The men’s grooming industry is a great case study in understanding the fundamental shift in power—from corporation to consumer—at the center of this book. Gillette and Schick spent about a century pumping out variations of the same products, until Michael Dubin realized that their lack of customer insight was a major opportunity for Dollar Shave Club (and then its East Coast competitor, Harry’s) to disrupt the status quo.
Dubin’s plan of attack against the long-time incumbents focused on customer pain points. As Dubin put it to Fortune magazine, “the beginning of the story is about solving a problem for guys. And the problem that we’re solving at the very basic level [is] that razors are really expensive in the store. It’s a frustrating experience to go and buy them.”1 Shaving is a simple act, easily accomplished with a standard blade, so why did it have to be an expensive hassle? If a man could get cheap everyday essentials delivered via Amazon, a trip to the local Walgreens to ask a store clerk to unlock a display case—a brutal annoyance—shouldn’t be necessary. The solution to men’s shaving woes lay in a new value-driven formula, built around the customer, that would remove such headaches.
Behind the scenes of the customer-centric business blueprints were Dubin’s first investors: Michael Jones (a former CEO of Myspace) and Dave Fink, two budding venture capitalists who ran a small L.A.-based fund called Science Inc.2 The firm now has roughly sixty companies in their portfolio, including names like Prize Candle, FameBit, HelloSociety, and the popular underwear subscription company MeUndies. In 2011, however, the shop didn’t have much other than a vision to find distinctive direct-to-consumer subscription companies that had brand-building potential and an ability to disrupt.
While Dubin’s business plan ticked some of the “investment” boxes, what was compelling about Dollar Shave Club was the founder’s vision, sense of humor, and entrepreneurial shrewdness. “What I know is that for me to have successful businesses,” Jones told Inc. magazine, “I need epic founders and really good ideas.”3 Fink remembers Dubin showing up with a bag of razors and a rough cut of the now-famous YouTube video.
Although not a stand-up comic, as some have speculated, after graduating from Emory University in 2001 and moving to New York to work as an NBC page, Dubin studied improv with the legendary Upright Citizens Brigade for eight years. He credits his improv experience with teaching him how to attract an audience with intelligent humor. “It trains your brain to find what’s funny about a situation,” he said. “That helps the advertising that we do.”4
Beyond Dubin’s comedic chops, the Science guys also saw the wisdom in the business model. Fink had prior experience with the subscription apparel pioneer Fabletics, and had seen other successful use cases from the likes of The Honest Company, Salesforce, and HubSpot, so he was aware of a subscription play’s potential.
With a charismatic founder and a solid model, DSC represented “a thesis we wanted to chase down,” Fink told me recently—and they did, cutting Dubin a check for $100,000.5 While Fink says many of the other start-ups around L.A. wanted the status that a fundraise offered in the form of a fancy office and other perks, “Dubin didn’t give a shit about that stuff.” Dubin “saw no reason to move out [of Science’s offices], because he was getting free rent! He was smart—he’d take advantage of every opportunity possible, knowing the mindshare value Science provided him early on. This guy could have been working out of a garage... he was really focused on what mattered. He just wanted to surround himself with the best people possible.”6
In a sense, Science too was in “start-up” mode, and was willing to operate in unorthodox ways. Where Dubin was lacking, Science filled in the gaps with industry expertise, systems, logistics partners, and even complimentary office space. As Fink explains, “We provided Michael with software engineers, man-hours, rent-free office space, and other additional resources—so, accounting for all that, the actual investment is much higher. That said, Dollar Shave Club paid off in spades.”7 Science’s shared resources helped the razor CEO to quickly eliminate missteps, leverage the right forms of social media, and fend off competition—there were about a dozen copycats following DSC’s viral video.
