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Dollar Shave Club and the Disruption of Everything
- Freak_NL 10y agoAt the risk of being considered overly pedantic; is offering a better product in the marketplace to the detriment of your competitor called 'disruption' now? Isn't that exactly how the free market is supposed to work?
- adrianN 10y agoWhat else would you call disruption?
- AznHisoka 10y agoSpaceX
- Freak_NL 10y agoNot much, but that may be because of an intense dislike of the word; in common usage though I would define disruptive when used in the context of an event taking place in the marketplace as applicable only to situations that cause not just stiff competition to the extent of dislodging an incumbent party, but also a clash with existing laws, regulations, and societal conventions on a significant scale.
- rahkiin 10y agoFor me, disruption is the creation of a new product or service in a very well established market, that is very different than the established one. For example, Uber and the taxi world, AirBnB and hotels, DSC and Gilette. All have actual impact on the original established market players because without a big change they can't compete.
- ZeroGravitas 10y agoAs the article explains, the product is actually worse, but much cheaper, and in absolute terms it's "good enough" since the better product is over-serving its market. This is pretty much the textbook definition of disruptive innovation.
- ckastner 10y agoBut it's the same product, albeit a budget version of it. If the products differ only in quality and price, that's not disruption, that's simple competition.
- ZeroGravitas 10y agoA pizza in a restaurant, a pizza in a supermarket and a pizza delivery are all pizzas, but they're not the same product and differences in price is only one factor.
- ckastner 10y ago> A pizza in a restaurant, a pizza in a supermarket and a pizza delivery are all pizzas, but they're not the same product If the product is "pizza", then of course they are the same product. Lay out a salami pizza from a restaurant, supermarket and delivery next to each other on plates and they will (mainly) differ only in quality and price.
- macintux 10y agoYes, if you ignore everything that makes them different, they do look the same.
- ckastner 10y agoOK. What differences do you see between three plates of salami pizza that is not purely a difference in the quality of their ingredients (floor, water, cheese, tomato sauce, salami, etc) and the composition of these?
- Bartweiss 10y agoParticularly weird since DSC didn't offer a better razor. They looked at the existing state-of-the-art, scaled back marginally, and dropped the obscene markup. Realistically, this is about breaking a monopoly thanks to easy consumer outreach.
- TheCondor 10y agoI don't know all the details here but by what definition of "better" are we using? I think there are two disrupters here, DSC applied a different business model and distribution model to razors and blades. Dorco, possibly because of DSC money, showed that they can mass produce good enough blades in multi-blade cartridges cheaper than Gillette, who builds billion dollar machines to manufacture them. If blade count is "better" then Dorco is on par or better. If it's the coatings and springs and the whole package then maybe Dorco is merely good enough. Either way, Dorco is able to compete at a quarter of the cost and that seems disruptive. DSC found a great partner though, that has been key. I suspect Gillette has oversold their innovation too.
- Bartweiss 10y agoI guess I was treating "better" as "delivers a better shaving experience". That's subjective, but I don't know anyone who reports that DSC razors, even the top-tier ones, are more desirable than a decent line from Gillette. Pretty much across the board, the conclusion is "not enough worse to care about". I do wonder how much Gillette oversold their innovation, or at least made advances that could be copied just by looking at their product. They certainly seem to have been throwing a lot of R&D at near-zero returns on actual quality.
- joe5150 10y agoDefinitely worse enough for me to going back to buying Gillette blades at the drug store, after spending $9 a month for at least a year on DSC's best razor.
- 10y ago
- billmalarky 10y agoTo me the disruption involved the new supply chain and marketing channels made possible by tech that drastically undercut the incumbent. The actual product differences are mostly irrelevant.
- estefan 10y agoFor the last few years most programmers I know have thought everything has a technical (app-based) solution. But those easy wins are gone now. This is the next trend in tech - upending existing industries by using tech to drive efficiencies. Start looking for "real stuff" you can improve with tech, rather than just software/apps that're hard to defend.
- adrianN 10y ago> upending existing industries by using tech to drive efficiencies aka what technological progress has been doing since the very beginning.
- estefan 10y agoNot really. It's hard to see what industries twitter, tinder, instagram, etc. have been upending.
