e.l.f. Cosmetics: Joey Shamah. The Dollar Store Formula That Built a Cosmetics Giant

Transcript from https://podmenti.com/t/5e2a3397292da58c

Okay, so five dollar f ninety nine cents whatever flat rate and
You're gonna sell it through the website.
Again, it's complicated and but the other question I have is
How are you gonna handle the logistics? I mean you have it sitting in a warehouse.
But
Who's gonna package this stuff up and send it out?
So honestly, we didn't even think about logistics. We were just
Following Glamour magazine's lead.
They wanted us to make a website so we could get in the magazine.
We didn't think we were gonna get an order.
Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements.

Guy Raz and on the show today.
Joey Sham started a
dollar cosmetics brand that turned into a billion dollar business.
Among the thirty three cars that lined up to race the Indy five hundred this year, one was particularly notable. It was painted in shades of pink and
And its driver? The only female competing this year, Catherine Legg. But perhaps as notable as the driver was the car's main sponsor. Not Penz Oil or Firestone or Coors Light, but rather
Ef Cosmetics, the first time ever that a beauty brand sponsored an indie car. And if you know something about ELF, that's not entirely surprising, because ELF was essentially built as a disruptor brand back in 2004.
At that time, people either bought the drugstore, where they were cheap, or at the department store, where they cost a lot more.
And the assumption was that price equaled quality.
Drugstore makeup just wasn't as good as the high-end stuff.
But when ELF launched, it upended that model.
At the time, discount makeup cost about five or six bucks for a lipstick or blush.
But elf products, all of them?
cost a dollar.
And the thing is, they didn't look or feel cheap.
And it meant that customers could take a risk of trying out more of their products.
Which made the brand particularly popular with teens and tweens.
When Joey Shamma and his original partner, Scott Vincent Borba, started Elf,
They ran into a lot of roadblocks.
For starters, the big box retailers weren't interested. They didn't think there was a market for their products.
But within a few years, the brand started to gain traction.
Joey sold most of the company back in 2014, but he managed to scale it to a pretty successful brand in 10 years.
And today
ELF is publicly traded with a market cap of around$4 billion.
Not surprisingly, the$1 price point has gone away, but the products are still relatively inexpensive, between$5 and$15. As for Joey, he grew up in Brooklyn in the 1980s and 90s.
His dad had an apparel business, and most of the people in the community, including Joey's family,
Were of Syrian Jew.
We are very tight knit community.
We do a lot of things together. We have a very strong network.
Um and we um are very entrepreneurial in in spirit. You know, I I came from
A community of merchants. Like we buy product, we sell product, we know how to do that.
And that's something I always aspired to. I wanted to do it differently.
So I had a passion for making money.
I had a passion for
Making a name for myself?
And I had a passion for making an impact. Whatever was gonna happen, it was that was gonna happen.
I remember when I was in high school, I was president of a teen division of our community center.
And the the woman who was running it at the time said, I don't know how, but I know you're gonna be successful.
And I really go back to that.
um that meeting that really stuck with me of saying
I'm gonna be successful. I don't know how
Um if it was beauty, it was beauty. If it was yoga mats, it was yoga mats, it was apparel, it was apparel.
It was gonna happen.
Okay, so uh you
grow up in a home of, you know, your dad's an entrepreneur and did you
always, you know, were you kind of encouraged from a young age to to join the business? Was that you were sort of groomed to do?
Uh, I mean, I think my my parents and the and they really afforded me the flexibility to follow what I wanted to do.
Um, I think it was a possibility, but my personal fear
in life was joining my father's company.
And not being a productive member of it and just being the boss's son and not really proving my worth and being successful on my own.
Um, and that was my biggest fear.
Yeah.
But I think you did wind up working with your dad for a while, right? I mean I I know that for college
Uh you went to NYU and you studied business, but I think you also worked with your dad during that time, right?
Yeah, so I worked with my dad in his apparel company as I was in college. So I would
I was learning the basics. I was learning what it
What a purchase order was. I was learning what a system was to track orders, what delivery dates meant.
how to sell. I did a little bit of sales for some of the closeouts or the leftover inventory that they had. So
That's how I really
Got my feet wet.
Okay.
Uh I I wanna I wanna go to
how this begins. Because what I've heard is it's two thousand two, and you're at a party in Los Angeles and you meet this guy, Scott Vinson Borba. First of all,
What were you doing in Los Angeles? What was this party uh
You're a senior in college at that time?
Yeah, so uh that that that's a story that's out there, but that's not the real deal. Okay, good. Okay.
So actually I was introduced to Scott Vincent Borba through a mutual friend.
Um and the concept was
That's got was it
A beauty Maven.
He really understood the beauty industry. He worked at a lot of different
Beauty companies. He was one of the first
Employees at a brand called Hard Candy.
Yeah, he was at Neutrogena running the Neutrogena color cosmetics brand. And he had this idea
That he wanted to create a line of cosmetics.
And we were my father was looking
Maybe with me to invest in a business and to help and that's kind of
Where it came from.
So basically you and your dad were kinda looking around for some ideas and somehow somebody got to Scott and said, Oh, I know these guys in New York who are looking to start something like it was
It was like
Basically that.
Basically that.
Okay, he was living in LA, right? Or was he living in New York?
It was funny'cause he was living in Manhattan Beach, California, and I was living in Manhattan Beach, New York. So that was just a funny coincidence, but he was in California.
What was Scott's concept?
Scott's concept was
A line of cosmetics.
Similar to that of of hard candy, it was a value line of cosmetics.
When we looked at the landscape of the retail market.
There were still a lot of big box retailers.
Two of the biggest ones in the early two thousands that were growing exponentially.
were the f dollar chains. So it was family dollar, dollar general. They were
Growing to five, six, seven thousand doors.
And the problem they had
Is they didn't have quality and consistency on their shelves.
So basically they either had an unbranded
No focus on quality brand where it was
Two items on a blister card.
For a dollar, a lipstick, and a nail polish or whatever?
Or
They had access to some
Branded merchandise that was left over.
From a drugstore or was a return or it was extra
So you had the covergirl colors that you didn't want, maybe you could find the one you wanted. It was at a discount, but it wasn't planogrammed and it wasn't consistent. So the idea is hey.
Let's actually, instead of a plain wrap
Lipstick.
Or a seven eight dollar
you know, Covergirl or Revlon, or whatever costs, let's make something that is branded as cheap as the plane wrap.
Exactly.
But you're trying to figure out this kind of wormhole, right? Can we get something good enough?
that is really cheap to manufacture that we can sell for a dollar, right?'Cause it's a dollar store.
Is that what you're thinking?
Yeah, basically what we learned really early on is when you break down the cosmetics
To formulations and componentry.
Formulations, yes, you can hit that price point.
The real
Artistry, if you may.
is in the component tree where we couldn't afford metal, we had to go plastic, or we couldn't afford things that were multi parts and it need to be one part or one mold extrusion.
So we needed to really figure that part out.
But the actual cosmetics we were able to hit that
Dollar price point.
Okay, so uh you guys are on board with Scott. You're gonna form this business
And you guys had
relationships in Asia with
apparel businesses, so
Tell me a little bit about how you started to see whether you could actually do this. Wha what did you
Who did you start to talk to to see if you could actually
Make this stuff.