Harry’s is perhaps the most successful of the imitators that popped up after Dubin and company. Founded by Andy Katz-Mayfield and Jeff Raider of Warby Parker fame, Harry’s leapt onto the scene in 2013 with careful design engineering and a bit of philanthropy (a strategy shared with Warby Parker), which helped to position it as a slightly higher-end brand.8 While Harry’s and DSC share similar business models, each brand’s positioning has made for a friendly coexistence —Dollar Shave with its fraternity-like following that appreciates value, and Harry’s style-oriented appeal to men happy to spend a bit more cash.
As is usual for massive success stories, auspicious timing was also involved. The early 2000s represented a new broadband-assisted resurgence of online businesses, but many were still forced to invest in costly custom technologies, often hosted on internal servers and infrastructure. The next decade, however, marked an important speed-to-market shift, showcasing how e-commerce start-ups were able to build strong technological foundations without the same restrictive cash outlays.
By 2012, the barriers that historically made entering the e-commerce space costly—such as expensive traditional marketing and custom technology infrastructure—were crumbling, allowing e-commerce as an industry to rapidly evolve. In addition to the likes of Dollar Shave Club, online-first companies such as eyeglass retailer Warby Parker, mattress player Casper, cosmetics noise-makers IPSY and Birchbox, and meal-kit entrant Blue Apron burst onto the scene with similar foundational approaches to building their respective offerings.
While not all of these companies rooted their business models in subscription, each exploited the increasing abundance of open-source or otherwise readily available technology to build momentum. Consider just the simple task of creating a website that could power online transactions. Rather than having to build from scratch, market entrants were launching online stores on platforms like Magento, WooCommerce (Wordpress), and Shopify at a fraction of the cost of their e-commerce predecessors.
At the same time, other solutions to tackle things like automated email, customer service, and D2C logistics provided a unique set of cost-effective tools that completely changed the economics of an online start-up. With newly acquired capabilities to “stack” one solution on top of the next, the agile e-commerce universe was in bloom, giving companies like Warby Parker the ability to launch in a fraction of the time it would have taken ten years beforehand.
And once the infrastructure was in place, attracting customers was not only cost-effective, but had the potential to scale faster than ever before. In 2012, marketing, in the context of direct-to-consumer brands, was inexpensive thanks to buyer-friendly, low-cost CPC (cost per click) and CPM (cost per mille [thousand]impressions) rates on Facebook. Google ads provided another potentially attractive channel for certain brands. Plenty of advertisers capitalized, with companies like Dollar Shave Club, Harry’s, and Birchbox leveraging Facebook to acquire millions of customers on the cheap.
Let’s take you out of the reader’s seat for just a moment: you are now editor-in-chief at a major news outlet such as the New York Times, Huffington Post, or the Globe and Mail (if you’re Canadian, like me). If you wanted to cover the eyewear industry, would you be more likely to publish a piece on Sterling Optical, or on Warby Parker? How about food—would you do a story on Kroger, or Blue Apron? What about mattresses—the American Mattress Company, or Casper? Schick or Harry’s? Yellow Cab or Uber?
You get the idea: people love stories about trending companies with a fresh take on an industry. The legacy brand is the fat, weathered jock, while the disruptor is the cool new kid on the block. Unique start-up stories sell. Regardless of operational challenges, shallow cash war chests, or temperamental founders drinking too much IPA, the press gravitates toward them—providing a distinct advantage for early-stage companies looking at the media as a viable way to drive consumer awareness.
The narrative coming out of the start-up scene of 2012 combined three interesting elements: the ubiquity of the subscription model; the adept use of technology and social media; and an undeniable, overarching desire to push legacy incumbents off their high horse. As each of the big disruptors scaled up, the mainstream media ran an increasing number of articles talking about the rise of these budding companies, each piece serving as great promotional fodder for their subjects.
Dollar Shave Club accounted for over half the online razor market the year before it was acquired by Unilever.