- onion2k 10y agoCommunication, dating, and photo-sharing respectively. None of those businesses were the first to offer solutions to those problems. They're all incremental improvements to what was there before.
- amirmc 10y agoI wouldn't say any of those businesses have upended the markets they're in, nor driven 'efficiency' (what's 'efficiency' in terms of dating, anyway?). From your comment, it seems you'd agree ('incremental improvements').
- traviscj 10y agoAgree with your overall point but I think the efficiency Tinder is trying to increase is pretty self-evident.
- 10y ago
- alaskamiller 10y agoIf Gillette was Apple and someone else decides to buy up Chinese-made tech gadgets, throw it into a USPS Priority box, give up margins as marketing, and create a quirky new brand would that also yield a similar result in 4 years? Also, there must be quite a lot of ad agencies up and down Madison Ave laughing out loud because in their monthly pitch sessions to P&G they must have offered something similar to DSC on a silver platter for much less than a billion dollars.
- ZeroGravitas 10y agoIf they did offer that to P&G, then P&G was right to reject it. P&G have nothing to gain from this as incumbents, they'd just be throwing money away. The article covers this, saying Unilever was only in a position to buy because they had no existing product in this area.
- adgulacti 10y agoi agree. this way unilever is getting a foothold in another category in which they can undermine P&G's profits, even though in a bit by bit fashion. they will surely bundle DSC concept with existing personal care portfolio. on the contrary, p&g is galaxies far from hurting unilever's profit maker : ice cream business. still it is clear that gillette acquisition was the best thing p&g did in its his entire history. they wouldn't have survived profit-wise otherwise. IMHO, DSC model (subscription based company directly owning supplier to consumer chain, offering nice price + convencience) is the way to disrupt incumbents in consumer goods even though they will never get as big or as strong. there are lots of products which we do not care which brand we purchase as long as a certain level of quality and on-time sufficient delivery is ensured. i would definitely subscribe to a service which analyzes my consumption and delivers all "non-critical" products to my home/work location.
- alaskamiller 10y agoDSC is a lifestyle marketing company. They're like the businesses that buy on Alibaba to sell on Amazon. You're thinking of Harrys, they raised money to buy up a German razor factory to do a full stack business. You're also really thinking about house brands that your local Walmart offers that plenty of people already buy. Walmart on a subscription model already happens, they get sales upticks every payday or welfare disbursement days. Amazon's CPG division is also building up heat. Their house brand is swallowing up category after categories from the Alibaba to Amazon guys.
- AznHisoka 10y agoThe article seems to imply Dollar Dhave Club succeeded with the help of AWS. I don't get it. These guys aren't Google. It's a simple static site with a few dynamic forms. Anyone could've built that easily in 1998, let alone 2006.
- petra 10y agoMaybe he means Amazon's fullfilment solutions ?
- wsc981 10y agoWith "Amazon's fulfilment solutions", you're probably thinking along the lines of this: http://www.thechocolatelabapps.com/amazon-fba-va-virtual-assistant/ http://www.thechocolatelabapps.com/amazon-fba-va-virtual-ass... I thought the same when I read AWS in the article.
- giarc 10y agoI think the author implied that with AWS anyone could start a full blown web based business for cheap.
- cookiecaper 10y agoCheap web startups have been possible since at least the mid-90s. AWS makes it much less cheap, actually.
- goldenkey 10y agoI want to add: Linode, Slicehost, Rackspace, and other good hosts have been around way before AWS and offer very good VPS services that one can scale with ease. Auto scaling is not unique to Amazon. It isn't a cloud thing either. One could scale quite flexibly for at least 20 years now. Unfortunately all the misinformed boot camp coding hipsters don't know their history but love to be plenty opinionated about technology as an artistic movement. And you get these wide reaching grabs for whimsical awe, full of misinformation. Dollar Shave Club was nothing but a marketing success. The tech has absolutely nothing to do with it. Cute narrative attempt, I guess.