For
You know, for for cheap.
So
I headed over to Asia.
Uh, it was the summer of two thousand and three.
We had one of my father long time
Office managers, was a very entrepreneurial guy.
And he introduced us to the first factory that we worked with.
And I remember trying on the mascara in the factory, seeing if it was waterproof, had no idea what I was doing.
So this was in August.
Two thousand and three.
And it took the better part of
Ten months.
Uh it was June two thousand and four when we first had product to sell.
So let's let's kind of dig into this.
J I'm just thinking about like
lipstick, for example, right? It's like
Whatever goes into the actual lipstick and then you you put it in the lipstick container, which is plastic and it's got a cap on it, and then it's gonna go into, you know, a a
what's it called? A a blister pack, right? That you that you can put on a shelf or something like that.
How do you actually make that for a dollar?
I mean less than a dollar, sorry, much less than you gotta sell it for a dollar.
So there were products out there.
We weren't the first person to sell lipstick for a dollar.
We weren't the cheapest guy selling lipstick for a dollar.
We were just creating a brand around it.
We were creating an em emotional affinity. We were making sure it looked good and it felt good.
But still, help me understand, like
Yeah um you know, um
blush, you know, or uh a powder. Um
Mascara. How does that
Just the the the container.
And the brush and then the actual cosmetics for it's gotta be like fifty, sixty cents.
At at most so you can mark it up and make
Some margin.
So it's about it was about half of that.'Cause our target could
Cost was about thirty five cents.
angle everything we sold. We sold it for fifty nine cents.
So they could retail it for a dollar.
Right, of course.
How do you make it for how do you make
Something like that for thirty five cents.
Well, that's what it is what I'm trying to say. That's what it costs. Wow. Like that's how much it costs everybody. Now, yes.
You can put active ingredients in yes. This was twenty five years ago, and yes.
There are more expensive componentry and finishes and all that.
But you're also paying for
The corporate overhead. You're paying for the infrastructure. You're paying for the spokespeople. You're paying for the marketing campaigns. You're paying for the shelf space. You're paying for the returns.
You're paying for the warehousing, and all of that
If not done efficiently, it won't work.
But when you look at a pure cost of goods sold across the market
For what we wanted to bring to market.
It was not that challenging.
How are you guys um I mean you had Scott involved, he was in LA
You're in New York.
W were you working out of uh the offices of the apparel company, you know, you're working with contractors. Scott was
In in full disclosure, still working for other cosmetic companies, but working for us on the nights and weekends. Um, he was doing the product development.
So
Yes, we did use my father's apparel office.
My father uh is a par company had a warehouse.
In Edison, New Jersey. So we were definitely leveraging anything we could.
Across my father's supply chain and we were, you know, working nights and weekends when we needed to.
So you have uh you identify a manufacturer in China.
And how many how many skews are gonna be how many different
product you gonna make.
So thirteen categories we started with.
And sixty seven SKUs. So we had eyeliner with a sharpener.
We had a pressed powder that had salicylic acid in it. We had a few lip glosses. One of them was a plumper, one of them was
Inspired by Stilla, which was a high end brand at the time.
Um an eyeshadow that had four colors in it, so a quad of eyeshadows.
That was you know, it was across eyes, lip and face.
Eyes, lips, and face, which is how you came to call it.
Health.
Eyes lips.
Face, right?
Exactly.
And who
Who were you thinking were your competitors? Did you think that that Maybelline and Revlon and L'Oreal were your competitors, or not really, because they were
they were charging four or five times the amount that you guys would be charging.
In terms of the space we were trying to get to, yes, very much. Maybelline covergirl.
There was some smaller brands, NYC and Wet and Wild.
Those are more of our core core competitors.
Because they were the value brands. Even Rimal London.
But both Rimmel London and NYC were owned by Cody.
Way and Wild was a standalone.
But that was the problem.
In the early days.
That you had a few incumbents
That owned a bunch of brands and controlled all the space at retail. Yeah.
So you had L'Oreal, which was L'Oreal and Maybelline. You had
P and G which owned Covergirl at the time.
So there was no room to you to like box your way in two feet of space because it was all controlled by four or five companies, even if it was twelve brands on shelf.
And and so here's a question for you.
We know from from all the work we've done on this show over the last ten years that
the margins on cosmetics can be incredible. It it's like it's like vitamins. It can be an amazing business if you do it right.
Um
So the raw materials, even high end materials, are not that expensive, and uh essentially a huge chunk of their
costs or marketing, right? Like it's if it's Revlon, it was Cindy Crawford, right? Or Cindy Crawford, Halle Berry. Yes.
And so that but that gives them a lot of reach and a lot of publicity.
You're saying that that
is a big reason why even the sort of the the value brands like Covir or Revlon were comparatively expensive.
Yes.
a slide in one of my earlier sales decks that had, you know, if you look at the cost of the lipstick
How much is actually in the lipstick versus going everywhere else?
And that's you know, we took that
apparel mentality.
from my father's business of you buy something, you mark it up, you sell something.
As opposed to you buy something, you pay to market it.
You pay to get shelf space.
You pay to promote it.
And then you sell it.
And we took out all that middle.
And we were just
Delivering value to the customer.
I mean it's interesting because we have done brands on the show, not just cosmetics, but let's talk about cosmetics for a moment, that have very deliberately
priced their products
uh higher price point to signal
quality to signal
Luxury.
Uh so there is that strategy too.
A thousand percent.
I mean so much so.
That one of our biggest obstacles
In the early years.
was retailers
Afraid to put our product on shelves.
Yeah.'Cause they didn't want to trade the customer down.
If they're selling a six dollar lip gloss
And I'm selling a dollar lip gloss and they customer buys mine over theirs.
Then they just lost five dollars of of sales.
And by the way, the first order uh how much w do the first order cost?
Roughly, did it cost you guys?
Yeah.
Uh we it was a hundred and fifty thousand dollar order. And this was basically an investment that you guys
put into it. You guys put this money into it.
Yes. We bought the we bought the goods. It was one container. Yeah. It was about six hundred thousand pieces. And the strategy was
While we're manufacturing this, we're gonna start to pitch dollar stores, dollar general. Is that what you thought you would do?
Yes.
Um we had a sales rep agency for Dollar General.
Um, I remember being at that meeting.
Um we pitched the whole line. We went to Dollar General and Family Dollar.
And we said we've got the answer for you quality over quantity.
And they
Politely said we we like what you're doing.
But we are committed to quantity over quality.
But that was just
A few of the dollar store.
Location. Did you did you try to approach others?
So we went there's a trade show called E CRM. Yeah. You meet a lot of uh
Retailers, you're kind of guaranteed a meeting, a twenty minute or 10 minute meeting with each retailer.
And it's kinda like a round robin.
And that's where we met ninety nine cent only.
And Dollar Tree.
But
And you know, as
We were trying to get out there, we just kept hearing.
We're committed to the quantity. This doesn't make sense. I don't want to trade my customer down.
I don't have room for it.
Thing like it was
No no no no.
Yeah.
Up until this point, I mean you're trying to get this into dollar and dollar general, which was the whole point of this product. You're thinking that's where we go, that's where our market is, that's where it's gonna crush it.
