idea?
I started off in the professional beauty industry in 1995, so I do have a background in this business. I worked a lot of training hairdressers and producing looks and recipes, so I understand hair coloring well.
Make sure that you are able to track the returns on every single piece of marketing that you do.
This knowledge has really helped me, especially when it came to the details of developing products and figuring out what my customer was looking for, what her needs were.
Take us through the process of designing, prototyping, and manufacturing your first product.
Just to start the whole thing took us close to two years, partly because I was working in a full-time job until the site went live.
I started to look out for manufacturers of hair color as early as 2013. We found a good one who was flexible and willing to produce small batch sizes for us. They were also ready to produce unique formulations just for us, and that was very important to us. We took a full year testing and tweaking formulations until we had a range that was ready to be launched.
While the testing was going on, we were also working on the trademark registration, the product packaging, the website domain name, and website design. My wife came up with the name “Ugly Duckling”, and I liked it! I immediately found a trademark lawyer and registered it.
I would really recommend registering your trademark if you are an entrepreneur creating a brand, especially if you are going to be selling under this brand name on the internet. The last thing you want is someone coming in after you have done the work and taking your brand name away from you. In my case, It was really lucky I did because within two years of me starting, what exactly happened! I was able to successfully fight them because of that trademark protection. A few thousand dollars well invested!
After I registered the trademark, I also got myself a domain name on GoDaddy (the two are not exactly the same - you need to do both separately and independently) and started to work on developing an e-commerce site with a web designer. After looking around at the options, and discussing with my co-founder we decided not to go with Shopify but with Prestashop. I know that Shopify is great. But we wanted to own our code and be able to customize the website in quite specific ways. I also did not like the idea of paying monthly charges forever.
I personally don’t know how to either design or code, but we found a design agency to produce a basic website.
Once we were ready to place our first product order and launch our products, I looked around for an e-commerce fulfillment center. We found one which was willing to set up an electronic integration between our site and their center from the get-go. This was important because I had no staff (still hardly do!) and manual intake and transfer of orders just wasn’t something I wanted to spend my time doing. So we got our products made and shipped the whole thing to our fulfillment center, then we turned our site on and crossed our fingers - exciting!!
Describe the process of launching the business.
Our site went live at the end of Oct 2015. The first website was truly very basic, actually downright ugly. We even used a stock image that I had bought for like $5 to use on the home page. It’s an image of a girl with copper hair - I still shudder when I think of it!
Just to give you an idea of our investments by this stage: to get to the point where our site went live we had already spent around $100,000. 50% of that was taken up by initial travel costs, meeting with suppliers in different countries, company incorporation, brand registration, product testing costs, the design fees, the website plus some marketing collaterals. The other 50% went on the first batch of products - inventory.
After our website started ramping up, we had to immediately increase inventories. We went from around $50,000 around $100,000 in invested inventory in the first year.
We also invested in improving the website experience, reshot all our product visuals, re-did the shop-now page, made four or five nice hair make-over videos with nice models - that sort of thing.
All this was another incremental investment for us. In all, we invested another $150,000 or so directly in the business. So the total initial investment in the business - around $250,000.
This was without including my personal expenses, in other words, my salary. That has had to come out of savings from 2015 till today. That’s the reality of starting a business. I will return to this point later because it is really important.
Now to talk about our experience straight after launching our store. Launching a webstore can be like opening a shop in the Sahara desert...I mean, the shop’s there, but who is going to visit? I was very, very nervous when I launched. To my surprise, Google was very kind to us as soon as we launched and we got a lot of hits really fast - to this day I am amazed, because as I said our website was really basic, and we were totally, totally unknown.
We even had one or two wholesalers calling us and wanting to buy. And I was like: “ How did you even hear about us ?”
I can only assume the fact that we were selling professional color online was truly unusual. Not too many people were doing this and as a result, Google gave us a lot of impressions which then led to traffic. And Amercans as a whole do like to try out new stuff and buy...that’s one of the amazing strengths behind this economy!
Anyway, for whatever reason, people were somehow finding us and we started to get at least a few orders almost immediately. Not a lot, but steady and growing. That was encouraging even though the amounts were very small.
I recall my wife and I used to do a small informal celebration every time we hit $300 of sales in a day!
Gradually, our sales started trending up as did our traffic.
Google Analytics, Monthly Organic Traffic from Sept 2016 to February 2018
The above screenshot shows organic clicks on our website. “Organic” means people finding us through searches. We were at around 7,000 - 8,000 organic hits per month by September 2016 - around 9 months after launch. By February 2018 we had reached around 20,000 organic hits per month.
Today, September 2019, our organic traffic is around 40,000 per month.
My expectation is that we should be at 70,000 - 80,000 organic hits per month by next year. The other channels - social, emails, referrals, adwords, etc will bring in the rest. So total digital traffic of around 100,000 per month by then is realistic, I would say.
Since launch, what has worked to attract and retain customers?
Facebook was and is a major factor in whatever success we have had. Although we opened up every social account we could think of when we launched, it was Facebook which really worked for us.
