Dr. Dennis met Carrie in the elevator and they would make fun of how skincare products had no real value to them. Then they changed that.
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us. But we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.
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Dave Young:
Welcome back to the Empire Builders Podcast, Dave Young here, Stephen Semple is standing by. He told me the title, he told me, the topic that we’re going to cover today, the Empire, and it’s Dr. Steven Gross.
Stephen Semple:
Dennis.
Dave Young:
Dennis.
Stephen Semple:
Dr. Dennis Gross Skincare.
Dave Young:
It doesn’t actually roll off the tongue, Dr. Dennis Gross Skincare. I have to admit, I’ve not heard of this one.
Stephen Semple:
Well, you’re such a skincare buff, I’m kind of surprised.
Dave Young:
Well, a lot of people say I have amazing skin for a 90-year-old man. In my 60s, but…
Stephen Semple:
Now, you may not have heard of it, but the company was started by Dr. Dennis Gross and his wife, Carrie Gross, in 2000, and in 2023, it was sold to Shiseido, a big Japanese skincare company for $450 million.
Dave Young:
Okay, that’s not chump change.
Stephen Semple:
That gets a little attention, right?
Dave Young:
Yeah, sure.
Stephen Semple:
Yeah. So, the products were created by Dr. Dennis and his dermatology clinic, and they were originally just sold and marketed to his patients. So, it was literally one of these little tiny businesses, where the stuff is being designed by a real doctor, a real dermatologist, but in the early days, basically the only place you could buy it was his clinic, and the only people who really knew about it were the patients, and the people the patients told. So that’s really how it started. And Carrie grew up in California, so they’re in New York, but Carrie grew up in California, and she spent her days outdoors, and her skin was starting to show its age. And Dennis, basically, when they met, Dennis was already a dermatologist, and he started to give her hope and optimism. And actually, how they met was she was not a patient or anything like that, don’t go there with your minds, they lived in the same building, and they met on the elevator, and basically got to know each other because they ride up the elevator together periodically.
And at the time, dermatology was just being used for rashes and things along that lines. And it’s the 90s, and creams were being bought in the department store, and they were moisturizers, and there were no indie brands. And for fun, they would look at the labels together, and he was amazed at how little there was in terms of effective ingredients in these creams. As a dermatologist, he could look at it and go, these really don’t do anything. And peels were starting to be done, the whole thing, you put stuff off… But they were aggressive, and to him, it made no sense that the skin would be a part of the body where the best thing you could do would be to injure it so that it comes back stronger, it just didn’t make sense to him. And he really didn’t see the results, and people would look blotchy afterwards, and things along that line.
So, he decided to design a peel that would work better. And the whole secret ingredient was, there was a second step that would turn the chemical reaction off, so that it wouldn’t be so damaging. So, it was a two-step process that he created. Now, his offices were near the UN, and he had lots of variety of clients. So, the whole thing that he found that was amazing is he was able to test the product on a lot of different skin types.
Dave Young:
Oh, that makes sense. Yeah.
Stephen Semple:
Right? Because of the variety of people that would be coming through his clinic. And what he found was, in terms of dermatology, people were going through this cycle of hope, they would try something, and hoping that it would work out, and try the next thing and hope it will work out, and he was in this unique situation of being a chemist, a dermatologist, and being able to try things with patients. He created this two-step product, which then he was able to turn in the pads and create jars of the product that the patients could take home after the first peel, because there was additional extra steps that you had to do at home, and they could take it home. And then he started selling complete kits that people could take home, and it really proved out the concept, and people would start coming in to the practice to buy it. People who weren’t patients, who had heard about this, hey, can I buy this thing and take it home?
Dave Young:
Cool.
Stephen Semple:
So, he launches a product that he calls MD Skincare, that was the first product. And the plan in the business was to go out to spas, and he also had people in the beauty press who were patients. So, he got these articles in the beauty press. And remember, this is pre-internet, really pre-smartphones. So, things like the press were a big deal. And Carrie used to work for Nordstrom, so she was able to go back to them. But what he found was the press were still skeptics about how well this works, so he’d bring them in for treatments to earn their trust, and also in terms of selling the product to spas, he couldn’t just sell the product to the spas, he had to go and train them on how to properly do it. So, it’s 2002, and MD Skincare is in a bunch of spas, and in a few stores.
And Sephora has just come to the United States, and Carrie pitches it to Sephora. And Carrie basically says, Sephora, look, we’ve got this great business model here, because we’ve got this in these high-end resorts, so clients will see it in the resorts, and then they’ll go home and they’ll want to buy it in their local store, because there’s this great halo effect of having seen it in the spa.
