Logan Ensign:
Vitaliy, welcome to Shelf Life. Really excited to have you today.
Vitaliy Simonian:
Thank you. I'm excited to be here.
Logan Ensign:
How about you get us started with telling us about your background and what your career journey has looked like to get you where you are now?
Vitality Simonian:
I can't say it's gone too far, past the DG world or Dr Dennis Gross skincare world. I actually joined the brand right out of college. I did finance in my undergrad. After undergrad I went and finished my master's. I got my MBA Right out of school. I joined the company. I've now been there for almost 11 years. Actually it was 11 years two days ago, so I hit my anniversary point just recently. It's kind of funny because you're studying finance in college, You're thinking, oh, I'm going to come out of college and school and go into banking, I'll be on Wall Street making these big bucks. And now I'm in beauty. Of course I started out doing finance and accounting for the beauty industry, but I'm in beauty and I've been here for 11 years. So I started out with accounts receivable, accounts payable, worked my way up to sales analysis. I started getting the hang of understanding and analyzing the retail business, understanding market trends, then kind of progressed more into the forecasting and demand planning, Eventually budgeting, internal budgeting, operations, logistics. At some point there was some sales background or experience there, some marketing. So, over the years I've definitely worn many hats.
Logan Ensign:
Interesting, and was there something kind of thinking back to when you joined DDG that was compelling about the company to dive into beauty?
Vitality Simonian:
No, honestly, I was just excited to test something new. It's funny. I got the call I did not really have any background on the beauty industry, so right away I actually called the front of mind, who worked in the beauty industry. She was editor, I believe, at Allure magazine at the time and so as soon as I got off the call with the interview call, I called her up and I said hey, have you ever heard of this skincare brand? And she said yeah, I actually. That's my dermatologist. Dr Gross was her doctor, so she was a frequent patient of his. So she told me quite a bit about the brand and she had nothing but positive things to say about it. And so I said you know what, let me give this a shot.
Joel Beal:
And so I went on for another one or two follow up interviews and things just worked out and what was the scale of the company at the time you joined? Based on the number of roles you've had, I imagine it was still a pretty small team, which is exciting because you get a chance to obviously see probably a lot more things than you would have if you went to, for example, a big bank.
Vitality Simonian:
So I want to say the finance department was maybe three people and that's, you know, four people. If you had operations and development Right now our team is probably closer to about a dozen. I think total company and staff wise it was maybe around 30 to 40 employees. Now we're just past the hundred mark. So we've definitely grown over the years and we're continuing to grow.
Logan Ensign:
Well, and one of the reasons we're really excited to have you here, vitaly, is because you touched so many parts of the business and, I think, get to kind of have a unique perspective on how different parts of the business think about problem solving and what matters to them. I think one of the questions we have for you. A lot of folks we talked to are quite interested in trying to better understand trends. You know we're in a post COVID world. Covid taught us that things can move quickly, and so I'm curious, as you think about you know all your roles, but maybe especially today, how you all are thinking about responding to trends.
Vitality Simonian:
That's an interesting question, because I don't think we've ever been really known as the trendy brand, right? If you look at our packaging, we're not the flashy kind. It's not like we sparkle off the shelf when you walk in. Of course, some of our packaging is quite beautiful and a lot of our imagery is done very well. We have a very, very experienced and highly capable creative team, but in terms of trend, we never really thought ourselves as the trendy brand. We don't really follow market trends. We prefer to say that we follow consumer trends. You have a lot of people that have now just kind of begun talking about fruolic and retinol, lactic acid, hyaluronic acid, alpha, beta, and to them these are like the new hot topics, right, but these aren't anything new to dermatologists. Dermatologists have been trying to advocate for the benefits of these things for decades now. So I think it's kind of funny because instead of more stuff seeing the trend and going, oh, let's kind of jump on the trend. I think Dr Gross is kind of sitting in his office and is like ah, finally people are starting to really understand what the benefits of these are. And so what do I mean by consumer trend? Dr Gross has his practice and he's been practicing. He's been a practicing dermatologist for the last almost I mean probably more than 20 years at this point, and we kind of like to call his practice the living lab. He sees real world concerns from his patients and he works to create solutions to those concerns right. So it's not the trend that we're seeing online or in social media, it's more so the trend that he's seeing from his clients at the practice. So I call ourselves the consumer trending brand as opposed to marketing trending.