And you have zero validation. Every every meeting you have with the ninety-nine cent store, dollar store people is like, no, no, no, no, no.
Did you think
Maybe I was wrong.
Yes. Oh yes, very much very worried.
Yes, when you're this is my first Foreign into business.
I'm newly married. I have
You know, I'm trying to build my career.
Uh you know, you have to live. Like, how are we going to
Make this a business.
I mean we knew we thought we had something, but it was
It didn't feel like it at the time. And I remember
I think it was in about February.
Or January.
Um early two thousand and four. I was driving to the city.
And it was just
As Alex Rodriguez
Was signed by the Yankees.
And there was an underwear brand called Two Exist.
And to exist had sent a package of underwear to the to his
Hotel or apartment.
And they were talking about it on the radio.
And I was like, Wait.
How did like how did this happen?
And actually knew one of the people involved with the company.
And I said, How did that happen? He's like, Oh, we have a PR firm. Interesting. And I was like, Oh, PR
That sounds cheaper than marketing.
Alright, so you hear the story about Arod and the underwear, and you find out, you figure out which PR firm was behind that plan.
Yep.
I reach out to the PR firm, I tell them about the concept.
And I don't know if they loved it or wanted another client, but they scheduled what they call desk side editor appointments.
So it was me and it was one of the members of the PR firm.
Um who went over who was the who was the rep on our account? Her name was Amanda.
Yeah, uh okay.
Now, so here's the thing, you you bring it to these editors, right? And you're show them product and you have a brand, like you I'm assuming you hired like an agency to come up with a logo for Elf and and a look.
Yes, we had an agency
Um in Coast Domestic California called Juno Design.
Mm-hmm. They created the the the uh the logo, some of the look books, some of the
The brand catalogue.
And then we also had a digital agency that built the website.
Well, and was it
I mean, was it really expensive to do I mean, uh now you make a logo on AI and I must think good, but was it really expensive to do that?
It w it wasn't cheap, but it wasn't real I mean, we were bootstrapping it. We didn't have any revenue coming in. If my father was funding everything we needed and it was we did everything as cost effectively as possible.
Okay, so now you've got a um
Yeah, this this concept.
And
uh and you've got a design firm and and you bring it around to these editors, right? Yes. We went around to all the beauty editors in the
City in New York City from Glamour to Lucky to good housekeeping to Oprah.
Seventeen, Vogue, Gla everything.
And we pitched them.
About this line of color cosmetics that we wanted to bring to the market.
We walked him through the whole line, how it went from eyes, lips, face.
How it was inspired by prestige.
How it was
The quality was great product.
Um and then at the end we said, Oh, and by the way, everything's a dollar.
And then they were blown away.
So you're kinda keeping it a secret until the very end, the the price.
I think there was the wow factor that like okay here's another guy showing me another line of cosmetics like
It looks good, but
Why is it any different than the other twelve dollar lip gloss I saw yesterday or I'll see at four o'clock today?
But then when we told them the price
Then it was like that was the
Like the winning factor. And then I remember it was late
April.
I was w walking in the city, I got a call from the PR firm
Great news.
Glamour magazine wants to put you
in the magazine for the next month's issue.
Well, it was actually Glamour magazine called me up and said, We want to put you in the magazine. Okay. But we have a problem'cause our readers need to be able to get you. Right. We need to buy you. So they gave us an ultimatum. Yeah. They said either you're in all Walgreens by next month
Highly unlikely.
Or open a website so that the customer can get you.
But nobody shopped on web I mean not nobody, but people really no nobody shopped on a website.
We didn't even know what e commerce was, it was like us and Amazon at the time. And you couldn't get into Walgreens because you couldn't get in anywhere. No, not even and even if we could, you'd need to set up ship, get in shelves, off planagram. It was
Not even an option.
When we come back in just a moment.
Joey gets a much coveted meeting with a buyer from Target.
But then
She asks a question that he simply cannot answer.
Stay with us, I'm Guy Raz, and you're listening to how I built this.
Hey welcome back to How I Built This. I'm Guy Raz.
So it's April of 2004 and Glamour magazine wants to feature Elf Cosmetics in an upcoming issue.
But first, Joey has to make sure they have a working website.
So we called my web developer and I said, Can you make us an e commerce part of our website? And we have thirty days to do it.
He says, Yes, we can do it. I say, and how much is it gonna cost?
And he said five thousand dollars.
I I said five thousand dollars.
I don't know, that's a lot. I can't really afford it. We're not selling the product. I go, How about I give you some equity in my company?
He said, I don't think so. I think we really need the five thousand dollars. So
We gave him five thousand dollars. He built an e commerce site.
Um if i i if you saw the e commerce site today, you would cringe.
It was the clunkiest.
E conversa not his fault, that was just the time.
And basically we launched the e commerce website on June fourteenth, two thousand and four.
Okay, so this was a s and I'm sure there was like multiple steps and'cause this isn't it wasn't stripe, there wasn't it it was just hard to get get a credit card in. I mean it wasn't hard to do. We needed a credit card processor authorized that now. And then
You once you got the order, you would still have to ship it out. I'm assuming you charge for shipping too at that time.
So basically we decided early on we're selling dollar cosmetics.
How do we charge for shipping? Yeah.
I'm pretty sure the post office
had like a a a flat rate, like if it's a certain size. Right. So we did a flat rate of five dollars and ninety five cents.
And we did not accept returns.
Okay.
So it's hard. You're gonna buy cosmetics on this internet thing that you've never purchased on before and you're really gonna hope you like it.
Because
You're already in it for at least six, seven dollars and you can't send it back.
Yeah.
And this is probably not UPS, so it's not traceable. It's probably like what priority mail or something.
It was priority mail, yes.
Which means it could get lost and all this stuff. So
Okay, so five dollar f ninety nine cents, whatever flat rate and
You're gonna sell it through the website.
And uh
Again, it's complicated. And but the other question I have is
How are you gonna handle the logistics? I mean, you have it in a warehouse, sitting in a warehouse.
But I mean
Who's gonna package this stuff up and send it out?
So honestly, we didn't even think about logistics. We were just
Following Glamour magazine's lead.
They wanted us to make a website so we could get in the magazine.
We didn't think we were gonna get an order.
So we didn't think it all the way through. We did have a credit card processor.
You know, in the warehouse there was an office.
So we had some workers and people in the warehouse that could help out if we got two orders, three orders
Who knew? We didn't we had no idea that e commerce would ever
Become something.
And now it's just you go you Shopify or whatever, and it's all automated. But then if somebody put their credit card in, you would get like some kind of email or some kind of communication, which you then had to take that information and manually put it into a processor, right? Like a credit card machine.
It was so cumbersome.
We needed to print it out and then go into the portal, put the credit card number
Some of the credit cards would bounce back, then we'd have to email the customer.
Your credit card's not working.
Then we would come back and then we'd print the label.
And then weigh the package.
And then drop it at the post office.
Okay, you've got a hundred and fifty grand worth of inventory plus the shipping costs, plus all the ancillary costs. I mean who knows how much you're in.
now, how much cash is is in is gone into this business. You know, a lot of people
May not even know this, but
But if you don't
There was a time where Glamour magazine or Vogue like that moved product. It was a big deal. The early two thousands.
the late nineties were like the heyday of of big
magazines. And if you even if a tiny
Mention could could have a huge impact.