Source: “Unilever And Dollar Shave Club: Delivering A Close, Uncomfortable Shave For Procter & Gamble And Others?,” Seeking Alpha, July 21, 2016, https://seekingalpha.com/article/3990306-unilever-dollar-shave-club-delivering-close-uncomfortable-shave-procter-and-gamble-others.
This phenomenon isn’t new. In the early days of Amazon, Bezos was masterful at storytelling, using the press to spread his narrative of “the biggest store on Earth” to drive awareness, and ultimately more clicks to his online store. Dubin applied the same approach, using his improv training to write the perfect men’s grooming story no journalist could resist. In the months after Dubin’s video went viral, articles touting its ingenuity appeared in outlets that included AdAge, Business Insider, BuzzFeed, The Economist, Fast Company, Forbes magazine, Maclean’s, Mashable, TechCrunch, Time, and Wired.
At first, mainstream observers dismissed DSC as a fly-by-night YouTube company; but, like Amazon, the new shave club quickly silenced naysayers, earning $20 million in revenue in just its second year of operations, and over $60 million the following year. As the company grew, DSC brought in additional capital from the likes of Forerunner Ventures, Pritzker Group, Venrock, and others—raising a total of over $160 million over seven rounds.9
By 2015, DSC was selling $152 million worth of razors a year (and had expanded to offer other men’s grooming products, including “One Wipe Charlies,” a baby wipe for men).10 At the time, Gillette still controlled about 60 percent of the $3 billion total razor market, but it was a different story online. While e-sales weren’t much of thing before DSC, the company had quickly established itself as a $236 million concern for the incumbents.11 There, DSC suddenly accounted for 54 percent of sales, more than double Gillette’s 21 percent.12
In 2016, with Dollar Shave Club on track to see $200 million in revenue, the company built on a funny video and $1 razors sold to Unilever for $1 billion, cash. The sale took place about a year after the Dollar Shave Club was valued at $615 million in a $75 million funding round led by Technology Crossover Ventures, according to the Wall Street Journal.13 What started with an exploration of advisory synergies between the two companies ended with Unilever becoming an outright acquirer of the L.A. start-up, with thirty-seven-year-old Dubin remaining as CEO.14
The sale remains one of the priciest in the e-commerce space. Unilever’s CMO, Keith Weed, told CNBC, “When we bought the Dollar Shave Club, the commentary was ‘Unilever goes into shaving’... No, ‘Unilever goes into subscription selling,’ is what the headline should have been.”
Some analysts raised eyebrows at the multiple Unilever paid—five times annual sales. It’s not hard to see the upside for Dollar Shave Club from its new affiliation with a ninety-year-old consumer goods giant; but Unilever, too, will get its own fair share of value from the deal. It gains a foothold in the increasingly popular direct-to-consumer market; and it gets access to plenty of data and insight into what resonates with customers—data it can leverage for much of its retail channels. In Unilever’s annual report for 2016, the company’s president of personal care, Alan Jope, cited “ripping up the rule book and learning new business models” as an important new ideal. Another value driver for Unilever was DSC’s personal attention to customer service: it once sent free razors to an unemployed guy to help him look good for interviews. “It’s a reminder to all our brands that the people who buy our products should always come first and be the focus of what we do,” said Jope.15
Unilever also gains access to all the benefits that accompany a subscription model: the power to create loyalty, drive recurring revenue, generate better customer data, and feed all that insight into more effective marketing. DSC already sells other products in addition to razors, including shaving balms and shampoos, so the potential to experiment with product from Unilever’s other brands, like Dove and Axe, has incremental revenue potential.
