Cheeky start-up Dollar Shave Club has the $13 billion shaving industry on edge as its commercial featuring founder, CEO and improv actor Michael Dubin has gone viral— it's at 4.2 million views and counting—thanks in part to the brand’s cheeky motto, “Our Blades Are F***ing Great.”
The Santa Monica, CA-based e-commerce start-up, just a few weeks old, had 12,000 people sign-up in the first 48 hours for its razors and blades sold in an arrestingly simple way: select one of three razors, pay one low monthly fee, and have them delivered to your door.
The back-story, from their website:
Like most good ideas, The Dollar Shave Club started with two guys who were pissed off about something and decided to do something about it…
We got tired of spending $15-$20 every time we bought razor blades. We asked ourselves, did we really need all this fancy technology in our shave: a vibrating handle, LED guide-lights, 8-blades, and grip that could steady a 9-iron? The answer was a defiant “No”!
Dollar Shave Club users choose from the simplest twin blades with a lubricating strip and one year’s supply of 60 blade cartridges, for $1 a month up to the “Executive” package, a Gillette Fusion-competitive six blades for $9 a month ($3 per cartridge).
The razors are made in China and South Korea and mailed to customers, proof that “e-commerce has now matured to a point where specialty online retailers with excellent supply chains can mint money from such targeted offerings,” says Aileen Lee, partner at Kleiner Perkins Caufield & Byers.
P&G-owned Gillette controls 66% of the global market for men's razors and blades, followed by Energizer Holdings Schick-Wilkinson Sword with 12.5% and Bic SA at 5.2%, according to Euromonitor International.
But while these titans boast titanic marketing dollars, extensive research and years of customer engagement, the start-up strategy spurring Dollar Shave Club is to be nimble, leveraging free video via YouTube, social media, chutpah (taking potshots at rivals' use of celebrities such as Roger Federer and too many bells and whistles), in addition to piggybacking on consumers habituated to mail deliveries from experts like Netflix and Zappos.com.
"There's clearly almost a backlash among shavers, among razor users, about the price of a man's razor," Sanford C. Bernstein consumer products analyst Ali Dibadj said. "Over the past 40 to 50 years you haven't had more volume growth in this category, there aren't more razor blades than years ago…it's all through pricing."
According to Business Insider's Matt Lynley, who trial-ordered from Dollar Shave Club:
• It works exactly how you would expect it to work.
• Choose the $6 model for free shipping.
• The Dollar Shave Club is still one of the most exciting propositions this year, in his view. There's no reason to not be excited about this.
Dollar Shave Club has raised over $1m of seed funding from pedigreed Silicon Valley VCs including Kleiner Perkins and Andreessen Horowitz.
"We are presenting a new business, a good idea, a funny video and tapped the pain point for a lot of consumers,” i.e., an over-abundance of fancy razor blade choices, said Dubin to the WSJ. "Keeping it simple is the name of the game. This was an easy premise for people to understand, and we don't want to complicate it."
And as Forbes concluded:
Dollar Shave Club has a long way to go to prove it’s a real business. But lots of established competitors in profitable, sleepy market segments should take note: you’re just one YouTube video away from being on the hot seat with your investors.