Logan Ensign:
I like that, and when I think of health and beauty, I think that may be exceptional. I mean, you guys are probably fairly unique in how you think about this.
Vitaliy Simonian:
Yes, we're in the beauty industry, right, but we're more so skincare as opposed to makeup, and skincare that's kind of you know, that's your health, right. So, yeah, I do consider ourselves as part of the health industry, as opposed to more so the front facing beauty or instant gratification type of industry.
Joel Beal:
This is fascinating, I think, this comment you've got this living lab with Dr Gross, which I think is awesome. You think about product development and how you test ideas and you have a very obvious one, I guess, there, which I think is quite unique. Clearly, a lot of these concepts, a lot of these products have been known for a while, as you mentioned earlier. So now it's about how you educate consumers, about how they can help them and really take them to market. How do you approach that? As Logan was mentioning, I think of and you're right, this is probably more the beauty side of health and beauty. You think these days a lot about influencer marketing and, you know, celebrities, all that kind of thing. This seems very different. This is rooted, it sounds like, a little more in science, medicine. I'm curious how you bridge that divide. Obviously, you're trying to drive consumer demand, you're trying to sell more, and what's the approach that you take there?
Vitality Simonian:
From the get-go. When I just started with the brand, it was obvious that education was our number and priority, right. I want to say education is how we market. We know we don't have these showy marketing campaigns to just drive the consumer in to buy our product. Our job is really to amplify what Dr Gross teaches in his practice, and so we use education as kind of a means of marketing his message and what he's trying to teach it. Obviously, a million to 10 million people can visit Dr Gross on a weekly basis, right, to really learn about the benefits of a lot of these ingredients and formulaic approaches to product. But social media is a tool that you know has been able has really been helping us amplify that message. So what we're doing is we're trying to compact these educational sessions that Dr Gross has in his practice into these 30-second clips. So, in other words, we're trying to pass this educational message this consumer via Instagram, via TikTok, through Twitter, through our own website, through YouTube, right? So it's great to see that we now have this tool and that's what we're using for education. We're not using it to kind of just grab your attention and say, hey, buy this product. No, it's really for us to pass on Dr Gross's message, and that's what we're doing. That's how we market.
Logan Ensign:
You know you do sell through some traditional beauty channels, and so, as you work with retail, do you find that there's education you're doing at that point as well?
Vitality Simonian:
Yeah, of course. I mean we have a very large sales team that's on the ground and they're across the country, it's somewhere international. They've been taught by Dr Gross directly. You know we have training sessions. We don't just bring on salespeople and kind of just send them into the field as just boots on the ground. They go through pretty rigorous trainings with Dr Gross himself. We have a very talented education department that really trains not only our own internal staff but also, you know, we travel to Sephora events where we train their cast members, and cast members are pretty much the team that they have on the ground. So we do definitely have training within the actual retail stores. We have a means of training and ultimately, I mean right now that the consumer has never been more educated in our lifetime than they are today. Right Again, there's just so many tools out there, whether it be social media, whether it be word of mouth, the internet, and it's just, the consumer already comes in with a certain level of education. It's just that we're there now to guide them and answer any additional questions. There's just so much data out there and I think the biggest concern for us right now is misinformation, and I think that's what we're kind of battling right now with our education, the way that we market things.
Joel Beal:
How do you combat that misinformation, especially in the health space? There's so many different ideas, fads, et cetera. Again, you're a brand that's really rooted more in science. You're founded by a doctor here. Do you find that that's best handled by having your salespeople go into stores and doing that one-on-one training and making sure that it's that personal touch? Is that through marketing and building up a brand that's really based more in the science?
Vitality Simonian
The ultimate way to really battle misinformation is to address it directly, and I think DG, or Dr Gross, does that quite a bit. He addresses a lot of the misconceptions that are in the street. You'll see quite a bit of videos that he posts up online saying this is what I'm seeing people do and unfortunately, this is the incorrect way of doing it. When it comes to dosages of clinical ingredients, there's quite a bit of misinformation as to how to really apply them and how often to apply them. There's a basic message that Dr Gross likes to pass on is red skin, red flag. So I think the best way of really battling a lot of misinformation is to just attack it head-on.
Joel Beal:
I'm also curious to understand. You said you have a pretty extensive sales team. They're out visiting I know you sell through Sephora. What's the goal for that team? Clearly education is a part of it. Maybe that's primarily what they do. My understanding in the beauty space is that's a more common approach. It's you're going into these stores. There's a lot of education, a lot of really getting closer to the customer, more so than we might see with some other consumer brands where they ship it in and do their marketing but they're not going into the store and partnering with that retailer. So I'm curious what that retail execution side of the business looks like for you.
