“I’m Mike, founder of DollarShaveClub.com. What is DollarShaveClub.com? Well, for a dollar a month we send high quality razors right to your door. Yeah! A dollar! Are the blades any good? No, our blades are f**king great.”
With these words, a billion dollar company was launched. Based on the premise that razor’s are overpriced and shopping for them is a major inconvenience, Michael Dubin combined his experience in marketing with his penchant for improv comedy to create DollarShaveClub.com. With a monthly subscription fee as low as $3 ($1 for the product, $2 for shipping), customers could now have razor blades delivered to their house. These unbranded blades cost $0.60 to $2.25 per cartridge compared to $2 to $6 for the market leader, Gillette.
DollarShaveClub.com was purchased by Unilever in 2016 for $1 billion with the goal in mind of taking on their rival, Procter and Gamble, who owns Gillette. Many on Wall Street were caught off guard by this valuation – the company’s last funding round valued the company at $630 million in late 2015 and the company only had $152 million in revenue in 2015. Why was this company worth so much? Lets take a look!
Improvisational comedy has played a big part in Dubin’s lift. For eight years, Dubin studied improv in New York from the Upright Citizens Brigade. He believes that business and improv are very similar – “Whether it’s an executive team or an improv comedy team, you need to know what you can expect from the other players or partners.”
When he wasn’t working on his improv ability, Dubin worked a variety of jobs in the marketing industry. He started off at NBC before transitioning to Time Inc where he served as a marketing executive specializing in web properties. One of his projects was LeapFro.gs, a social media designed for travelers. Although the site did not last long, it gave Dubin experience in eCommerce that he would use later for DSC.
At a holiday party in 2010, Dubin was talking with a friend’s father who mentioned that he was trying to sell 250,000 razors that he had purchased from Asia. From this conversation, Dubin had the idea of starting a website to sell the razors online which would evolve into Dollar Shave Club.
DSC currently offers three types of razors: The Humble Twin (2 Blades), The 4X (4 Blades), and The Executive (6 Blades). The monthly rates for four cartridges (except for the Humble Twin which gives you five) are $3, $6, and $9 respectively. These blades are produced by the South Korean manufacturer Dorco Co. Unlike their competitors, DSC does not focus on loading up their products with features and then increasing their prices like Gillette is known for. They believe that being good enough is key – why should you pay for features that you didn’t ask for and don’t need? Do you really get a better shave from ten blades? If you do, is it really worth $6 to $7 per cartridge?
In 2013, DSC launched their second product, One Wipe Charlies, a moist towelette the company describes as “Butt Wipes.” Later, they launched lines of pre-shave, after-shave, and shave butter. Their goal is to become a complete bathroom necessity provider, all shipped to you through DSC.
Dollar Shave Club launched their website softly, shipping out a few orders per day while figuring out how their internal systems should work. Everything changed on March 6, 2012 when they launched their now famous ad, “Our Blades Are F***ing Great.” In three months, the YouTube video got over 4.75 million views. The video was shot in one day and cost only $4,500 to produce.
The video got people’s attention – and their wallets. After 48 hours of the video being posted, DSC got another 12,000 subscribers. The systems that they developed could not handle the demand.
Mr. Dubin had one small printer running nearly 24 hours a day, with a fan near it to keep the motor cool. The address labels were collected in trash bags, tossed over a fence to the fulfillment center and affixed to packages the next day.
This ad had huge implications for the industry. With this video, Dollar Shave Club was able to get people’s interest and loyalty for essentially free while Gillette spent millions on TV ads. While Gillette and P&G had huge R&D budgets to add new features to their products, DSC was able to attract customers by saying that customers don’t want more from their razors, they just want to pay less.
In 2010, before DSC launched, Gillette had greater than a 70 percent market share of the US razor industry. By 2016, their market share had fallen to 54 percent. DSC and their fellow shave club, Harry’s, were able to collectively increase their market share by 5 percent in 2016 to bring their total share to 12.2 percent.
Gillette has had several responses to DSC and shave clubs in general. First, they launched their own subscription based model, Gillette Shave Club, which they later renamed Gillette On Demand. Their products start at $7 for the first order and $10 for subsequent orders with the most expensive offering at $18.45 for the first order and $21.45 for later ones. Second, they started reducing their prices on their in-store products by an average of 12 percent. Gillette has faced difficulty in keeping their market share as the shave clubs tend to have intense loyalty and many consumers feel betrayed by Gillette over charging them.
So, what do you think? Was Dollar Shave Club worth the price to Unilever? Will their strategy of low cost, unbranded, shipped to home products continue? Will Gillette be able to recover or will they be gone in ten years?