I met a very very talented hairdresser online: Elona Taki She was already very very famous on Facebook and Instagram and she had been making these amazing videos. I messaged her and sent her some products and we hit it off very quickly after that.
What was great about her videos was not only her amazing hairdressing competence, it was the fact that her videos were totally authentic - no faking, no filters, just a very factual hair tutorial with amazing end results. Very rare in this day and age!
I’m giving an example of one of our videos below. This particular one went viral among the hairdresser community - I think it got over 2 million hits - no advertising!
I should say (and I think this is the experience of some other e-marketers also), that the effectiveness of Facebook posts for brands has declined over the last 3 years. It used to be the case, for example, that Facebook would send your posts to all your followers, Today, you would be lucky if between 5% and 10% of your followers ever get to see your posts.
Facebook advertising still works, especially If you have good video content. But even that is less effective than it used to be.
We now restrict our Facebook advertising audiences to people who have visited our site already in the last 60 days. In other words, we do retarget campaigns only. That works. We get around 2.5x return and that is an acceptable level for us.
These days we have diversified the ways in which we reach our potential customers. We now also use Facebook Messenger, SMS campaigns, Google Adwords and email.
Today organic traffic is almost 70% of our total traffic. Facebook is about 20%. The rest put together, paid search, direct, email & referrals is 10%. Our monthly traffic is around 50,000. There are good months when we touch 60,000 and in weaker months it would be more like 40,000.
How are you doing today and what does the future look like?
We take in anywhere between 600 and 900 orders a month. Our conversion rate is between 1% and 2%, which is about average in the internet world, I believe.
Our average cart value is around $60 and trending higher as we bring in more high-value products and package deals. So that gives us around $50,000 per month in sales. It’s not huge by any means, but it is relatively stable and it’s growing. Some months we may make more, other months less.
We do sell a little on Amazon in addition to our site, but that has never been a focus for us.
Almost 60% of our business every month is repeat orders, which is a good sign. This was something very important to me. I do feel that if your existing customers re-buy your products and talk well about you, you are doing half the job of building your brand.
Below is a picture of a very talented hairstylist called Cecilia Kashat. She does beautiful work and she uses our toners and our blonding products.
FIRST OBJECTIVE FOR 2020 - PROFITABILITY
Our profitability is OK at this point but definitely not where it should be yet. To this day I have not paid myself a regular salary yet...and it’s been 4 years!
The problem is not the cost of goods which are well under 20% of sales, which is good by any standard. The problem is fulfillment costs. In 2018 we transitioned from our first fulfillment company to a much bigger company. We did this because we wanted to provide faster shipment speeds and a better quality of packaging. In hindsight, we chose a company which would have been more suitable for a larger company with bigger volumes. We ended up being tied in with some pretty large minimum monthly payments. So currently fulfillment costs are currently around 45% of sales...way too high.
We are now looking to transit to another fulfillment center. Our target is to get our fulfillment costs down to around 30% of sales which I believe from what I have researched, is possible.
Just to be clear, when I say fulfillment that includes transportation costs also - FedEx, USPS, etc. Not just storage, picking, and packing. I am pretty sure that it is possible to get fulfillment costs down even lower, and I suspect that some large pro sellers on amazon.com work with around 20-25% of sales.
But that isn’t a priority for us. 30% of net sales would be good enough for now.
So our target P+L for 2020 looks something like this:
- Cost of goods, including inbound freight and clearance - around 22% of sales.
- Fulfillment - around 30% of sales.
- Digital Advertising & Promotion - around 15% of sales.
- Other marketing and office costs, including salary costs - around 10% of sales.
That would leave us around 23% of sales - enough to pay me a liveable salary and for the company to make a profit and finance future growth.
So that’s the first objective for 2020: to right-size the P+L so that we are profitable at our current sales level.
SECOND OBJECTIVE FOR 2020 - GROWING OUR DIGITAL TRAFFIC
Our second objective is to keep growing our digital traffic. We have a number of ongoing digital projects which I believe will help us take our total digital traffic to around 100,000 per month in 2020. If we can do that, sales should grow pretty significantly from where we are now.
I’m sorry I can’t share the details of these projects. They are confidential at this stage.
THIRD OBJECTIVE FOR 2020 - TRADE SHOWS & EVENTS
Our third objective, and that’s also planned - is to move from a pure online play to a mix of on-line and off-line. In other words, go beyond digital and get into more beauty stores. Also into cosmetology schools, where our product already does very well. And independent beauty wholesalers. Again, we are already very successful with the wholesalers who have signed us up.
We will be doing more trade shows as well. Our brand is pretty well-known thanks to our Facebook presence these last 4 years, so I believe the reception should be good. I believe many other start-ups have followed a similar route.
Once again, if we can do this, that should give us double-digit growth next year.
FOURTH OBJECTIVE FOR 2020 - MORE INNOVATIVE PRODUCTS
Our fourth objective, is, as usual, to keep coming out with truly innovative products that can stir up the market. I’d like to think that we have been very good at that so far!