- aorth 10y agoThe article highlights Dollar Shave Club's 2012 introduction video[0], which is funny and fantastically frames the reality of the razor market. I don't know why I missed this a few years ago... [0] https://www.youtube.com/watch?v=ZUG9qYTJMsI https://www.youtube.com/watch?v=ZUG9qYTJMsI
- puranjay 10y agoThat video has to be the most profitable marketing campaign in terms of investment vs. reward. It single-handedly built DSC's initial customer base and its brand. And all while making people laugh.
- JumpCrisscross 10y ago> According to the traditional way of measuring marketshare Dollar Shave Club only has 5% of the U.S.; the discrepancy is due to the massive price difference between Dollar Shave Club and Gillette So what fraction of shavers use Dollar Shave Club versus Gilette?
- macintux 10y agoDirectly above that snippet: > ...leading to Dollar Shave Club capturing 15% of U.S. cartridge share last year. Seems like a pretty good proxy for customers. Astonishing, I'd only vaguely heard of them.
- rconti 10y agoThen, of course, cartridge share presumes Gillette and DSC uses consume cartridges at the same rate. Why not just compare actual user metrics? I guess it's hard to figure out how many people actually use a store-bought razor; not as hard in the online world (though it may be proprietary information to DSC).
- Mendenhall 10y agoI dont see this as "disruption", they wisely competed in a space with a huge mark-up on product cost. Something like this wouldnt work on an already lean industry.
- tootie 10y agoWe consider companies like Facebook or Twitter to be tech companies because tech is their differentiator even though they're really social media companies. In this vein, DSC is a marketing company. They are really good at convincing people to buy their razors which are totally normal razors that you can actually buy elsewhere.
- URSpider94 10y agoThis is actually the textbook example of "disruption" as described in The Innovator's Solution. The generally accepted definition of disruption is capturing a market from an incumbent by introducing a product that meets most of a customer's needs at a much lower price and/or higher availability. The beauty is that the big players are structurally unable to compete, because they have baked in a high cost structure and are dedicated to serving ever-higher customer needs (think five blades).
- Mendenhall 10y agoThanks for that definition and its context, I was unfamiliar with it even though I have seen the used often. I viewed it perhaps in a more old school way of simply exploiting their weakness of those baked in costs. Your definition helps me understand more now how the term is used,I appreciate that.
- tjl 10y agoOne problem is that people often misuse the term "disruption" to mean different things.
- codecamper 10y agoOr is it a sign of an overheated stock market where traders are looking for positive signs of anything positive and are willing to pile in money to established players who are "adapting" to these new, incredible models of razor distribution.
- shubhamjain 10y agoThe profound effect of this disruption can already be seen happening on a smaller scale if you observe the marketing space in the recent years. Small brands can now compete without fat advertising dollars. Content marketing is becoming more relevant than ever. I recently got in touch with a small marketing agency which is publishing interviews with athletes for one of their clients, a sports sock manufacturer. You don't need billboards, flyers or TV ads to drive awareness, you can leverage free and paid marketing channels to build your business without burning loads of cash. Marketing today is less about budgets but more about how you can effectively execute on various parts of digital marketing - social media, content, paid ads and SEO. I can guess it will be a big win for consumers in the upcoming years; not so sure about incumbents.
- jknz 10y agoOnce BigBrand will have realized that billboards and flyers are not effective anymore, BigBrand will redirect its money towards the new channels: I guess it will be a big win for google and facebook. I am not so sure it will be a win for consumers once most available content will be biased ("sponsored") by BigBrand money. To prevent such nightmare we need laws to force some kind of transparency on sponsored content.
- sp332 10y agoThere are already laws and regulations on sponsored content. The recent PewDiePie et al. fiasco even made it to HN. https://news.ycombinator.com/item?id=12086047 https://news.ycombinator.com/item?id=12086047
- waynenilsen 10y agoFor anyone that is curious DSC resells http://www.dorcousa.com http://www.dorcousa.com products
- neonhomer 10y agoIt's interesting, comparing the Dollar Shave Club 4X to the Pace 4 Cartridges it's actually cheaper on DSC. Plus it's handy that it automatically ships. https://www.dollarshaveclub.com/page/checkout/product/4-blade-razor https://www.dollarshaveclub.com/page/checkout/product/4-blad... http://www.dorcousa.com/pace-4-cartridges-fra1040/ http://www.dorcousa.com/pace-4-cartridges-fra1040/
- taneq 10y agoIt's generally poor form for a wholesaler to sell direct at a price that undercuts their distributors. That's what 'recommended retail price' is about.
