- YouTube/Dollar Shave Club
The “shaving wars” between traditional cartridge slingers like Gillette and online startups who offer subscription models at lower prices is heating up.
With the news that European consumer goods giant Unilever intends to purchase shaving start-up Dollar Shave Club, best known for its creative advertising and cheap razor cartridges, for $1 billion (according to Fortune) comes final definitive proof – shaving and personal grooming has successfully been disrupted.
The deal signals a dramatic shift for established companies like Unilever and Procter & Gamble (owner of Gillette). The companies are finally recognizing that more and more men are buying their shaving and grooming products online, and that this trend only increasing in pace, doubling to $263 million year over year in May of 2015 and surprising market experts, according to the Wall Street Journal.
Unilever gets more than just an entry into the shaving market for the first time with DSC, the WSJ notes. The unprofitable DSC does not make its own blades like competitors do, and in fact sources them from a company called Dorco, according to Lifehacker. It does, however, boast 3.2 million members and is on track to reach $200 million in revenue by the end of 2016, according to the press release on the acquisition. DSC will benefit from Unilever’s global reach to bring its service to new markets as it continues to operate as an independent entity with CEO Michael Dubin at the head.
This puts pressure on Gillette, which is still the market leader with about 60% market share. P&G executives said privately to the WSJ that DSC’s success caught the consumer goods giant off-guard.
Gillette started its own shaving subscription business in 2014 called The Gillette Shave Club to compete with DSC and fellow grooming startup Harry’s. In the third quarter of 2015, it was reported by Fortune that Gillette’s online business had grown to take up 21% of the ecommerce razor market, still paling to DSC’s reported 54% share. Harry’s makes up the lion’s share of the remaining 25%.
In further evidence of the stakes at play and how seriously Gillette is taking its new competitors, in December of 2015 the company even sued DSC alleging patent infringement on the way certain materials coat and lubricate the razors
- Hollis Johnson
Though DSC wins in ecommerce market share, it’s likely that Harry’s is still the winner when it comes to net revenue. Its vertically integrated pipeline including a wholly-owned razor factory in Germany means it can manufacture better quality razors for cheaper for its more than 2 million customers and subscribers.
Prior to the sale, DSC and Harry’s have both raised venture capital at $163 million and $287 million respectively, according to Crunchbase, with Harry’s commanding a slightly higher valuation from investors at $750 million compared to DSC’s $613 million.
For Harry’s part in keeping up with the shaving wars, it launched on Tuesday its second generation razor blades with numerous improvements, as well as updated handles, for the same price as its old models. The DSC-Unilever deal will likely mean increased investor interest in the shaving brand.
With an aggressive Gillette, a Unilever-backed DSC, and Harry’s vertical integration and design, the fight for which company gets the privilege to shave your beard as they fall out of fashion is on.