Vitality Simonian:
So it actually is a partnership with the retailers. The sales team is constantly going into store working with the team that's in stores Sephora's team yes, they are a sales team, but they are technically educators For the most part. I think you hear that a lot of the sales really rely on commission as opposed to salaries. It could be anywhere between 40% salary, 60% commission. A lot of sales teams work on. For us it's quite the opposite. We're not incentivizing the teams to just sell, sell, sell and push and push and push. No, we're incentivizing to educate the consumer. So we don't want that one sale, we want that consumer that's coming back and really understanding how to use these products and to benefit themselves With the importance of that education.
Joel Beal:
Does that make you be that much more careful about which retailers you work with? You mentioned Sephora. You obviously have a great relationship there. But when you look at selling through more retailers, some are probably going to be more inclined to allow you to come in and educate. That's more of their ethos. Others they just want you to ship in the product and sell it. Curious how that makes you think about distribution.
Vitality Simonian:
We're hearing pitches from retailers left and right, other retailers and there's quite a bit of other retailers that are fairly big and named competitors to Sephora and they've been reaching out to us for years now. We are very cognizant of who we work with. We're very cognizant of the partners and what their relationship is with consumer. We find that our partnership with Sephora is the best approach for really meeting the consumer's needs and for getting Dr Gross's message out. We're not just trying to ship pipeline into every single retailer that's out there. Like I said, it's not about the sale, it's about the consumer.
Joel Beal:
It's such an interesting concept because we see across a lot of brands that tension. Obviously, everyone is looking to sell more, they want to get into more channels, they want to sell across more retailers or regions, et cetera. Yet it's so easy to get overextended. You start putting your products in places where, yes, you're going to sell a little bit more, but you can damage your brand. It's very interesting hearing from you great products, You've got a great partnership in saying, hey, let's keep working on this one. I'm sure you look for other opportunities as well, but not just taking everyone who's interested. That requires a lot of discipline. Again, it's something that we see. We see brands expand out and then start to pull back as they realize okay, that's a lot of work. We're damaging our brand. We need to optimize.
Vitality Simonian:
Yeah, we're not perfect either. We've dipped our feet in other waters. We've tried out some retailers which we were maybe a little bit hesitant on. It just didn't work out. We agreed to mutually. Part ways we didn't hurt our brand. We try new things every once in a while, but we know the heart of the message that we want to really share. It's through very, very particular partnerships and with partners that really believe in the same exact mantra as we did.
Joel Beal:
Something that we know about your business is that you have started selling devices. It's a bit of a new category. You start talking about different supply chain, different, I imagine, sales motion. Maybe there's more similarities than I would normally expect. I'm curious to better understand what led to the decision to expand. What's the process of entering, kind of a new vertical?
Vitaliy Simonian:
Yeah, we actually entered the device market, I want to say maybe 10 years ago, maybe a little bit more. We entered initially with the steamer device that we had, which did very well for us, and the most recent I think one of the hottest items on the market and doing a phenomenal job, is the LED faceware device that we have. I think it's a little funny that it's a shocker for some, you know, for I guess the way that you made it sound is, if you're surprised, the device market. But I don't think it's surprising at all. I mean, we're a skincare brand, right, we're not a moisturizer and serum brand. You know, once again, our goal is to bring the practice home to the consumer, right, we want to bring Dr Gross's message and what he's doing in his practice to the consumer so that they're able to kind of replicate that at home in a safe environment and safe way. So we're constantly developing new technologies, and by technology I don't mean a device, I don't mean the actual steamer or the actual LED device itself. I mean the technology is. It's a means of delivering an ingredient or a for me, leg benefit to a certain target air. A moisturizer's technology, right, that's a means of delivering a benefit to a certain area. A serum is a technology, and so is a device right. So a device is a means of delivering the benefit of light therapy to the skin.
Logan Ensign:
What about more on the the execution side? Did it present new challenges in terms of production and transportation and forecasting and planning, or did you even find through this that it operates fairly similarly or you were well equipped to handle from a supply chain perspective?