Key performance indicators, such as a company’s retention rate, are a great sign of overall consumer satisfaction; by 2017, more than 50 percent of DSC’s customers stayed on as subscribers after one year, and 24 percent remained on board by month forty-eight— that’s almost one-quarter of its subscribers paying monthly fees for four years.16
The ability to create this kind of customer retention in the traditional world of consumer packaged goods (CPG) is unheard of. Creating a consumer-centric brand à la Dollar Shave Club in the age of digital commerce is difficult for most established CPG companies when, as with Unilever, the majority of sales volume has historically come through third-party retailers. Although this kind of retail business model can drive substantial transactions, the relationship with the end-consumer is foggy at best. In other words, brands that sell solely through retailers forego a customer relationship in lieu of a transactional one. Going forward, we will see more established brands selling product via third-party shelves struggle to stay relevant, as consumer expectations increase. Sure, brands can be selective about the channels they choose to sell through. Amazon is always a consumer-centric option for those who want to capture volume and keep the customer happy. Yet, as evidenced by Uniliver’s $1 billion snap-up of DSC, there’s simply no substitute for building a strong direct-to-consumer brand, built on relationship-driven commerce and disruption of the status quo.
Not surprisingly, churn rates (the proportion of subscribers who leave in a given period) are generally higher for a B2C subscription business than they are for B2B. Individuals, compared to corporations, are more fickle—and run into payment/credit card issues, have a desire to try alternatives, or simply get bored with an offering at a much faster rate than a business does. But reducing churn is imperative across the board—not only to prevent lost revenue, or because the cost of acquiring a new customer is almost always higher than the cost of retaining an existing one, but to boost another metric that directly affects profitability: customer lifetime value (often referred to as LTV). When businesses like DSC can gather valuable data on their subscribers (such as their churn rate), and understand important metrics like customer lifetime value, subsequent decisions related to marketing and customer acquisition are more informed. Contrast this paradigm to a traditional analyst’s attempt to predict when Sally might return to the local Walgreens to buy more body soap.
Dollar Shave’s subscription success begins with the category itself: men buy razors, and need to change the blades frequently. This consumption and replenishment cycle lends itself perfectly to a subscription model. But to keep customers around for four years, a business needs more than just category fit; a focus on customer service becomes critical. If subscribers sign up but are not taken care of, they cancel quickly, resulting in a rapid increase in subscriber churn. There are countless examples of what great customer service looks like post sign-up, from outbound welcome calls to signed cards mailed on a customer’s birthday. In the case of DSC, the company paid close attention to training its customer service reps, not only to satisfy customers who had complaints, but to learn from those who cancelled their subscriptions. Understanding the “why” led to a greater customer retention rate over time.
Finally, Dollar Shave Club’s brilliant marketing can’t be overlooked as a key success factor. Instead of using traditional media to spread images of male models shaving with needlessly elaborate blades, Dubin took his “everyman” message to YouTube for $4,500. This was not only cost-effective—it’s hard to find another example of an ad at this scale with a cost-per-view of less than a fiftieth of a cent—but a highly calculated branding play. Skipping TV, radio, print, and in-store promotion was deliberate, sending a pointed message to its prospective customer base: Dollar Shave Club was a new kind of shaving company, with nothing traditional about it.
As DSC pushed tradition to the sidelines, in 2019 Gillette broke new marketing ground with an ad speaking to the #MeToo movement, as well as one featuring a transgender teen. Though the reception was mostly positive, the first ad sparked a #boycottgillette movement online.
It’s hard to make sense of what Gillette was trying to accomplish with these ads. Beyond being controversial, each one seemed like a desperate attempt to be seen as relevant after decades of marketing malaise.
The end result from DSC’s budget video was classic word-of-mouth mania about not only its YouTube clip, but the entire brand mission. Telling colleagues about a Gillette ad you saw is unlikely. Certainly, talking about your recent trip to buy some Fusions at CVS isn’t interesting. But sharing a link to that hilarious viral video for the razor club you just joined? Well, that’s something to talk about.
Gillette should thank Unilever for waking them up. For decades, the 120-year-old company had ruled the men’s shaving space unchallenged, enjoying steady sales and profits. When King Camp Gillette founded the company in 1901, “customer experience” wasn’t in the zeitgeist of corporate America. The priority was form and function. And, for decades, Gillette stayed in its lane, introducing new handles and blades, never deviating from its product-first perspective to consider changes to its core business. If you look at Schick, the Pepsi to Gillette’s Coke, the same patterns emerge. These grooming giants have a deep history of focusing only on product function, oblivious to customer experience.
