Mark Levine and Michael Dubin began operations in 2011 of Dollar Shave Club (DSC). It is located in Marina Del Ray, California. Sales for both 2014 and 2015 were reported to be approximately $1.43 million. Clearly, for 2016 this number should be recorded as $1 billion as that is the amount that Unilever paid for the acquisition of the company.
Dubin studied improv so that he could get a better read on people. When you learn improv, you need to know how what you say will affect your audience. He says the same concept applies in business.
How the Company Started
The two company founders met at a party and somehow got onto the conversation about how expensive razor blades were.
They felt frustrated by having to pay so much for replacements each month. After a discussion, they put together a marketing plan and determined how to sell a lower-cost alternative.
According to Crunchbase, the company was able to raise $72 million. There were a series of funding sessions with large venture capitals participating. Recently (2016), Unilever bought the company for $1 billion.
According to reports from Lifehacker, Time and the Huffington Post, the company does not manufacture its own blades. It purchases from Dorco. Depending on the subscription chosen, customers can do better by buying from Dorco direct.
Customers can also save by buying Dorco razors on Amazon.com. While DSC’s claim to fame is they can deliver on a monthly basis, many feel this could be overkill, as most don’t go through the amount of razors that are shipped. There are flexible options within the plans, but these are made clear on its website.
Industry analysts fear that the concept is only as good for as long as the big players keep their prices high. If consumers find these big companies undercutting prices, it’s difficult to imagine DSC being able to counter.
Why it Works
The company recognized that people don’t need fancy gadgets and paraphernalia when shaving. They need quality blades at affordable prices. Big companies like Gillette charge upwards of $4.00 to $5.00 per replacement cartridge. Dollar Shave Club gives you the same product for so much less.
The company has three different levels of service and gives one month for free ($1 S&H) as a trial. The first level consists of four cartridges containing two blades.
The mid-tier contains four cartridges with four blades. The highest level of subscription is four cartridges containing six blades. The company also has other supplemental products that customers can add on to the purchase.
A large company like Unilever would not take an interest unless a company had some meat behind it. Whether the buyout was wise or not is irrelevant to DSC. The fact is the deal was made.
If you have been on Facebook within the last year or so, it is likely you have seen advertising from Dollar Shave Club.
Most people shave so the target audience is huge. People who shave are quite aware of just how expensive razor blades cost. When they find out they can grab them for a fraction of the cost, they become quick converts.
Its main method of promotion is direct-to-consumer. If you do nothing else, make sure you take a look at the company’s promotional video. It’s quite amusing but it also gives some good insight into what the company is all about.
Don’t worry. It’s less than 2 minutes long. In case it’s no longer on the front page of its website, you can find it here:
The video has over 23 million views to give you an idea of its popularity. If you do have the time, read through some of the comments below the video.
At the moment, the price of the service is still low enough to beat out the shaving giants. However, it is unclear if they can maintain that lead indefinitely. They do have the advantage of offering a subscription-based service, so they will likely keep customers in the system for extended periods.
People need razors, so it’s appealing to have them delivered without having to worry about running out.
The name of the company makes it quite clear what it’s about. It is about low-cost shaving products without all the gimmicks. But, the video also conveys a somewhat subtle undertone in that sales of the product will help to employ people.
Clearly, the edginess of their promotional video is directed at younger males. These are people who don’t have a lot of money but want to keep well groomed. This could be a large reason why the video was a viral hit and led to the company’s ability to obtain substantial capital.
The company also offers a refer-a-friend program which gives you a credit of $5 towards purchases. It’s unclear if this is a large source of income.
The company has a rating section on its website. It rates quite high. Of course, it’s unclear if the company posts all bad reviews on its website (they do post some).
While it is against the guidelines of the Federal Trade Commission to report false testimonials, there is no guideline or requirement stating the company must publish every review it receives. Still, it’s admirable that they posted some bad reviews on the site.
In 2012, AdAge awarded the company the best “Out-of-Nowhere” award for the video. They received other accolades as well.
Lessons Learned By The Business
- Mike Dubin believed in his concept. He was able to go up against the big players because he had the right kind of vision and knew it was possible.
- The company knew early on to capture the interest of a young group of people and get them hooked on the product. The subscription-based model increases the chance they will get several months of sales. The low price point of the subscription along with flexibility in delivery makes it easy for people to justify the purchase. This is especially true when the big corporations continue to charge hefty premiums for a similar product.
- The company rode on the coattails of a replacement business. DSC does not make much on the razor holder. It makes its money on the recurring sales of replacement blades. Therefore, it has no problem giving away the holder for free, along with some blades to get started.
- Dubin knew that marketing direct-to-consumer was going to the be the best means of getting the message across. It didn’t hurt that he had a fun video that went viral. The message appealed to people who in turn shared the concept. This continues to increase membership rates.
- Convenience is at play in the company’s strategy. This should never be overlooked because people are busy. Having razor blades delivered on a timely and consistent basis takes one item off the to-do list (and the shopping list). It doesn’t hurt that they save money in the process.
How Other Businesses Can Learn From This
Find a hungry audience or group and give them what they are hungry for. These are people who will become loyal to you when you continue to deliver what they want. Young men who don’t have a lot of money but want a quality shave is a main group DSC is going after.