- syphilis2 10y agoI recall people complaining about Dorco raising prices after Dollar Shave Club came about. The conspiracy theory was that DSC reached an agreement to keep DSC competitive. This is unsubstantiated, but you can use the Internet Archive to look at prices on dorcousa.com and see that prices have gone up. For the Pace 4 Cartridge Refills FRA1040 2012: $3.50 2013: $4.50 2014: $5.50 2016: $6.50 https://web.archive.org/web/20111103235102/http://www.dorcousa.com/ https://web.archive.org/web/20111103235102/http://www.dorcou...
- hoopism 10y agoInteresting to note that a fairly popular article pointed out that Dorco was much cheaper back in 2012... since then, not so much. http://lifehacker.com/5903771/forget-dollar-shave-clubbuy-the-same-high-quality-razors-for-a-third-of-the-price http://lifehacker.com/5903771/forget-dollar-shave-clubbuy-th...
- jokoon 10y agoHonestly I really start to wonder if big TV ads for already popular products really make a difference in sales nowadays, or if it's just a matter of "sitting" the dominance of mainstream, known products. Because you can start to question how ads work, and if big companies are just wasting that money to maintain the "classic" media system.
- blahi 10y agoTV ads have never been about sales promotion baring informercials in their early days (it isn't about promotion nowadays for them either).
- maroonblazer 10y agoWhat seems to be missed in this analysis starts here: > That worked as long as P&G’s other advantages in technical superiority, advertising, and distribution held, but were they ever to falter, it was eminently viable to sell cartridges for less and still make a healthy margin. For Dollar Shave Club there was no real technical superiority, and AWS disrupted the distribution. Is drafting off of others' technical innovations replicable? Sure, but you're not alone. AWS is a resource now available to almost anyone. Are "viral videos" replicable? Hardly. DSC hasn't even managed it themselves. Until someone disrupts creative direction then the kind of disruption referred to in this article is a long ways off.
- aleem 10y agoThe razors-as-a-service model was the big win here. Microsoft moved office to subscriptions. Apple now sells iPhone via a hardware subscription. Amazon has product subscriptions and on-demand buttons you stick on your washing machine that you can press once for a refill. Gillette doesn't do direct sales so it misses out on subs. It must rely on retailers to execute subs. If Gillette did subs for $10 they could greatly impact their "base" dynamics, essentially: low churn, consumer inertia, recurring and predictable revenues, direct channel to consumer for marketing and cross/up sells, streamlined billing, etc.
- ececconi 10y agoGillette actually does have a shave club although it is quite a bit more expensive. It's called Gillette Shave club... https://www.gilletteshaveclub.com/ https://www.gilletteshaveclub.com/
- ceejayoz 10y agoThat seems like a pretty blatant trademark violation.
- nommm-nommm 10y agoErrr... No. "Club" has been used to describe subscription products for as long as I can remember. Columbia House/BMG's mail order CD business were called record clubs, for example. There was (is?) also the Book of the Month Club and plenty of other "X of the month" clubs that probably existed way before the world wide web. Perhaps "joining a club" sounds more positive/marketable than "subscribing to a mail order service."
- Fej 10y agoI'm sure the lawyers looked over everything very carefully.
- deleted 10y ago[deleted]
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- AnthonyMouse 10y ago> Value Destruction These words, they are not what is happening. Value is the thing the shaver gets from having a razor. P&G doesn't get any value from giving you a razor, that's why you have to pay money to get them to do it. You have to transfer some of the value you get back to them in cash form. If razors now cost 25% of what they used to, there is still exactly the same amount of value in existence. There are the same number of razors and the same number of dollars, only now more of the dollars stay with the customer. Probably there is more total value because at a lower price people will buy more of the thing. This may be more easily confusing because we have become used to measuring the economy by stock prices. But stock prices are a measure of the inefficiency in the economy. They're a measure of the return on capital. The amount more that companies skim off the top between what the customer pays and what was necessary to produce it. A company that makes products for $5 and sells them for $5 may have a negligible stock price while creating an enormous amount of value. A company that buys products for $1 and sells them unchanged for $10 may have a high stock price while creating no value at all.