In 2017, we launched Purple Shampoo and Mask for toning blonde hair. They’re sulfate-free and low pH.
In 2018 we launched the fastest acting, whitest toners in the American market. These have really acquired a good reputation in a short period of time and have become the go-to products for hairdressers serious about blonding.
In 2019, we launched what is the only hair bleach in the US market which has bond protection (anti-breakage) built-in. This has also been a great success.You can see the picture of the product below.
So in 2020, we will definitely continue the trend of more very very interesting, innovative products....Once again I can’t unfortunately be too specific at this stage - you would need to watch this space!
Through starting the business, have you learned anything particularly helpful or advantageous?
THE IMPORTANCE OF MANAGING YOUR CASH
Being self-funded, as we have been so far, means that you look at every single decision through the optic of profitability and you have to be super careful about the products you launch and the advertising money you spend. All that, as far as I am concerned is a good thing, and the right way to build any business.
But cash management is a field which I discovered needs really careful attention. It is so important to plan it properly so that you don’t run out and you don’t get any nasty surprises. So that would be the number one thing I would caution would-be entrepreneurs on, especially self-funded ones.
Develop your own spreadsheets (I did), plan your cash flows on a weekly basis and monthly basis and err on the conservative side.
Do not EVER run out of money! In my case, as soon as sales started ramping up, I discovered I needed much more money just to stay in stock. I had to sell 2 apartments that I owned to make that happen, plus do some fairly intensive borrowing from family members. All this can be stressful.
TALK TO PEOPLE WHO KNOW STUFF
The second thing I would say is that getting the advice of knowledgeable people is important. You cannot do everything on your own.
For example, when I started out I had very little knowledge of technology, and also fairly superficial knowledge of digital marketing. I found experts, coaches, consultants. Especially people who knew about all things technology. That was what enabled me to choose Prestashop, for example, over Shopify.
It was also what enabled us to put in a secure sockets layer from the get-go and have file backups for all contacts, all payments and transactions.
Not many companies of our size have built the kind of technology infrastructure that we have. It didn’t cost much but it just made everything much smoother and easier.
One of these technology advisors was a friend and he became a co-founder of the company. Others I paid in order to learn. That enabled me to learn about email marketing, which is a science unto itself. Also about Google Adwords advertising. Also about Messenger marketing. And SMS marketing.
I didn’t know anything about these things (I’m still learning, come to that!) and it is thanks to people who advised or coached me that I was able to pick some of this up.
YOU WILL DISCOVER OPPORTUNITIES AS YOU GROW
Thirdly, as you grow your business, you will naturally discover opportunities. Look at the products that are selling the best. Try and figure out why your customers are buying these products and what their needs are.
In our case the answer we discovered was that customers were desperately trying to go white blonde (there was this big trend out there) and our products were giving them the results that other brands were not giving.
We just focussed on this segment and kept on launching products for blondes. Today, we are known in the hair color market as the blonding company. It was not what we were when we launched, it’s something we made ourselves into as we learned more about what was working and doubled down on that.
TRACK YOUR SPENDS & RETURNS - DON’T JUST GUESS
Fourthly, and this would be my last piece of advice: make sure that you are able to track the returns on every single piece of marketing that you do. It’s simple enough to do. You just need to insert small pieces of code (pixels) into your website so that you are able to check the profitability of every single dollar you spend on Facebook, Google, emails, etc. A good website developer can do this for you in a matter of a few hours.
It would be crazy not to do it.
You can’t afford to waste your marketing money. Not if you are paying more than $100,000 on Facebook or Google advertising per year, as we do.
What platform/tools do you use for your business?
We also use:
- Bitbucket.org to hold all the source code we write.
- Stripe for payment collection.
- Upwork to find people who can work for us.
- Facebook Advertising and Google AdWords.
- Instagram, Pinterestand Twitter, but predominantly Facebook.
- SendGrid & GetResponse for emails.
- ManyChat for Messenger marketing
- EZ Texting.com for SMS marketing.
- Google Analytics to keep on top of everything.
- G-Suite for documents, spreadsheets and office emails.
What have been the most influential books, podcasts, or other resources?
Traction by Gabriel Weinberg & Justin Mares is a great book about the different channels that you can use an entrepreneur to build traction in the internet world.
I have found blogs by Neil Patel on the subject of how to rank on Google truly helpful.
Other than that, the rest of my reading is for leisure and for pleasure - histories, and biographies mainly.
I would go crazy if I spent any more time on my business than I do currently!
Advice for other entrepreneurs who want to get started or are just starting out?
I would say you need to figure out how much cash you are going to realistically need. Then figure out how you are going to get it.
Keeping your day job is a good option. Or getting your spouse to keep her/his. Just to give you an idea: In my case, the investment was around $250,000 plus five years of my unpaid salary - so, effectively around $1,000,000 give or take.
Where can we go to learn more?
If you have any questions or comments, drop a comment below!
Ugly Duckling has provided an update on their business!
9 months ago, we followed up with Ugly Duckling to see how they've been doing since we published this article.
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