Yes.
But this issue comes out from what I understand on June 16th, 2004.
And it's not a huge article about uh the it's like a w a couple lines in in about your cosmetics, right?
It's one blurb and a picture of our concealer.
Okay. And is
Does anything happen? Do you do you notice any movement right away, or
I yes, so I remember
walking into the office and we had this screen like a back end to the website
Where if someone placed an order, you'd see the order, the date, and the value.
So all of a sudden we walked in day one.
And we had
Four hundred orders. Wow.
And you know
All the products, the hundred and fifty thousand dollars of inventory.
Came in the assortment packs.
And I remember my father's CFO.
Who was helping out.
We were opening boxes, this one had purples in it, this one had pinks, we you know, we we had pallets of inventory that only had
This color out because that was the hottest cellar.
So there was stuff all over the place. So you be like on one like opening one by saying, I got the purple here somebody else is like, Oh I've got the I got the uh candy apple red lip gloss in this one or whatever. Like that's literally what you're doing? Yeah, I mean after the first six orders, things just start okay, what do we do now?
So then we took them out of those assarming packs, we built sixty-seven boxes, each box had the unique item.
Everybody I remember.
My brother.
Who's now a doctor.
He came in.
He picked a few orders. That was not for him. He never came back. Went to med school. We never saw him again in the business. But we were
Finding anyone that could help us.
Uh pick and pack orders.
Joey, I I'm I'm curious. I mean, did you
uh get uh tons of orders from that that glamour magazine or just
You know, even if it was fifty orders.
A day it was exciting. Or was it was it more than that?
I think it was more than the the dollars. It was the validation. It was like yes.
We believed
That we had something here.
So over the next
Year and a half.
We had a lot of these glamour placements.
Which were honestly great placements and we wouldn't be here without'em.
And then we had even better placement. We had like
We not brand features.
But there was one
feature that we had in Good Housekeeping Magazine.
Now
If you remember good housekeeping
There was nothing better than a good housekeeping seal of approval. Yeah. And good housekeeping gave a feature
Of our lip gloss.
At a dollar.
versus the lip gloss that was sold in Sephora for twenty four dollars of still a cosmetics.
And they said.
Whichever one you buy.
You will love it.
I had that blown up in the office. That was a huge win for us.
Oprah magazine.
Did a backstory cover?
Where they laid out all our makeup.
And then they made like a piece of art of our makeup around the dollar sign.
And they did a whole article and every time one of those bigger ones happened
We felt the spike.
And by the way, in that in that first year, two thousand four, did you try and pitch Sephora?
No.
You knew that they weren't gonna carry your products.
I mean, I don't think we could afford to be in there.
Mm.
In that first year of business
'Cause you really
first orders come in in June of two thousand four. Do you remember what w how much you guys did in sales that year?
I wanna say about four hundred thousand.
Okay. So pretty good. I mean means you you sold out your initial inventory, which means you had to bring in more inventory, right? Yes.
Alright, so
But was it
Was it stressful to you? D did you feel like I am still worried that this
might not work.
Every day, every night.
Nights were worse than days,'cause days you're busy. But yes, I remember
Maybe maybe in the next year we had like a m a budget of like a hundred and twenty five thousand dollars a month.
Of sales.
Like how might you had to hit that you had to hit that number. We had to hit a hundred and twenty five thousand dollars of sales a month.
Why was that your target?
I don't remember why it was, I just remember that number.
And I remember we we had our web business. We had very, very small regional business.
Where you had like a chain with four stores or six stores or eight stores that carried our product.
And then we had a few international inquiries. I remember one from Australia and one from
Um the UK actually in in Wales.
And they started like
Can we copy what you're doing?
And kinda take it to our market and buy the product from you. Yeah. And I said sure.
At this point.
Why not? Like you you're an account like any other and I don't have to worry about all the
International complexities. Wow. So
I'm saying we we even you put all those together, I think we were able to hit maybe a hundred and twenty five thousand dollars a month, but I think it was barely to cover costs. There was no growth, any new inventory had to be funded.
Bye.
My father's capital, like it was he might be just
Flushing money down the toilet?
Yes.
It was it was stressful. I mean every sales meeting was maybe this was the unlock.
In the early days, I remember I was newly married. I was living in an apartment over my parents' house.
I just had my first son.
in in January two thousand and four.
And I had to, you know, we live in a community that has high expectations.
And we needed to figure it out.
Dick.
Cause any tension between you and your dad?
No.
He
didn't have very, very deep pockets, but he believed in it.
And he
was happy, I think, from what I saw.
To to not stress about it.
He was

Wasn't afraid of it.
And
I guess you could have i if if everything was just
Disasterous, liquidated, like try try and sell it for
You know.
Cut rate price and maybe recover some of your investment.
It's not that easy on a dollar product because you're already at fifty nine cents selling price, so I'm gonna sell it to you for what, thirty, twenty?
I mean it's it's it's it's hard.
Yeah.
Okay.
So two thousand four, your
You know.
you're kinda incrementally growing and I I read that you also
Manage to get
a m a pitch to target that year. That you managed to
Uh make a a a pitch to them. Um
What was the reaction?
So the the first time I met the target buyer was w one of the E C R M trade shows where you are scheduled to meet all the buyers in a ten minute
And I
Tell her this whole pitch.
About uh quality, cosmetics.
Colour.
Yeah.
And her response was Elf.
Why would I want to put something called Elf on my face?


And I was like

I I didn't know what to say. I I don't even recall my response but
That was a challenge.
And it ended up actually
We stayed in touch with the buying team. I believe she went off the desk.
And I don't know, somehow
We got a call.
Two months.
Or sometime later.
Where they had an opening
And they had a
Not in the cosmetic section.
But in what they call the trial and travel section.
So we were able to put two or three
Different items there.
The same item different colors, and we had a bin.
And that really was uh ended up being a game changer for us.
But that w didn't happen in the first year. That happened maybe. No, it happened later in two thousand and
Sixth May two thousand five, two three.
'Cause I read that the first real retailer, like significant retailer that you may actually get into is H E B the supermarket chain based in in San Antonio. Yeah, so the H E B
That was one of our aha moments as a company.
Because through all of our nose
That we got in the early days.
One of the biggest no that we got
was we like the product, but we don't want to trade our customer down.
Like if I'm a retailer, if I'm at Walgreens and I'm selling a covergirl lip gloss for six dollars.
And I'm gonna sell an L flip gloss for a dollar.
Now there's five dollars that the company, the retailer's not getting.
Um and it was actually H E B.
Which is a high volume supermarket chain in Texas.
That's it, we're gonna try it.
And at that point, we had developed for the local markets this four sided spin a rack.
It held about nine hundred and fifty four pieces, something like that.
And H E B was open to putting
These racks in each of their stores. Uh so this is like a s like a six foot high rack, something like that? Yes, exactly. So you could spin that rack.
And it had, you know, nine hundred and fifty four
Products depending on the size of the product.
So basically we sell it we sold this into her.
And the thing sold out in minutes.
And at H E B. At H E B and did it go into all the H E B stores or just a few?
I we think it went into thirty, but the best thing that happened with H E B is we get an email from the buyer
The next morning saying I was wrong.
This brand is incremental.
