The Dollar Shave Club has attained a lot of visibility on YouTube and in the press. Some might think it is just another viral video story. But the truth runs much deeper and this business strategy just might succeed.
Dollar Shave Club is a startup ecommerce business offering men’s razors cheap: from $3 to $9 on a monthly subscription basis, shipped to your door. Customers sign up for one of three plans that give them a razor and a supply of blades every month, from twin-blades to a four-bladed or even six-bladed razor. Founder and CEO, 33 year old Michael Dubin, created a humorous and on-the-mark video, which has been viewed over 4 million times on YouTube. Over 12,000 men signed up in the first 48 hours.
Why Gillette isn’t worried.
Gillette dominates the razor and blade business, with 66% share of a $12.8 billion global market. In an April 12 WSJ article, Gillette spokesman Damon Jones said his company isn’t worried about losing marketshare, in part because other subscription-based companies have tried and failed. “If you want to spend 10 bucks a month, we have Gillette products available at all of those pricepoints,” he said. If price were the only pain point, Jones might be right. After all, 15 Gillette Mach3 cartridges can be purchased for as low as $2.06 each on Amazon.com, if the buyer agrees to recurring shipments. So what’s the rub?
Why Gillette should worry.
What DSC is all about is simplicity and backlash. Men generally hate to shop. Many go to great lengths to extend the life of their blades to cut down the monthly cost. ’Stop paying for shave-tech you don’t need!’ pines Dubin in the video. What Dubin is saying in his own funny, irreverent way, is that the Gillette’s of the world have been inventing ever more complex new razors and raising price every year to pad their pockets, not serve your needs. The appeal of DSC is not only that it is easy and saves you money, but that buying a razor from them is a very public way of saying to Gillette, ”I’ve had it and I’m not going to take it anymore!’ This goes beyond price points to a much more fundamental identification with the brand and Michael Dubin. If DSC razors, with lubricating strip and pivoting head, and its service levels, are good enough, repeat business and strong cash flow will follow.
Why has The Dollar Shave Club raised $1 million in funding from saavy venture-capital firms Andreessen Horowitz and Kleiner Perkins Caufield & Byers?
These guys are not stupid. Gillette is truly a great brand and has earned every share point. Yet, in following the classic CPG playbook to drive value for its investors via ever greater revenue and profits, Gillette has left many dissatisfied and disengaged users in its wake. When someone comes along like The Dollar Shave Club and changes the dynamics of the playing field by tapping into a deep consumer sentiment that is easily understood and shared, what you get is not just a funny viral video, but a potential game-changing business model. If DSC can make it work for razors, what other categories might they shake up?
What this means for you.
- Nobody can sleep soundly in the new ecommerce internet world. New business models can pop up overnight from anywhere with a relatively modest investment, and with the right value proposition and brand positioning, can cause headaches for even the largest companies.
- Brand identity, personality and values are still incredibly important to consumers. Tapping into them in a genuine and authenic way, to the relevant target market, is the path to sustained profitability.
- Consumers feel overwhelmed and stressed. Simplify their lives in some meaningful way while saving them some money, and they will reward you. Serve it up with a little well-done humor in a way that says ‘we understand,’ and they will embrace you.