How Dollar Shave Club Made A Giant Tremble In Its Boots – Strategy With RS
Michael Dubin, created a video – that made fun of pain & money spent on shaving and posted it on YouTube. It went viral and that laid the foundation for the Dollar Shave Club, which 4 years later is being acquired by Unilever for $1 billion.
Dollar Shave Club is not yet profitable – so why has Unilever paid hard cash to acquire it?
The business picked up so well that it has cornered 8% of the $3 billion US market for razors & blades, forcing Gillette to file a patent lawsuit against it claiming it infringes on Gillette’s hundreds of patents.
To understand the Dollar Shave Club phenomena, let’s start by asking basic questions to understand the raison d’ etre of its success!
Do you know the route to follow, to build a successful business? It is simple. Identify an area which you are passionate about. In that area identify the pain point of customers from the existing best solutions. Then endeavour to either reduce or eliminate the pain points.
Take the mundane task of shaving. A young man followed the above route to establish a successful business – Dollar Shave Club.
He identified the existing best solution available in the market vis-à-vis saving – Gillette. He identified the pain points of customers with Gillette – the high cost paid every month, and month after month for buying its blades.
Thus he launched the Dollar Shave Club, which offers a subscription model, starting as low as $1 per month. For that price a razor was delivered every month to the subscriber’s doorstep. Of course if the subscriber wanted a better quality razor he had to go in for higher subscription fees.
On an average the company’s customers pay $7 per month to have razor delivered to their doorstep every month.
The Dollar Shave Club was launched in 2012 with a video which went viral – it was viewed 19 millions times.
The Dollar Shave Club can be credited with creating this segment because prior to its entry, the subscription model for a shaving product did not exist.
Even when Dollar Shave Club had 2 million members, it was still not breaking even. To add to its misery, Gillette too has entered the subscription market this June.
Anticipating imminent entry of competition, the Dollar Shave Club came up with a strategy based on 1 insight – men’s grooming market will grow at a rapid pace. It decided to introduce a range of men’s grooming products like shaving creme, hair styling gel etc. And you would not believe it – a men’s butt wipe branded as One Wipe Charlie!
What was the reason to expand into men’s grooming products? Apart from the fact that the segment was likely to grow, it would also allow the Dollar Shave Club an opportunity to send many more items in the same box that goes out every month carrying the razor! Result: Fall in delivery cost.
Business Lesson for us:
Ever one of us have the capability of bringing the ‘giant’ of our industry to its knees – provided we follow the essence of strategy adopted by Dollar Shave Club.
In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here.