And impulsive.
Because w they saw that because of the price, I wasn't buying one or the other. I wasn't not buying Covergirl.
For five or six dollars and just buying elf?
But I was buying Covirl and buying Elf, or I still have five dollars to spend, but I'm gonna buy five products.
Because there's such an array of product and really
you know, maximize my dollar.
So essentially it wasn't actually
eating into the sales of Covir or other more expensive product. It was just people were buying more product in that department.
Yeah, it was adding more to their top line, not taking away.
From their sales volume.
And that changed our whole sales pitch and the whole
Everything going forward.
And then we went in all H Bs, and then there were some H Bs that put four racks.
into the store each store and it became
It was our first viral sensation, I guess.
So how did that you sort of change our approach. How did it change your approach in how you sold this to try to pitch this product?
'Cause as we're meeting retailers.
And their response is, I don't want to trade my customer down. We're saying, look, H E B's doing it, and it's not. It's adding incrementality.
They're selling more.
It was a combination of impulsive, meaning I didn't want something but I'm gonna go get I'm gonna get it anyway'cause it's so cheap.
Maybe I was gonna buy a candy bar and said I'm gonna buy a lip gloss.
So there was no barrier to entry.
And you had data.
To back it up.
And we had data.
Okay, but H E B you're still having a hard time getting into these other retailers from you know, H E B's great, but but um from what I understand it's still gonna take some work and and H E B alone
doesn't make your company profitable yet, right?
No.
No, okay. And what were your just aside from just product, what were your other huge expenses?'Cause you're not doing any marketing, so what were your expenses?
So at this point we now had our own office
Um we were building somewhat of a staff.
I was still very involved in every element, but I was leveraging some people now that my father's apparel business was changing a little bit.
We
brought on two or three people from that business.
And then we brought on someone.
Right out of college, but she was great.
To help with some of the marketing and product stuff.
Probably some of the uh more experienced people are expensive.
Very expensive.
And did you guys ever think about like yeah, let's offer people equity for lower pay'cause it'll save us money?
Um, no.
I mean,
People needed to make
Money. They needed to pay their rent and
Their equity really really wasn't worth much because we didn't even know if we were gonna have a business.
It wasn't the currency people were looking for at the time. Right.
Right. Didn't make sense to them. I mean, of course, I'm sure they were kicking themselves later, but um
So you're in H E B and still um
En and do you remember by that point, by the time you're an HB and you see
You know, you see this
phenomenon there starting to feel like okay.
We're cooking now. We're we're or or still
Sleepless nights.
Still sleepless nights.
There's a large hill to climb. A to be profitable and then B to be successful.
So like how are we really gonna get to the top of the mountain, so to speak?
What kept you up at night?
Failing.
Not being able to you know, my father was still helping fund this. We were
Close narrowing the gap, baby?
But like how big can big be? I'm selling dollar cosmetics.
What do like where do we go from here?
Where's Target? Where's Walmart? Where's
Walgreens. Where's the big guys? Like how do I
I'm competing with Covergirl and Revlon and L'Oreal, like these guys
Control the space.
And when you're selling something for a dollar,
It you have to sell a lot of it.
for it to be a a s a successful business, right? You can't just rely on
one regional chain of of grocery stores.
Yeah, you have to be anywhere and everywhere and
And you have to constantly sh be shipping it in,'cause even if you set like our four sided spinner aq held nine hundred and fifty four pieces.
But
Once you sell nine hundred and fifty four pieces, you have to send in another nine hundred fifty four pieces. So there was a lot.
Like if if if a ten dollar item was needed to do a thousand dollars in sales, they were only to need to sell a hundred items.
We need to sell nine hundred.
Yeah.
I mean it's like a it's like a slim gym at the gas station. I mean the price the price difference wasn't that high anyway. Yeah, sell a lot of slim gyms. Exactly.
And there's only four flavors of Slim Jim, right? We have

Sixty seven items.
I remember.
In the early years.
We were making money and I told my f like uh maybe a little later, but I said, Okay, the company made money.
Where's my share?
And my father turned to me, he goes.
He left. He's like No, you gotta invest that back in
You have to do it again.
And then eventually you'll get there, but that's
Kinda that w that was my naivete.
Okay.
So I I read about this story.
that happens in two thousand six and
I wonder if it was
Mm.
if it was sort of strategically manufactured, but it was a rumor
that came out about Elf that actually really
Uh ended up
being an amazing
Boom.
for the company. Tell me about this rumor.
And and and were you involved with it? Did you manufacture it?
So I always tell everyone, if I manufactured it, I would have done it over and over and over again. So I definitely can't take credit for it. All right. But it was September two thousand and six.
And we had just come back from another industry trade show.
Um and
I remember we were in a recap meeting with we had a sales rep at the time who was there.
And we were all of a sudden the phone rang, and outside of being the CEO of the company, I was also the receptionist and the customer service care rep.
So I answered the phone and she says the woman says, Is this elf cosmetics? And I said, Yes.
And she says, Is it true?
I said, Is what true?
She said, I just got an email that you're being bought by Bloomingdales.
And that all your cosmetics
are going up in price.
I said I don't uh news to me.
And then I check the website and all of a sudden
We see orders
Coming in.
By the
Tens and hundreds of
And it was I think at one point through this viral spike
We were like the
eightieth most visited site on the internet.
Wait, where was this rumor coming from? Where was where were people hearing it or seeing it?
It was just an email. It was one of these like
We have no idea where it started till today.
And it everybody got it. My target buyer got it. My aunt in California got it. My cousin, my

They say
Oh, I got an email that you were being bought by Bloomingdales in two thousand and six.
So this rumor comes o comes out and it turns out that people panic and they're like, Wow, the price are gonna go up. We better buy
Buy it while we can.
Yeah. I mean over so we were getting about
Three hundred orders a week at the time, depending on the virality.
We went from getting three hundred orders a week to eighteen thousand orders a day.
For the next six weeks.
Okay, that's exciting.
But were you also a little bit worried that oh, what if people actually think this is true? The orders are
Are gonna drop off.
Pretty soon.
So that
Our excitement was great.
This is I mean the orders were coming in rapid fire.
Uh but we didn't have the inventory.
To support those orders.
We didn't have the process to reorder to pick to pack to do anything.
So we didn't know where it was gonna stabilize or what it was gonna mean in the long term.
But right then we were just drinking from a fire hose.
We were just trying to figure out
How do we get these orders to our customers? How do we continue to build
Off this virality.
And find ways to take this to the next level.
So
W how did you f fulfill those orders? I mean uh you know uh
Could your
What did you do?
So
I got on a plane.
And I went
To our factories in China. I went with our agent.
And we had to figure it out.
I remember when we first got to China, our first or second night there.
I called my father and I'm like
I I don't know what to do. Like this is too much. I I can't do this.
And I remember I was on my Blackberry.
In the elevator.
And he tells me, This is it.
You either figure this out
Or we pack up and go home.
Like this is what you built.
This is what you wanted to do.
This is your opportunity.
When we come back in just a moment.
A financial deal that finally lets Joey sleep at night.
and an ill-fated sale.
That wakes him right back up.
Stay with us, I'm Guy Raz, and you're listening to how I built this.
Hey, welcome back to how I built this.
