Dollar Shave Club – the quirky, cheeky in-your-face US razor subscription service, was recently sold to Unilever for $1 billion. That a lot for an e-commerce business that’s just 5 years old and has 190 employees.
But apart from the obscene amount of money that it was sold for, the Dollar Shave Club case study just goes to prove once again, that no company or category is safe from disruption by a couple of kids with a laptop and a touch of creativity.
If you look up the term ‘daylight robbery’ in the dictionary – a classic example of this phenomenon are razors. See the big companies see the only way they can compete here is to out-innovate each other with more blades, lubricating strips, lights, fog horns, ones that are powered by a hamster on a wheel etc, etc. Meanwhile all you really want is a single blade, that for goodness sakes, just works.
Dollar Shave Club spotted this gap, sourced well-priced razors from Korea, made a quirky video themselves and posted it on YouTube, sold razor subscriptions for just $1 a month for a ‘to-your-door’ delivery service – and over time built up a business with revenues of $240 million per year, which took 8% of the US razor market.
The online business was founded in 2011 by Mark Levine and Michael Dubin to combat the high cost of razors. The idea was rather simple. Instead of paying $10 or $20 a month at a store for disposable razors, a Dollar Shave Club subscriber could go online and set up a regular order to be shipped to his home monthly at a fraction of the retail cost. via
Not bad for a couple of hair-brained hooligans.
The take out here is that two guys and a silly video were able to take on the might of Gillette, and win. The tools for their takeover were simple; a plan, a product (which they didn’t make themselves) an arrogant competitor and a YouTube ad, which aired for free.
There’s nothing remarkable about the guys that started Dollar Shave Club. They’re not sending people to Mars or reinventing the way we communicate, but they’ve capitalised on the phenomenon of globalisation and the arrogance of a giant that was not able to imagine that there was another way to do things.
This story really should send cold shivers down the spine of every company that believes in the illusion that there is a ‘moat around their business’. If you are not imagining the unimaginable – you’ll meet your match at some stage, and when it happens, probably give it a label like ‘a black swan’. But black swans are not rare. They are as common as pigeons and make even more of a mess when they pay you a visit.
Five years and a price tag of $1 billion – well played Dollar Shave Club, well played.