Comparing retail prices online is a far cry from formulating custom hair color. But that didn't stop brothers Tamim Mourad and Omar Mourad and Cory Rosenberg from going all in on their latest startup, eSalon, based in Culver City, California.
When price-comparison shopping site PriceGrabber was sold to Experian in 2005, the three founders--along with Francisco Gimenez, a former employee--decided to dive blindly into the beauty industry. The outcome? A custom hair color startup that reeled in a whopping $17 million in 2014 revenue. The five-year-old company also recently celebrated with a second Allure Best of Beauty Award.
eSalon's product, Made for You Custom Hair Color, won the award for best single-process home color, which if you know anything about hair color is pretty revolutionary. The simple process requires customers to fill out a questionnaire about their hair and desired color. They are then matched with a colorist who analyzes the answers to create a perfect formula. The order is formulated within three business days and shipped in a box that includes personalized application instructions, dying tools, and shampoo and conditioner. It's a hybrid of box color and going to the salon.
With roughly 2.2 million units of about 120,000 unique color formulas sold, eSalon is putting the pressure on hair salons and making a big dent in the world of fast-growing businesses too. Coming in at No. 74 on this year's Inc. 5000, the company's 2014 revenue ballooned to $17 million, up about 4,048 percent from 2011.
A Hair-Raising Idea
After PriceGrabber, the three founders--and former vice president Gimenez--came together to begin a new venture. Tamim was having dinner with a salon owner when she mentioned the large gap in results between professional hair color and boxed dye. The difference stems from the way a colorist applies the dye and the use of custom formulas. That got him thinking about how years before he heard of a web-based custom-multivitamin service. Then the light bulb beamed on. "'What if we combine the two models?'" he wondered. Tamim came up with the idea to leverage the Internet to provide custom formulated color, like that of a salon, that could be applied at home like box color.
Of course, the learning curve was pretty intense. The founders started off knowing next to nothing about hair color. "We were all more or less self-taught, and a few of us really immersed ourselves in technical guides and educational books on hair color," says Mourad. "This helped to create all of the rules that inform our algorithms, as well as our personalized application instructions."
With technical aspects in place, they had yet another challenge before them. People are dissatisfied with box color, sure. But could they convince these people that eSalon has the solution?
Growing Your Hair Out
Gimenez, eSalon's CEO, quickly realized that marketing and educating consumers would need to be the top order of the day. A banner ad for eSalon custom hair color just wasn't going to cut it, he adds.
He explains how the magic happens when people understand the service. People are much more likely to sign up after they've read an online review. So all the marketing efforts were shifted and directed toward driving people to read articles about eSalon and creating content internally that objectively described the benefits of using the service.
Since then, the company has been working on building out its product line. It recently launched The Match-Up, a subscription service in which each month subscribers manually select or are matched with three hair care and styling products that are then sent to their doorsteps.
This expansion has helped eSalon market to a younger crowd. Naturally, the main demographic is older women with more than 30 percent gray hair who color every four to six weeks. However, developing relationships with younger women early on can help conserve the company's relationship with customers as they age. "For these clients, hair color is more of a necessity than a luxury, and we are able to provide them with an accessible solution without compromising quality," says Rosenberg.
Moving forward, eSalon plans on interacting with its consumers even more. A new video consultation feature is being tested to determine the value in consumers speaking with a colorist face-to-face. So far, there's been a 20 to 30 percent increase in reorder rates for those consumers.
Even with these new ventures, eSalon is just barely scratching the surface of an industry worth more than $2 billion. And with Baby Boomers still gripping on to their youth, the prospects look even brighter for the company.