I'm Guy Raz. So it's the fall of 2006 and Joey is in China scrambling to fulfill an unexpected surge in orders.
We had to find a warehouse. We had to
Make the goods.
We had to create a system to pick and pack the goods, and all this was done on the fly as the order velocity.
Was continuing.
And it took about six to eight weeks.
And I w we shipped a hundred and ninety two thousand orders.
From China.
direct to customers in the US and then that really you know that year we were projected to do two million dollars for the year. Yeah. After this spike we did about eight million dollars.
We were profitable. Wow.
And we never look back.
Well.
I mean talk about trial by fire. Okay, so you get through this.
But now you've got real
uh real sales, right? And I guess it's around this time where you you manage to
to finally convince Target to let you in.
So actually
In two thousand and eight.
I get a call from Target.
Now we had a very small relationship with Target. We were in the trial and travel section and the Target buyer said
What if Elf made us
A holiday end cap program for our stores. End cap at the end of an aisle, probably facing the registers, right?
Yeah, I mean this is you know, when you walk into Target they have what they call the race track. This is on the end, like
Every cart is passing this thing. This is the primo spot. This is like the
Uh
Park Avenue.
Of
Target.
This was like pinched me, am I dreaming like
It w it was like the premier retailer. First of all, Target was always like the retailer growing up because my father was doing business with them. It was in line with our values. It was
Perfect.
Now this was November two thousand and eight for holiday two thousand and nine, so still eleven months away. You don't ship till October.
For that, but we were like, We are in.
Okay.
You're in target.
But
Um
From what I understand, they actually want you to raise the price.
They don't want you to sell it for a dollar.
Which is interesting because most of the time when when when retailers uh CPG retailers go to Target, they're they're they're urging them to lower the price or to offer coupons and you know, especially around food, right? A lot of times r retailers are saying
Hey, you gotta so you gotta cut off a dollar. Here
The urging you to increase the price.
And and you you guys were reluctant to do this?
So they they wanted us to increase the price, but not of our everyday merchandise.
They appreciated the incrementality and impulsivity claims that we were making.
But they still felt that
We needed to
continue to grow the price point. So
At the time we're launching a small line
Called Elf Studio.
And basically if we had a four foot section in target.
Half of the f section was a dollar.
And half of the section was now three dollars.
Okay, was it the same product inside?
So yes and no.
The same quality of product was offered on both the Elf and Elf Studio.
However, often the elf studio was dual ended.
It also was bigger.
So if this was one ounce, this was one and a half or two ounces.
It had a little bit more pearlescence.
Um, but for the most part
We stood behind the quality of both the Elf and the Elf Studio line. But it really doesn't sound like it wasn't that different in terms of what you were offering. But y I mean, why why would a customer think that like that's a question I would ask you at the time. If I was on your team, I'd say, Joey, I don't know if people are gonna buy this. You know, they're they're used to us being a dollar.
One of my buyers told me a long time ago something that really stuck with me.
Price is what you pay.
And value is what you get.
And as long as we're committed to continuing to offer our customer extreme value
She doesn't want us to be stuck to the one dollar price point.
'Cause if we could take a thirty five dollar item that they get at Prestige Retail.
And bring it down for three dollars.
She wants that.
If it's a twelve dollar lip gloss that we can bring for a dollar
She wants that.
But it just needs to continue to convey value.
Okay, so you up until this point, the your sales and target were for trial products, like you going on vacation and you just buy a bunch of things.
How much of a game changer was it when Target says, Okay, we want you to have the second
tier in addition, to was it was it a small bump or was it a significant bump?
The biggest win.
was our ability
to compete
On everything you do in the food and drug mass arena.
Is sales per linear foot.
So if you're in a four foot section
They want to know how much volume, how many sales you're going to do.
Per foot on that four foot basis.
So when Elf first launched in target
They were forecasted to do
Sixty dollars per linear foot per store per week.
Out of the gate.
We were at a hundred dollars per store per week. So we were already performing on par or better.
than a lot of the then expectations.
And a lot of the competitors.
And you were already D to C for six years at this point, so now you're
You're I mean, this is the beginning of a D to C
craze, right? Two thousand tens. Before before we get into this, here's a question for you.
You not only do you weather the financial crisis of two thousand
Let's say seven to to nine, and it continues really to twenty twelve, when the market only fully recovers.
There's always this story about financial crises or or d recessions and and it's lipstick is always used as an inelastic like people will still spend money on lipstick because, you know, it's it's something people are w are comfortable spending money on and it's kind of recession proof and people still want to look nice. Is that was that true?
Did you see that happening in real time?
Not only did we see it happen in real time.
It's what propelled our success.
Because like you said, in two thousand and seven and two thousand and eight
During the financial crisis, it happened to be at the same time
That Revlon launched a brand called Vital Radiance. Now you probably don't remember or ever heard of it. I don't.
And Loria launched a brand called Hip.
To compete with Mac.
And the
Major premise of both those brands.
was we are going to sell more expensive cosmetics in the drugstore arena.
We are gonna compete with Sephora.
Mm-hmm.
Uh Dwayne Reed at C V S. Wow.
And that
With a
Utter failure. That failed miserably quickly.
And that is really what opened the door.
For Elf Cosmetics.
To get shelf space at Target.
And really
continue to become a brand that's thriving in the
in in the retailer space.
So even though so many businesses were struggling at that time,
It was a combination of price point and the product.
Cosmetics, people still want to look good.
Yes, because if you're not going to go to the salon, you might as well
Find the next best thing.
It's so interesting, yeah.
Um
All right.
I mean you're
You guys are growing and you're finally you started this business really launched in two thousand four, six years in
You gotta be feeling like okay, this is now we are cooking with gas here. Do you remember
Roughly by the end of two thousand nine.
Wha what you guys were doing in sales?
A year.
I remember at the end of two thousand and ten
We were doing about thirty million dollars in sales.
Wow.
And we were able to do it.
A lot because of the the mix of business.
Between web and retail.
was a great mix for a growing business.
Because when you're operating on retail on web business, you have a high margin business. Sure. And you have immediacy of cash.
So I'm now have to wait. When I sell to Target or if I sell to retailers
I buy the goods.
Ship the goods.
Then get paid sixty or ninety days later.
As opposed to the internet business.
I'm able to get paid right away.
So we're really able to grow.
From ten to twenty to thirty million with very little additional debt or leverage.
Joey, how many hours were you working on this a week? Like now we're we're getting into two thousand ten. Were you were you was it all consuming?
Yes. I mean
Again, I I'm a Sabbath observer, so we work twenty four six. You stop working on sundown on Friday until sundown Saturday. You don't answer your phone, you don't
C no calls with China, you just stop.
Yes, we take a day off. It's a great rest day and it really it gives time for family.
But other than that, if you're not sleeping, you're working.
Okay.
Yeah.
So you get to a point where, you know, things are looking pretty good, thirty million a year.
And I guess in around two thousand ten.
At some point you get an unsolicited call.
from an investment banker saying, Hey,
We uh have a client interested in in maybe uh making an offer. I got a call, it was January.
Two thousand and ten.
And this woman calls me as a cold call.
And she's like, I see what you're doing, and we'd love to kinda represent you and and seek a sale process.
Her name is Veneto.