Vitality Simonian
Supply chain wise. Surprisingly, it isn't that much different. Of course, now you know you have the batteries that you have to worry about and, as I'm sure many people have heard already, there are certain regulatory requirements that we have to buy by when it comes to devices and like batteries and light therapy in general. There was quite a bit of a learning curve, but not as much as some would think. What really helped us succeed in this market was I can't say we were the first market movers, for sure, but we definitely one of them and we definitely did it best, which is why our name is really attached to a high end LED device product. So right now, I want to say that we probably have the number one selling LED face mask and there's quite a bit of imitators out there. So you know, imitation is a form of flattery, but I do want to consider us as a first market mover and it's really tough to knock out a first market mover. It's tough to knock out a king and that face or device is a king.
Logan Ensign:
We find new product launches, from the conception all the way through to execution, are really key to people's overall strategy. So I think you've mentioned two key concepts right First mover or near first mover, great brand but do you have other perspectives on why your new product launches go well, or how do you think about that sort of in the whole life cycle of new product launches?
Vitaliy Simonian:
This was an unorthodox life cycle of a launch, because we launched the face or device five or six years ago and it hasn't been till like the last year and a half where it's really resonated with consumers and in the market. It's really interesting because it's not as if we're constantly pushing out marketing. Behind it there's quite a bit of organic growth. You know we're seeing the device in Netflix shows, we're seeing the device in Hulu shows, we're seeing influencers and celebrities posting about the device and these aren't seated placements. A lot of these things were surprised and shocked to see like, oh, look at that, this person posted about us. Holy crap, did you see that? So I think that actually speaks for the product itself. You know there's two life, there's two life cycles to launch. There's the marketing and there's kind of the regular run rate, right. So a product coming out the gate, the success of the product net gate is based on the marketing itself. If it doesn't come out well, chances are because it wasn't didn't have a strong enough marketing campaign behind it. The consumer wasn't educated to the point why they need to. They understood why they needed to try this product, why it would help them. How is it beneficial? So at the very beginning it is very much the product. After maybe a six week, and sometimes it could be as long as a six month period, that's where you really start to understand whether the product resonates with the consumer themselves. Did the consumer come back because they understood the benefits, because it works for them, it's beneficial to them? So now they're replenishing on it, they're purchasing it on it again, right? So now we really have an understanding of the run rate and the success of the product itself versus the success of the actual marketing campaign.
Joel Beal:
I'm visualizing the sales curve for this product right now, which sounds a little bit unconventional yeah, it is Versus your typical launch and what that looks like. Was that something that you saw coming as it really started to take off? Was that something that caught you completely by surprise? Were you able to forecast that? Okay, I mean, if it happened in the last couple of years, when there were all the supply chain issues, did you find that that impacted things?
Vitality Simonian:
I can't say that I am too surprised because even over the past five or six years we have had an issue of really producing to demand. Not to the extent that we're having, you know, over the past six to 12 months that we've seen recently, definitely not to that extent. But you know, the demand was there and it was gradually growing at a very healthy rate. And then it's just this, you know, all of a sudden this spike or this foraging that we've seen, and now it's just like are we need to get ahead of this? So now we're planning, like two years down the line as opposed to, you know, the next six months of inventory or 12 months past that we actually we don't even think we've hit the run right yet. We still don't understand exactly what the average, you know sales volume is, because every once in a while you know, every other month or so there will be a retail that's out of stock and we just can't fill them completely to their full demand. So we're still learning. But at no point did I question the possible success of this product. Our CEO, kerry Gross, dr Gross's wife, who has been, you know, the key person to really bring the brand to where it is today. She had no doubts about it, and I mean, she's the one that lives with Dr Gross on a daily basis, right? So she knows where his mind is and she knows exactly what he believes the true benefits of any of his products to be.
Joel Beal:
Do you find a lot of cross-selling across? You know people that buy your LED device. Are they also gonna be buying more traditional products? At least in the way that I look at it, is that something that you look at or do you find that it's kind of a different consumer?
Vitality Simonian
Funny, you're actually hitting on a lot of key points. We actually have reached the point of the life cycle of this product where it is a new customer acquisition. It's really hard to believe because the product is a high price point product. Right, when we look at customer acquisition skews or products, we typically look at lower cost products because you know the consumer. When they're hesitant to actually dip their feet into the water and really test out a new product or formula, they're you know the price point can be a deterrent. So a lot of the new customer acquisition skews or products that we like to test out are much lower price points. We're seeing this across our own website, which where we have the most data sets, you know to really understand the consumer behavior and all that. And we're seeing that. You know customers are buying or trying our brand for the first time through the Face Word device and then they're coming back and trying the Alphabet Appeal, which is our flagship skew. That's what the brand was built on. They're trying the new moisturizer, they're trying the new serum. It's a very unusual customer acquisition product, for sure. But, like I said, when the product resonates with the consumer and the consumer understands the need and the benefits and the results, then you've not only want to sell, but you've won the consumer's heart.
