Dollar Shave Club: When Being Good Enough Pays Off

“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!

Background

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.

Bedtime-Routine-Michael-Dubin_Hero_Retouched

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.

The Product

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.

The Video

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.

Market Impact

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.

Going Forward

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?

10 comments

  1. This is an awesome, well-written, thorough post! I really like what Dollar Shave Club is doing with the Men’s grooming industry and I am a believer that DSC was a transformational mover in the industry. While I definitely think that Gillette is not going anywhere, I believe that DSC will shape up to be an extremely successful business. In terms of valuation, buying a company for almost 10X revenue seems crazy, especially when there isn’t any IP to acquire, merely a customer base and business model that could be easily imitated. With this being said, I hope I am proven wrong!

  2. Awesome post! I think Dollar Shave Club has enjoyed success that the company Brandless is trying to ride on. When it comes to products like razors, tissues, toothpicks, I don’t need any bells and whistles. I’m not more loyal to one brand than another; I simply want a product that gets the job done at a low cost. At the same time, the first ad clearly shows that this guy knows how to market towards the younger generation. I thought that ad was awesome. It was refreshing and witty (unlike those stupid Chevy ads where they have people guess what car won all these awards and then say ‘no it was actually Chevy!’). I think that whatever company, be it Gillette or DSC, that can get the razors to be the cheapest/most convenient will enjoy success.

  3. I firmly believe that P&G does a great job with their branding and marketing so I think their brand loyalist are here to stay. My dad still uses Gillete Proglide blades and wouldn’t give a second thought about switching blades. DSC’s market share is most likely growing from millenials that started to grow facial hair (like me) and needed an efficient, affordable option to groom themselves. Oddly enough, I opted for a Braun electric shaver over DSC’s subscription. I did not know about Unilever buying them out though – that’s definitely a game changer and I’m excited to see what that brings for DSC.

  4. Very thorough post Bob! I remember talking about DSC in my Strategic Brand Management class and how Gillette’s response of price reduction was actually like a stab in the back for its consumers. For a few years since DSC’s inception, Gillette has always argued that they provide higher quality razors at a higher price, but the response of price reduction shows how they have been ripping people off for quite some time and are just doing it to try to maintain market share. I’m hoping that this DSC’s online subscription model keeps succeeding well into the future–it definitely is both more convenient and price sensitive!

  5. Awesome post! I think this is an awesome marketing strategy. I thought the commercial was hilarious and so well thought out. It really gives across the message that this is a no BS product, just straight to the point which was really refreshing compared to the rest of the ads that are out there. I completely agree with @mattwardbc that Gillette isn’t going to go anywhere, but DSC will continue to maintain a % of the market. Wish they had this for women. I’m getting tired of paying $20 for 4 razor refills!

  6. I think we have seen many examples of small start-up companies exploding because of their use of social media. Consistently we see them start to eat away at the market share of bigger companies, but the bigger companies compete with these start-ups to still stay on top. For a true start-up do dethrone a king, I think it will take more then the use of social media, but more finding ways to expand and maintain the business model that made them successful. To expand and come out on top I think a few areas that will need to be developed are
    Logistic Train
    Market Awareness
    Expanding in a methodical way.

  7. Nice post. Could have been a bit more focused on the digital aspects, though,.

  8. I love the subscription business model of DollarShaveClub. This is a very smart idea. As a product of almost daily usage, subscription model does help customers save the time and cost spending on the shavers. Moreover, shaver is not a product which requires a high level of technology so that customers are not technology sensitive. This is perfect for E-commerce. And the digital marketing of DSC has successfully attracted their target customers and provided a new fun way of the product. Nice post!

  9. I think the Dollar Shave Club is doing an excellent job of tapping into the subscription-based services trend. They have successfully proven to be a disruptive force in the razor industry given how much they have affected Gillette’s market share. They also capitalized on a realization that many men shave so often that a high quality razor is not first priority, certainly not before price and convenience. I agree with Brittany, wish they had this for women!

  10. I really enjoyed this post! We just talked about the Dollar Shave Club in my strategic management class, so it was cool to see the topic brought up again! I think that the Dollar Shave Club was truly a dark horse. Shaving is something that many people feel like they have to do. Kind of like taking a shower and brushing your teeth. Although some people prefer an experience when partaking in these necessities most people just want to get it done without spending an arm and a leg. I think that The Dollar Shave Club offers this ease and affordability. It also adds an element of convenience because you do not have to worry about re ordering. All in all I think that this is one of the most interesting businesses to look at. Initially, I would have never thought that a small generic brand razor membership could run against one of the largest companies: Proctor and Gamble. Very impressed what this company has done and where they have gone with it.

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