Function is important, but once your product does what it’s supposed to, how many more enhancements make sense? In this particular case, how many blades does a man need? Gillette could have hit the pause button after it released its first three-blade razor in 1998. In 2004 The Onion published its legendary fake article by “the CEO and President” of Gillette, headlined “Fuck Everything, We’re Doing Five Blades.”17 Apparently, Gillette’s product marketing team read the piece, but didn’t get the humor memo—the five-bladed Fusion razor came out two years later. In 2018, a Gillette exec told a trade-show audience, “We’re debuting a razor with 19 blades and 74 lubrication strips”—before quickly adding, “just kidding.”18 Hey, Gillette exec guy! The Onion called—they want their joke back.
Gillette, now under the eye of parent company Procter & Gamble, is a classic example of a legacy brand with zero perspective on what today’s customer demands. This “company-first, customer-second” approach is common to frumpy corporations that rely on retailers to manage the customer experience, rather than establishing direct relationships with their end users. Hewlett Packard is another example—it had a great run selling printers below cost, forcing customers into buying the compatible ink cartridges at grossly inflated prices, but when customers caught on and stopped shelling out, HP was forced to revise its model. In response, the company now offers Instant Ink, a subscription service that promises to save customers 50 percent on cartridge replacements.
When Gillette realized its decades-long stranglehold on the razor market was under serious attack, its first counterpunch wasn’t an innovation, or even a copycat service, but a lawsuit: in December 2015, Procter & Gamble sued DSC for patent infringement. Dubin was sanguine about the legal hassle, telling CNBC that “at some point the big boys and girls are going to come at you with every weapon in their arsenal. And you know the legal weapon is one of them... So I don’t think that it was a huge surprise.” (The suit was settled for undisclosed terms in 2019. P&G also filed several suits against Edgewell Personal Care Co., maker of Schick-brand razors, accusing it of the same.)19
In 2017, Gillette launched a DSC replica, Gillette On Demand, a sorry attempt to win back customers who had defected to online leaders DSC and Harry’s.20 The move to develop its own version of a shaving club is just another sign that Gillette is feeling the heat in a changing market, with Dollar Shave and Harry’s not only taking swings but landing punches. Copying the innovator isn’t a bad thing if you want to stay relevant (especially if the innovation benchmark is set by a bunch of suits pushing patent paper upstream), and despite its obvious conceptual debt to Dubin, Gillette On Demand has provided the company with a decent stake in the new online razor market. But, as some have speculated, if Gillette were a more agile company with fewer layers of crusty management, it might have done a better job of fending off its new rivals. “Frankly, Gillette should have taken out Dollar Shave in year one,” says Ali Dibadj, a consumer products analyst at the research and brokerage firm Bernstein.21
With Unilever’s $1 billion acquisition of DSC, it is evident that an innovative subscription model—in the face of a traditional industry—can equal big money. Upstarts like Dollar Shave and Harry’s get it: the shift in power from corporation to consumer, meaning the customer’s voice is now louder than ever; the hypergrowth of online shopping; and the metaphorical megaphone of social media. While resistance seemed to be the initial strategy, Gillette and Schick are now starting to come around. Edgewell Personal Care (Schick’s parent company) recently acquired DSC rival Harry’s for a reported $1.37 billion in cash and stock, in a move to keep up. The new Gillette On Demand offering, meanwhile, has the company’s global VP, John Mang, acknowledging that “guys want to be able to get blades wherever and whenever, and that’s one big void we’ve worked really hard to fill over these past couple years.”22 One thing is clear—selling razors “direct” isn’t just a gimmick; it’s indicative of a burgeoning consumer-centric subscription-based economy that’s going mainstream.