Dave Young:
Yeah, that makes sense.
Stephen Semple:
That’s how she pitches it to Sephora. The money from the practice is really financing the product in the early years, it’s still not making money, and there’s no employees… Actually, in 2002 is when they hire their first full-time employee, who does field selling, and they open up a little office as well. But their clients are loyal, and they’re super fans, and they also did samples. They do these little direct mail and skincare challenges, and they figured out how to put these things into individual packets, and eventually they got it patented. It cost $100,000 and a whole pile of money, but they got a patent on this product. They had to dip in their savings and mortgage of their home to make this happen. As Dr. Gross says, “Growth costs money.”
Dave Young:
Yeah. Yeah.
Stephen Semple:
And it does. So, Dennis writes a book, 2005, goes out on a book tour, starts to win a bunch of awards, and they’re now close to breaking even, seven years after starting, they’re finally hitting some profitability with this.
Dave Young:
Wow.
Stephen Semple:
What happens in 2008? Economic crash.
Dave Young:
Yeah. Yeah.
Stephen Semple:
Things like skincare slow down, because that’s a luxury, right? Plus, at the same time, they get sued because Dr. MD was too close to the name that an established company already had.
Dave Young:
Okay.
Stephen Semple:
The company suing them, also tried to buy them.
Dave Young:
Stay tuned, we’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Let’s pick up our story where we left off, and trust me, you haven’t missed a thing.
Stephen Semple:
Because Dr. MD was too close to the name that an established company already had.
Dave Young:
Okay.
Stephen Semple:
The company suing them also tried to buy them. But they decided they’re not going to fight, they’re going to settle, and they’re going to change the name. And they had to make a decent payment to them. They were like, we’re going to lose this thing. So, in 2010, they changed the name. Now, Dennis really did not want to put his name on the product, because his last name is Gross, and he remembered being teased a lot as a kid about it.
Dave Young:
Sure, yeah.
Stephen Semple:
But Carrie says, “Nope, we’re putting your name on it.” So, it ends up becoming Dr. Dennis Gross-
Dave Young:
Skincare.
Stephen Semple:
… is the name of the product.
Dave Young:
Yeah. Okay.
Stephen Semple:
Now, 2010, they have their first million dollar month, they launched a new version of the peel, which is extra strength, which is also risky because the peel product is their bestselling product, and he also then goes on to develop this plastic mask with an LED light. So, you may have seen these on the internet, and basically, it stimulates collagen because as we get older, collagen production declines, and this light treatment actually stimulates collagen production, and it’s been approved by the FDA as being effective. So, it’s early 2020, and they feel like they need expertise to go to the next level. So, they approach some PE groups, and there’s a PE group that wants to buy a minority stake. 2020.
Dave Young:
Okay. Yeah.
Stephen Semple:
2020. So, they’re close to signing the deal, the pandemic is announced, and what closes? Everything.
Dave Young:
Everything, yeah.
Stephen Semple:
Spas, the clinic, everything. The deal’s off. And they really thought they were going to lose everything, but they decided to go all in in the digital space, do these masterclass online, all this other stuff… The online sales take off, three months later, PE wants back in. And they make the deal happen in June of 2020, and then in 2023, along comes the acquisition offer of $450 million from our Japanese friends. So, it all works out well-
Dave Young:
It all worked out.
Stephen Semple:
… for them in the end. But it’s amazing how many things, as we’re doing these podcasts, that have these 2020 turning points, eh?
Dave Young:
No, 2008, 2020, yeah.
Stephen Semple:
Yeah.
Dave Young:
I was going to ask if you feel like 2025 is going to be one.
Stephen Semple:
Oh Jesus.
Dave Young:
Are we living through one of those turning points right now?
Stephen Semple:
Again, it seems like it’s one after another, we just get past one, and get our feet under us, and the next one happens. But to me, the thing I found that was interesting is this whole idea of, he didn’t start off saying, hey, I wanted to make this huge business around skincare, it was all around the things he was learning in the clinic.
Dave Young:
Sure.
Stephen Semple:
So, he was treating people in the clinic and he saw there’s these products out there really not working, and we can make a better product. And then, the first marketing was the halo effect around the spas, which I thought was really, really clever. But it was really about this whole idea of taking his clinic, and figuring out how to turn what he did in his clinic into a product. And I thought that that was really great observations on his part.
Dave Young:
Yeah, yeah. To have a product that works, that’s really a pretty important piece of this story.
Stephen Semple:
You’re right. You’re right.
Dave Young:
Because there’s a million things out there that say that it’s going to make your face look better, and make your skin look better.