Joel Beal:
I think there's going to be a lot of jealous people listening, thinking of wow, our customer acquisition strategy is selling our highest price product. Just thinking of this whole story and you know, I guess in my mind this was a more recent launch you're like, no, this is seven to eight years in the making to get to this success. And it was an instant. You know, it was solid and it's gotten better and better. That's an amazing story.
Logan Ensign:
Yeah, I just hear discipline, discipline in making sure there are results, discipline in maintaining the brand, sticking with something that people believed in it's so it doesn't happen overnight, exactly. Last question we have for you, vitali, because you've worn a lot of hats, I think you're uniquely positioned around finance and sales and planning and understanding consumers, and a lot of people are asking the question right now what do we make of this market? Right, we've got these competing forces around what we've got? Inflation and pretty healthy consumer demand, but also you know other signals that companies are being more conservative. And so, from your vantage, what do you make of the market today?
Vitaliy Simonian:
If I had the answer to that, you know, I probably would be working in Wall Street. I'd be the head fund, exactly. You know, let's start kind of within our own industry. You know the beauty industry. I think there's a lot of outside or external entities that are really understanding and starting to really realize how beauty is important and how successful a beauty brand can be or a skincare brand can be, because there is a need. Where there's a need, there's demand. It's a very tough market. Competition's very fierce and the only tool we have is to really fight the misinformation that's out there from brands. You know there's a lot of people getting into the skincare world that don't really have a background in, you know, skincare or dermatology. There's a lot of celebrities that are jumping into skincare right here. Hearing a lot of these celebrities that are starting their own brands, I don't know. Would you buy a car engineered by a celebrity? Personally, I probably would think twice about that. The market itself you know, economically I do think it's a very skeptical market. There's a lot of new trends that we've never seen in the past. Especially when we're dealing with inflation. You would expect certain things to happen, certain key indicators to flash, which we're not seeing in the market. I mean, inflation was at over 10% not too long ago and yet the markets are still some of the hottest markets. Some would still say we're in the bull market at this point, right now. Right, it's definitely one of those areas where you're trying to really understand what's happening. The way that we're approaching right now is we're prepared for anything to happen. Right, we're building two to three different scenarios. Financially, you have to be prepared for the worst If there is a recession, if we are in a recession or a recession does come, we're not invincible. We likely will feel the impact. So we're prepared for our decline in sales and you know, we have certain strategies that we will implement. We want to make sure they're flexible. If revenue drops by a certain percentage, you have to be ready to make certain cuts. So we have scenario A, we have scenario B, there's a doomsday scenario and, yes, you know we're part of what's the saying. There's two recession proof industries. There's the alcohol and there's the beauty industry. You drink when you're happy, you drink when you're sad. Well, beauty, like I said, beauty is not just cosmetics. It's I think it's, I consider it personally a health industry. And, of course, what do you do? You put your health above all. So we just happen to be very lucky to be in this particular industry. But we start to be very cognizant of the consumers. Right, we have to be cognizant of the average everyday consumer, the blue color workers, and so we have to be very cognizant of our price points. We actually haven't done a price increase for the past five years. This was the first time we ever done one. So over the past five years, as our own costs have been increasing year over year over year, we've been really absorbing a lot of that. We haven't been passing that down to the consumer and fortunately it got to the point where, you know, we couldn't any longer. So we did have to look at a price increase, but once in five years is I'm sure. If you ask anyone in any industry to only increase the prices by, you know, once in five years, that's unheard of. And we understand. You know we're not the average pharmacy moisturizer that you find for six or seven dollars, but the ingredients and the raw materials are efficacious for a reason. You know the raw materials that we use and they're expensive and that's what leads us to have to really set these high price points.
Logan Ensign:
That really is amazing, Vitaliy, for five years in today's environment, not to have gone through a price increase. I mean, we work with a lot of brands and that is genuinely the first I've heard that. Yeah, as we're talking, it just keeps coming back to me discipline and sort of really preserving the brand. It's really cool to hear about that. Well, fantastic, Vitality. Really appreciate you joining us today. So many interesting insights.