Online retailers offering subscribers monthly deliveries of razors are a new phenomenon, fresh-faced scruff compared with the more mature, full-bearded brands like Gillette and Schick. But those startups are trying to take a nick out of a high-margin business, and the biggest of the giants has noticed.
Gillette, a division of consumer packaged goods giant Procter & Gamble and the dominant brand of razors and blades, jumped into the online shave products market in early June with the launch of Gillette Shave Club—“a fast move” for such a large brand, says Ali Dibadj, a Sanford C. Bernstein consumer products analyst. Procter & Gamble holds about 70% of the global market for razors and blade, with Gillette as the leader. Gillette had sales of $7.9 billion and a brand value of $20.4 billion as of May 2015, according to Forbes.
Gillette was reacting to the emergence of such web-only retailers as Dollar Shave Club, No. 319 in the Internet Retailer 2015 Top 500 Guide, and Harry’s, which offer shaving blades and razors, by subscription. Each entered the e-retail market within the past three years and each has raised tens of millions of dollars in several rounds of funding.
“This is an example of massive disintermediation of a well-established brand: Going after high-margin business with lots of share,” Dibadj says. “Because of the Internet, the moat has shrunk, and these other companies have been relatively successful from a unit share perspective. From Gillette’s perspective, these other guys are still small but they can’t be ignored because the Internet makes things move very quickly.”
Consumers tend to stick to their favorite brand of razors and blades, Dibadj says, and Gillette has consumer loyalty plus high-quality blades for which it charges premium prices.
Gillette Shave Club has three levels: classic, with five Mach3 Turbo cartridges; advanced, with four Fusion cartridges; and ultimate, with four Fusion Proglide cartridges. The plans range from about $3.40 to $4.88 per cartridge, according to Gillette.
The club is not only about shaving. Consumers can sign up for just the shave plans or rewards that include access to free products, exclusive content, grooming tips and major league sports and entertainment ticket sweepstakes, according to Gillette. The shave club launch included a promotion for subscribers to win a trip to Major League baseball’s All-Star Weekend, held July 12-14. That power to attract major partners is one way for a big brand to distinguish itself from less-established competitors, Dibadj says.
Dollar Shave Club started in 2012 and gained traction with humorous YouTube videos and TV infomercials that promoted its alternative to high-priced razor blades. The California-based seller of men’s skin care products won the E-Retail Growth Award in the inaugural 2015 Internet Retailer Excellence Awards, given June 3 at the annual Internet Retailer Conference & Exhibition in Chicago. The award was for the retail website that ranked in the Top 1,000 for at least two years and achieved the highest growth rate in 2014. Dollar Shave Club, which has 1.7 million subscribers, grew web sales 242% year over year in 2014 to $65 million.
Dollar Shave Club expects to double web sales this year, CEO Michael Dubin has said, and aims to become the pre-eminent online skin care retailer for men and “own the bathroom cabinet.”
Dubin declined to comment on Gillette’s club.
New York-based Harry’s, started in 2013 by Andy Katz-Mayfield and Jeff Raider, earlier this month raised $75.6 million in a Series C funding round, led by Wellington Management and including Tiger Global. Raider had previously worked at eyeglass retailer Warby Parker, which started as an online-only seller and is No. 247 in the Top 500 Guide.
Harry’s, which owns its Germany-based blade manufacturer, allows consumers to sign up for various kits (The Truman set for $15 or The Winston set for $25) plus refill sets that are just blades. An eight-pack, for example, is $15, with free shipping for orders over $10. The e-retailer also sells shave kits ($31 and $41), plus shave cream, moisturizer and a razor stand separately. Several stores also carry the company’s products, including Barneys New York Inc. (No. 183), J. Crew Group Inc. (No. 52) and Nordstrom Inc. (No. 19), though products are not available in all stores.
Harry’s did not return requests for comment.Favorite