Stephen Semple:
Yeah. And he really researched it. He went out to the stores, and he saw the products that were out there, and he took a look at the active ingredients, and said, man, this has hardly anything in active ingredients. And then, he looked at the peel process, and he went, okay, one part of this makes sense, but it doesn’t really work, and here’s what you need to do, you need to be able to start it and shut it off. Yes, created a better process, and then from that turn that better process into a product. And you know what? I think there’s those opportunities out there, I think it’s really easy to look at something and go, oh, these products are terrible, but not to do the next step of, okay, well, if they’re all terrible, how do you make it better? How do you do something better?
And again, it could have been easy to go, well, I can make this better product, but I can’t get it in the stores, going, okay, well, I can still do this through my clinic. Now, it costs them money for a lot of years, there was seven years of the clinic was subsidizing the product until the product developed enough legs to get going. But it’s amazing, there’s so few overnight successes, are there?
Dave Young:
Oh my gosh. Yeah. Our awareness of them seems to pop up overnight sometimes, but when you start digging into the backstory like you have, it’s like, oh, this was not just an overnight success. Yeah.
Stephen Semple:
Well, and in fact, if all you did was look at it from when it was Dr. Dennis Gross Skincare, well, shortly after they changed the name, they started to do really super well, and it’d be easy to go, oh, well, it was super successful out the gate, ignoring the seven years leading up to that, of struggle, and challenge, and all those other things. Right?
Dave Young:
Yeah. And naming something is always, it’s a fun process, and it’s sometimes counterintuitive.
Stephen Semple:
Yes.
Dave Young:
You think, what was it, Dr. Med?
Stephen Semple:
It was MD Skincare.
Dave Young:
MD Skincare, okay, that’s actually still pretty generic.
Stephen Semple:
Yes.
Dave Young:
And there’s no other company out there called Dr. Dennis Gross.
Stephen Semple:
Right.
Dave Young:
I think, to me, the lesson about that is the less descriptive your name is, so descriptive name meaning MD Skincare…
Stephen Semple:
Yeah, yeah.
Dave Young:
That’s very descriptive, it’s sort of like if you named your company Toronto Tire Company.
Stephen Semple:
Yeah.
Dave Young:
Okay, it’s descriptive, but it’s not distinctive. And it’s not very memorable because every tire store in Toronto is a Toronto tire store.
Stephen Semple:
Yeah, exactly.
Dave Young:
Right? And so, every product out there for skin that was developed by a doctor is an MD skincare product.
Stephen Semple:
Yes.
Dave Young:
That’s why they’re having to sue everybody.
Stephen Semple:
Yeah. Exactly.
Dave Young:
And this is especially true for local businesses. If you have a weird name, rejoice in that, and get yourself on mass media and make your weird name famous. Because when people search for Andrew Gross, do you know what they don’t find? All of the competitors.
Stephen Semple:
Correct, correct.
Dave Young:
Right? You become famous for your brand and your product, people bypass the comparison phase, they’re like, oh, I’m just going to go right to here, yeah, this makes sense. Click. Buy.
Stephen Semple:
And it’s interesting, his wife, Carrie, who really insisted on the name Gross being put in it, at one point, was checking things out in stores, as you do, because you got to make sure your products are properly placed, and there was a couple of young girls looking at the product going, “I can’t believe they put the name Gross Skincare, this is really weird,” and she was actually really happy. Now, he would have been deadly embarrassed, but she was really happy because she’s like, they noticed it, they commented on it, they’re talking about it, it’s getting attention.
Dave Young:
And if you let them try it, they’ll buy it, and they’ll buy it again, and-
Stephen Semple:
Right? And they’ll never forget the name.
Dave Young:
Yeah, exactly. Exactly.
Stephen Semple:
Yeah.
Dave Young:
Carrie wins my award for the smartest move in this story.
Stephen Semple:
Absolutely. And putting her foot down, and insisting on it, because it’s these unusual things that really make things stand out. And people can be really hesitant and afraid of those things, and don’t be, lean into them.
Dave Young:
Yeah, yeah, absolutely.
Stephen Semple:
Lean into them. So, they ended up in the end doing really, really well, and next time you see on the internet, one of those plastic masks with the lights in it, you can think about our friends here at Gross Skincare.
Dave Young:
All right, well, thank you for bringing this Gross story to the Empire Builders Podcast, Stephen.
Stephen Semple:
And the ending of this would make Carrie happy.
Dave Young:
Right? Absolutely. Absolutely.
Stephen Semple:
All right, thanks David.
Dave Young:
Thank you. Thanks for listening to the podcast, please share us, subscribe on your favorite podcast app, and leave us a big fat juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute empire building session, you can do it at empirebuildingprogram.com.
