What Dollar Shave Club knows: Getting an edge on utility
The idea appears to have emerged in the nick of time. Back in 2012, when the revelation struck Michael Dubin that men would gladly order razors online if it meant saving a few bucks and trips to Walgreens, the word omnichannel was just a twinkle in the eye of retailers and manufacturers.
While YouTube viewers delighted in Dubin's declaration that "Our blades are f— great," iBeacon technology was in the test phase, Warby Parker was a relative startup and department stores had yet to consider same-day apparel delivery.
In the following years, Dubin's company, Dollar Shave Club, grabbed headlines for its edgy marketing as well as its growing market share. Today it is making headlines because of a lawsuit by rival Gillette. But Gillette's claim of patent infringement has little to do with Dollar Shave Club's success.
Rather, Dollar Shave Club is an example of the ways in which manufacturing supply chains are continuously, irrevocably being disrupted. Yet Dubin's approach to wooing customers is disarmingly simple: Put a traditionally ho-hum, replenish-able staple product online and then lather it up with a customized delivery system and scrappy humor.
In short, he is turning a chore into something fun and in the process may be accelerating the consumer's product repurchase cycle. Other staple consumer goods, from pet food to diapers, can do the same.
No stubble bubble
The appeal of online blade replacement is not unlike the appeal of reusable blades themselves: It takes a relatively high-cost but utilitarian item that moves on a fairly regular basis and finds a more seamless way to get it into our hands.
And men are seemingly game for the change. Online sales of men's shaving products nearly doubled in the 12 months leading to May 2015, to $263 million, according to the market research firm Slice Intelligence (as noted by a Wall Street Journal report). That represented about 8 percent of the total market, which shakes out to about $3 billion, the Journal reports.
The growth indicates no signs of a stubble bubble. In all of 2014, web sales of shaving products reached $189 million, up 70 percent from 2013's $111 million.
The Dollar Shave Club, which sells blades across three price points, claims 10 million customers purchase its blades at least every other month, according to a separate story in the Wall Street Journal. In addition to its three blade types — $1 for a shipment of Humble Twins, $6 for the 4X and $9 for the Executive — the company sells shaving creams and hair styling products. In June, Dubin projected his company to generate 2015 sales of $140 million.
What razors, diapers have in common
Those increased sales, I surmise, are the result not only of captured market share, but also of increased razor consumption by Dollar Shave Club's customers. Many men use their razors longer than recommended (Gillette blades reportedly can last five weeks). So a home-delivery system may actually accentuate use — men replace them more frequently than they would if buying from the store.
And let's not ignore the appeal of receiving a package in the mail. By arriving directly to the consumer, rather than being picked up off the shelf (or from behind a security display), Dollar Shave Club's products generate anticipation. When the package arrives, with its blades and cartridge snug in their custom box, it makes the customer feel special. That the company is called a 'club' reinforces this experience.
Which is why ventures such as Dollar Shave Club are so effectively disrupting the traditional manufacturing supply chain. With its monthly shipments, Dollar Shave Club is merely delivering into men's hands the convenience they had already wanted. These are blades, not tomatoes, after all. There's little variation in the task of buying them.
There are other categories like this — multibillion-dollar segments that, if they shift their delivery systems and price approaches, could change the way people buy and use products.
Indeed, the Dollar Shave Club model can be applied to pet food, diapers, coffee and possibly even batteries. In some cases it is. My Nespresso coffee pods arrive every month as reliably as my utility bill, and the Honest Company regularly replenishes earth-friendly diapers and other staples for its customers, with reduced prices for those who sign up for automatic shipments. I wish someone would come up with a way to automatically refuel my car every week.
3 disrupting questions
Direct-to-consumer gas may be a while in the making, but manufacturers can benefit from the digital model — especially if they keep in mind that the shift raises challenges for retailers as well, since they are left holding the empty bag of anticipated sales.
To determine the best approach, product makers and sellers should answer three questions:
1. What kinds of products are ripe for change?In addition to existing categories such as diapers and razors, manufacturers can search for emerging product areas that can adapt the disintermediation model Dollar Shave Club embodies. Any product that can support an experience that supplants the in-store experience, through a different channel, has the potential to bypass the normal means of distribution.
2. Why and how are consumers choosing us?Through online surveys, social media feeds, interactive apps and loyalty programs, product makers can regularly assess why their best customers choose their brands. Ongoing research can help them track how consumers purchase the products over time to identify the potential of other supply and delivery methods. One should not assume, however, that an online delivery channel is suitable for all categories. Shoppers are likely to grab their artisan water when they are already at the grocery, or their golf balls when checking out golf clubs.
3. What’s the retailer's role? Manufacturers and retailers can work together, beginning with an analysis of their own consumer purchasing data. If those insights can be used to create a new service delivery approach, then the only weapon Dollar Shave Club has is its pithy advertising and marketing. If I can get the products I want with the same quality experience from the retailers I already shop, then why would I switch to a new, unknown product or service?
The key, I suspect, is the product entails a normalized purchase process and doesn’t require the need to be reassessed each time it’s purchased. Timing is crucial, though, as Dollar Shave Club's Dubin has proved. He helped make razors sexy. Honest Company transforms diapers into responsible consumption. Perhaps someone can do the same with batteries.
One element is clear: If no one is, then someone should.
Bryan Pearson Bryan Pearson is President and CEO of LoyaltyOne Inc. and the author of the best-selling book The Loyalty Leap: Turning Customer Information into Customer Intimacy. www