The Madison Reed Mission:
“To make luxurious, at‑home hair color with ingredients you can feel good about.”
In 2013, founder and CEO, Amy Errett, followed the untraditional path of leaving her position as head of the San Fransico office of venture capital firm Maveron to raise over $40 million to build her own business from scratch. Madison Reed, named after her daughter, was built on her ideals of integrity, innovation, and love when it comes to the customer and her hair care. There was also the more concrete incentive of a $50 billion hair care industry ripe for disruption. Errett had observed the success of the razor subscription startup Dollar Shave Club and became obsessed with finding the equivalent ritual in female personal care.
As the old saying goes, “about 50 percent of women will be 50 percent gray by the time they turn 50.” In actuality, in the United States, about 85% of women dye their hair about every eight weeks. At the time, the hair color industry was a $15 billion business in the US split between two polar opposite options: self-dying one’s hair at home with a drugstore box of dye costing a couple of dollars or booking a salon appointment that would cost hundreds of dollars and a significant time commitment. Errett saw a unique opportunity to enter with a modestly-priced product that was high quality, easy to use, and backed by a team dedicated to customer experience. Equal parts consumer packaged goods brand and tech startup, Madison Reed revolutionized both the product and the process to bring 21st-century hair color into the hands of the modern woman.
As a company, Madison Reed set out to develop salon-quality hair color that could be delivered to the door. Working with a private Italian hair coloring manufacturer, they developed a formula to appeal to modern customers concerned with transparency and safety. Starting with the ingredients, all irritants and harsh smelling parabens were removed. Allergens like gluten, which posed as serious health risks to those allergic to it as ingestion would, were eliminated. Instead, naturally nutrient-rich oils were added to avoid the dreaded “flat” look of a traditional drugstore box dye job. What resulted was 45 various shades of “affordable prestige” permanent hair color.
To accompany a redesigned product, Madison Reed also revamped the user experience. By integrating technology into every step of the customer journey, from choosing a hair color to applying it at home, customers are given more control and customization opportunities. This technological approach helps support and guide, cutting down on human error and improving overall satisfaction with the product. There will be more on this in my presentation on Wednesday!
Officially there are two main ways to purchase Madison Reed’s hair color online: buying a single box or subscribing. However, the latter purchasing method is the foundation of the business. An average customer who subscribes will automatically receive her perfectly-selected and beautifully-packaged hair color every six weeks. At $19.95 for each “color kit,” Madison Reed collects $160 in annual revenue per subscriber. And that estimate doesn’t include extra tubes for long hair or other add-ons such as shampoo and conditioner which can be included in the auto-delivery order.
This subscription business model has helped fuel Madison Reed’s growth to date, with 70% of the company’s business coming from recurring orders. “Repetitive usage,” according to Errett, “is why this business has a chance.” Though the company hasn’t publicly commented on its profitability or revenue, only confirming that the business continues to double on a yearly basis, Forbes estimates that revenue has grown from $1 million in 2014 to upwards of $15 million in 2016.
Errett describes the strategy for Madison Reed going forward as the following: “We’re seeing now that omnichannel is critical in our business. It’s very hard to tip the scale if it’s all online.” Taking to heart this sentiment from its leadership, the brand has continued to expand its offerings and distribution channels to capture more of the market.
Starting with products for purchase, their main range now includes the 45 shades of permanent hair color, 8 shades of hair “gloss,” 6 shades of liquid-based and 6 shades of powder root touch-ups, as well as color-protecting shampoo and conditioner. They’ve also begun to beta test for a male coloring product, recognizing a new potential area for growth as it is now estimated that about 20% of men color their hair.
Following in the successful footsteps of startups like Warby Parker, Madison Reed has also expanded by adding brick-and-mortar facilities called “color bars” in urban locations around the country. First in New York City, and then followed by San Francisco, these physical Madison Reed locations offer reasonably-priced and timed salon services. Menu items include a $35 blow out and a 45-minute coloring session for $45. What began as an experiment has proven so popular that in October 2017 the company raised another $25 million in funding from investors including Comcast Ventures, Norwest Venture Partners, True Ventures and Calibrate Ventures (bringing their total funding raised to $70 million), in order to open 25 more locations. These new branches will all feature 1,500 square feet of space staffed by certified licensed colorists using Madison Reed products. Partnerships with traditional retailers like Ulta, Sephora, and QVC have also increased the brand’s exposure and sales.
And that hasn’t been Madison Reed’s only move to diversify from e-commerce. Partnerships with traditional retailers like Ulta, Sephora, and QVC have also increased the brand’s exposure and sales.
Madison Reed is a five-year-old, 85-person, hair color startup based in San Francisco. Seizing opportunity in a stagnant market with the introduction of a well-formulated product and well-executed customer interaction, the company has seen rapid growth and great brand loyalty. This has not only given Madison Reed the ability to expand but also necessitated constant innovations and additions. However, the company has never lost sight of its original mission to serve women the best in hair care. As Amy Errett says, “The company is named after my daughter, so you can imagine that this is personal.”
- Are there different factors that you need to consider when trying to enter the men’s hair coloring market? How do they compare as customers to your current customers and how will you address those different needs effectively?
- You recently decided to stop retouching your ads. Can you speak about some of the reasons why Madison Reed decided to do this and how the decision was made? Were you influenced by any other companies or campaigns to join the movement for realistic advertising?
- What fueled the decision to go brick-and-mortar with the Color Bar locations and expansion of services? What makes Color Bar different and innovative in this landscape?
- Right now you have lots of different channels, including human-powered and AI-powered, to serve your customers and address any possible issues. Do you think you will always maintain this multichannel approach or will there come a time where it can all transition to digital services?