She was at a small boutique investment banking firm called Financo, and she she said, you know, this is what we do.
Will take you to potential investors.
Then we'll narrow the field, we'll ask for indications of interests.
And then we'll get some final offers and we'll see what we want to do.
And we'll start.
With the twenty five thousand dollar retainer.
I said.
This all sounds nice.
But I don't know you and I'm not giving you twenty five thousand dollars on a hope that this is actually gonna work out.
So she came back and she said, Okay, we're gonna wave the retainer
But we wanna do this process with you. We really like the company you're building.
And I remember
We got a lot of private equity interest. Okay, thirty million a year in sales, so let's just say uh the valuation was five six X. Sounds about right, more or less, at that time.
Um it was closer to eight to ten X. Okay, great.
So there's a number out there. Are you comfortable saying what what the valuation was in two thousand ten at that time?
Uh the valuation of the company was probably it was about seventy million dollars.
Okay.
Seventy million dollars.
So here's a question for you.
At seventy million dollar valuation.
Why why were you open to selling
Some or all of the business at that point.
The first reason was
We had an opportunity to do something for the family which was
Perhaps not generational wealth, but wealth from
Definitely more money than I've made in my life.
I was
Twenty nine years old.
I was able to put money away and if everything else
fell apart, I would still have financial flexibility and
The second reason
was I didn't know what I didn't know.
Maybe L'Oreal and Revlon were working on the next thing to take me out in thirty seconds. I had no idea.
Um and then the third thing
Was
Really just
Like
It's not what you know, it's who you know.
So I think being connected with these guys
who are in this private equity world
That are selling companies every day.
They know the steps, they know the game plan.
To make you sail ready for the future.
Got it. Okay. So you get a bids and you end up uh accepting an offer from a private equity firm, T S G, Consumer Partners, right? Yes. And they're gonna take a minority share. So forty nine percent, you guys are still gonna own a majority of the company.
And
you're gonna get a check. You're gonna g get, you know, probably I'm assuming anywhere from seven to fifteen million dollars.
In the bank.
Correct. More than that, but correct.
And explain how it works. They they basically buy a minority share.
you get a check and then
Do they also put more money into the business to grow it?
So there are
Situations like that.
didn't need their additional capital, so all the money
Um, you know, a few things change that you have things you can't do. So I can't sell the company without them. I can't hire
Some crazy sal like there's a few guardrails, but for the most part there was very little difference.
From the day before we closed to the day after we closed.
Except on the
ownership structure, we now had a partner.
And now you had some money.
Yes.
That's when we started sleeping at night.
I understand that. I mean I think there are entrepreneurs who would say
I could see where this is going and I'd just turn this thing down, right?
But you're saying
Hey.
This can go the other way.
at any moment. Like you you had healthy paranoia.
Yeah, look, and
I would have done a lot better.
If I did that in the long run. If you didn't sell.
If I didn't sell.
But
I don't regret what I did one minute of one day.
And I always say.
Elf has had subsequent
Liquidation events over the last
Ten years since then?
This was the smallest, by far the smallest. Right.
But it was the most impactful.
You know, the stress of your life is now
It's much less.
You're not stressed on are you gonna make it?
You're excited about what the future's gonna bring.
Yeah.
Now I know that
a little t sort not too long after that, maybe a year or so after that, um Scott, who had you had who was involved in the beginning, he leaves
And uh and from what I've read, I mean, first of all, do you do you keep in touch with him? Do you have any connection with Scott anymore?
So Scott left a little before that. Scott left in two thousand and eight.
Sc Scott came to us.
My father and I
And we started
another business called Borba.
Which was a nutraceutical beverage.
And the concept of the beverage
Was
It's skin care.
Through
Nutrition. Ah so basically you drank two of these a day and your skin was clearer.
And Scott found a partner.
For Borba and he took the Borba business. They bought our steak out and they took it.
That business and then we stuck with the elf business. So it was a very amicable split.
Since then Scott and I have lost touch.
I think the Borba business never really took off.
I believe Scott
became a pastor at some point. I I d I I don't know. Yeah, he became already became a priest, which is an amazing um story.
Okay, so that that was that, and now you're you've got a a private equity partner.
And uh turns out that L'Oreal in twenty thirteen
approached you
You and uh your minority.
Owner.
to buy buy you out. And you guys went deep.
In this negotiation.
Tell me about that.
Offer that conversation.
So it was actually Revlon that reached out first. Okay. And after I got a call from Revlon, I called my good friend Vynette.
And I said Vynette.
What do I do?
So she goes, Okay, you guys are still y y you guys it's a little early. Normally these take a few more years, but you guys are
Killing it, you're really doing so well so quickly, like let's run another process.
So we met now with more strategics who are interested.
And actually
L'Oreal came through with the best offer.
They offered us about two hundred and twenty five million dollars for the whole company.
And we were very excited at that point.
And we were ready to sign.
And now this is locked stock and barrel. We're selling the whole company. We are done. We did it.
twelve years ago we started we're ready we're getting our checks we're leaving
And all of a sudden
Vinette calls.
And she said L'Oreal's passing.
It wasn't happening.
you were gonna get uh over a hundred million dollars, you and your dad, from that deal because
Yep. And was there any clause in the in the negotiation that if it fell apart you get some money or no?
No, zero.
So you were just assuming that everything is g and and w and you get a call that they're pulling out why?
So at the same time that they pulled out of the elf deal, they also
bought a different company called Urban Decay. Sure. So I think they were trying to just play both sides.
uh or see what got them to the finish line. They blamed it.
on the fact that they couldn't get comfortable with our supply chain and that we were so low cost and they had some f uh
They weren't comfortable with it.
But I think that it was really because that they were focused on the Urban Decay deal. Wow. So they were really c we did urban decay on the show. It found a fascinating story founded by Sandy Lerner who also co founded Cisco Systems. It's a fascinating story.
So you're
Must be You must have been crushed.
It was crushing in the moment.
But in hindsight, it's such a blip on the radar of what it's become and
how much money we subsequently have made through this that
It's it was a blessing in disguise.
And in twenty thirteen we regrouped
And then we did a process and that's how
We got TPG. T P G

Company.
Right, different private equity. And they come in
Uh to buy a majority stake.
uh from you and your dad
Uh the and they value the company at two hundred and sixty five million dollars.
So they're gonna buy a majority stake, which means that you guys are gonna hold on to a sliver of the company.
So that was when we were selling to L'Oreal, we were selling a hundred percent of the company.
When we met T P G
They're like, No, we really like what you bring to the table. We want you guys to roll equity with us.
And we want you to stay on stay involved and stay as equity holders. And I remember when they finally gave us a firm offer.
And the offer was we're gonna buy majority stake in the company.
And we're gonna bring in a CEO to lead the company.
It was like a weight.
Was lifted off of me, and I'm like, wait, it's not gonna be my problem anymore, but I'm still gonna have equity and upside.
I I it just it was like
A freeing experience.
And they brought in
The CEO Trangamine. He's still the CEO.
He's still the CEO.
He's delivered a lot of value for shareholders.
He took the company public in twenty sixteen. It's amazing. I mean so so you guys stayed on for about a year and a half, right? Um during the transition.
Um, but really it was y you were kind of winding out. You were winding down your time. You were g and and I'm assuming
By the time you finally you actually left, you were done. You were out. Out.
Yes. We worked with Tarang and Team for about a year and a half, a little bit more.
But
It was probably the most impactful two years of my career.
Because I call it my master's program.
Yeah.
Because I was able to learn
How it's done on the other side.
how Clorox exists and PG execs and like how they look at the business, how they structure teams.
It's a mixture, it's a blend of the entrepreneurial spirit.
And the best in class uh work.
Ethic that they do, and I put it together.
Okay.
So
You are out of the picture, but you now really have.
created um n uh wealth, like significant wealth for yourself and in a way that you can
Kind of
Um just I don't know, b do whatever you want. You can invest money, you can you can uh do nothing for a while, and I guess
For a a while you actually did
Not much.
But tell me about that period,'cause it sounds like it you actually were not happy.
Yeah, so we uh we have my father and I officially left Elf in December twenty fifteen.
And I vividly recall one morning when my kids got up to go to school.
And I sat down on the couch and I started watching House of Cards.
And then
few hours later my kids came home from school and I was still watching House of Cards.
And I'm like, I I can't do this anymore.
And w at that point we were working on something else, but it was taking a long time. But I knew that retirement life at
Uh thirty five years old is not for me. Yeah.
And and probably not particularly not a great example for your kids, right? To be Yes, that's for sure. And I think within a year, maybe less, you you started a new company
Uh that you called fit for life.
Uh and and I guess I should explain because it's kind of a cool concept because
I guess you you basically partner with big brands like like Reebok or or Guam which does yoga products and Fila and and I you basically get the licensing rights to sell
Products with their branding on them?
Yes.
The way we look at fit for life is anything that you see in a gym that's not a machine.
So any of the mats of the small weights of jump ropes.
Weighted vests, all that, those are the things that we do.
And you manage the whole process of like manufacturing, distribution, sales?
Exactly.
So yes, we have relationships with retailers. We sell to Target and Walmart and Amazon.
We are making the product, but they maintain the brand. That's their job, and our job is to operate the company.
And
Together with them create great products. What a fascinating business. I mean it's a and and is it a good business?
It's a good business. The fitness business is a good business, but it's not nearly as exciting as the beauty business. Yeah.
Beauty business is trendy, it's quick, there's
Virality. There's
There's a lot of excitement. There's a lot of MA deal. Like there's a lot going on.
The fitness business is I'm sure you own a yoga mat. When's the next time you buy your next yoga mat. So the velocity's a lot slower and it's less uh less exciting. Uh so um which brings me to your next business, which makes sense because you get back into the cosmetics business, be the beauty industry business, you start another
Company.
as beauty, but this time you guys are
Acquiring
Brands and
Right. Tell me a little bit about this business. This is i interesting business.
So in late twenty eighteen I get a call from my good friend Vinette.
Um she's telling us about a portfolio of beauty brands that was owned by private equity to compete with some of the big guys.
It was not doing very well and they asked us to look at the business and to possibly buy the business.
Two months later, they were getting in worse situation and they were gonna file for bankruptcy. At that point we looked at it again and the benefits to bankruptcy is that it kinda hits a reset. So any of bad contracts, any old monies owed and things like that all go away and you're able to start
on a new slate and go forward from there. And we now run a company called AS Beauty, which owns the assets and the company of Lore Geller Beauty.
Julep.
And we closed on that deal in February twenty nineteen. And it still has a follow'cause people remember those brands.
Yes.
So when we bought the business, it was a downtrending business, but it was still a business.
And now we are
growing the business very nicely both online and in a on Amazon.
It's interesting'cause you you know, you think about think about like big brands in the eighties like guest jeans or s or uh
Massimo and and Fila is huge in South East A in Asia, I know, which was huge when I was a kid in the eighties and nineties.
But um a lot of these brands that w
you know, people in their sort of forties, fifties, sixties will know.
uh it's like owned by somebody else. Maybe it's been sold multiple times, but still
using the brand. It's a it's just an interesting business to me.
Yeah, I think when you look at the retail environment, there's so much clutter out there, so any point of differentiation is valuable.
So when you have a brand like Guest or Fela that you've grown up with
Like Rebok, you remember those pump up shoes from the eighties, right? So that's something that cuts through the clutter and allows you to stand out as well as gives the customer confidence that this is a brand and that there's
There's something behind it.
So you've got this is what you focus on. Going back to elf
Uh it
It's amazing. I mean it could've
You know, you could have sold it, walked away and and you know, and we've done we did Beauty Counter, we've done other br some other brands that once they sold it it
went, you know, downhill.
The opposite happened with Elf. It grew and grew and grew. I mean it it I think I just checked their
market cap it's like
Three point eight billion dollars. I mean it's a
It's a
M it's a big company. It's t doing really, really well. Yep.
Um
Амін да
that w how you started this brand in two thousand two r really launched in two thousand four
you could do this you could recreate the playbook today.
I think when we created the brand in two thousand and two and three and four
Our biggest obstacle was how are we gonna get space in a retail environment controlled by four guys?
I think today's
Now
It's how are you gonna
Own the most amount of attention.
from the consumer on Instagram, Snapchat and and Meta.
So could I have done it today?
Probably.
Would it look different?
Definitely.
Do I have the
Tenacity and goal to do it again.
Probably not.
I wouldn't start a business at this point in my career. I I think buying a business is a much easier
Entry.
A young entrepreneur.
And I needed to cut through the clutter.
A thousand percent if you're creative and committed, you can find a way to do it.
Yeah.
Joey, when you think about this journey that you took, you know, of course you had a lot of I mean
You know, you did have help from your dad. There's nothing wrong with that, but but it it still it could have failed, right? It could have it could have gone nowhere when certainly when the dollar stores didn't validate this idea.
And then you think about where you got to.
Um
How much of that do you think had to do with just the grind you put in and how much do you think had to do with getting lucky?
At times.
So I think when you get lucky
And when you have the desire to be successful.
That's when you will be successful. So I go back to that elevator story I gave you a little earlier.
That when my father said, like this is it, you either figure it out
Or you pack up and go home.
I didn't manufacture that Bloomingdale's email.
But I could have tried to.
But I doesn't mean I would have been successful.
You can't wait for luck.
And you can't manufacture opportunity.
But when that luck is there.
You gotta take advantage of it.
Come heller high water.
That's Joey Shaman.
Co-founder of ELF Cosmetics.
By the way, you know how we mentioned that Joey's former partner, Scott Vincent Borba, left the beauty business to join the priesthood?
Well, just a few weeks after Joey and I did this interview, Scott was in fact ordained as a Roman Catholic priest in the diocese of Fresno, California.
When he left the world of business, Scott also left the trappings of his former life behind. He said that he gave up his fancy house and car, his Gucci suits, and his 401k.
And as for his new life
Scott told the New York Times that he's looking forward to serving God.
and working with his parishers.
Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and as always, it's free. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at guyros.com or via Substack.
This episode was produced by Carla Esteves with music composed by Ramtina Erablui.
It was edited by Neva Grant with research by Olivia Rockman. Our audio engineer was Patrick Murray. The production staff also includes Carrie Thompson, Alex Chung, Sam Paulson, Casey Herman, JC Howard, Chris Massini, Catherine Seifer, John Isabella, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.