- mox1 10y agoWell its a matter of prospective. Value for a shareholder is usually the opposite of value as a consumer. You also have to remember the subscription model that these razors run under. Gillette will happily give you a shaving handle + 1-2 cartridges for free, the theory being you are then locked into their system. Thus "value" is created for them, on expectations of future revenue.
- klodolph 10y agoI think that we are confusing two different things here—the creation of new value (making a razor) and the transfer of value from one person to another (paying money). Both are value, but only one is the creation of value. Gillette creates value by making razor blades, their lock-in is a technique to ensure that more value (in cash) is transferred to them in exchange for the value that they have (razors). So value is not created for Gillette, but existing value is transferred to them.
- 10y ago
- JackPoach 10y agoYes but... While Gillette dominates several international markets, Dollar Save Club may be hard to 'localize'.
- importantbrian 10y agoThe real disruption will come when the non-bearded come to learn all the joys of not shaving. Then we will be reading on the front page of HN how Dollar Beard Club disrupted DSC and Gillette.
- darryl42 10y agoOr switching to old fashion Dual Edge (DE) razors and blades where the blades are $0.10 each.
- pravula 10y agoor straight razor. No more blades to replace.
- dhimes 10y agoWhich is exactly what I did.
- xenihn 10y agoI've tried :( My skin and facial hair suck. The only razors I can shave with comfortably are Gillette Fusions. I know that they're incredibly overpriced, but the big package from Costco lasts me a year. I still get some mild irritation occasionally (even on the first shave with a fresh cartridge). I'm considering some form of permanent removal for my facial hair because it looks terrible and I will never grow it out under any circumstances.
- Grishnakh 10y agoYou tried DE and it didn't work? I'm a little surprised. Men have been using DE razors for generations (they first came out in WWI). Are you sure you just didn't give yourself enough time to learn to do it right? Also, there's different blades out there, and different razors, some more aggressive than others. Many recommend getting a variety pack of blades and trying them all to see which work best for you, and many have serious preferences for the razor (handle) too, because their design and the distance between the safety bar and the blade can have a huge impact.
- wldcordeiro 10y agoSpeaking of disruption, I really hope Robinhood's business model catches on for individual stock trading. It's absurd that most brokers still charge $10 per trade and makes it very restrictive for people trying to just get in. The parallel with Dollar Shave Club's rise hopefully pans out.
- honkhonkpants 10y agoInteractive Brokers offers $1 commission and an API, and has been doing that for 40 years.
- wldcordeiro 10y agoHmmm, wasn't aware of this broker, I'll have to look into them. May be nice to diversify across both services for my stocks and hold an IRA with IB. Thanks for the tip.
- arafa 10y agoI'm quite surprised there's been so little focus on the shaving experience. I really wanted to like Dollar Shave Club. I went with them early. Their prices were great and I really enjoyed their marketing. But after trying most of their razor models for months, they were far worse than even the Mach 3 razors I had. It was painful to shave with them, the handles had a bad design, the lubrication strips weren't working, etc. Maybe they're better now, but I get several months (or more) out of Mach 3 razor cartridges. I don't pay much at all for them and have little incentive to switch.
- shakeel_mohamed 10y agoI switched to a safety razor and never looked back!
- hx87 10y agoYep, $25 safety razor + 25 cent Feather blades are the best value for shaving bar none.
- bluthru 10y agoSome quick tips for someone interested in using a safety razor (you should!): Get a stainless steel razor so it lasts, and buy a variety pack of blades to determine your preference. I personally find the Feathers to be too sharp, but I don't have tons of coarse facial hair.
- Grishnakh 10y agoSame here. About $30-35 for an Edwin Jagger razor and $8 for a 100-pack of Derby Extra blades; I've been using that same pack now for about 4 years! I still have 25 left. However, be careful: if you're not used to using a double-edged safety razor, it has a high learning curve. You'll probably cut yourself when you're first learning. Read online tutorials about how to do it right, and very importantly, don't be in a hurry. Once you've gotten the hang of it (after a month or so), it's pretty easy, but it does take time to learn the proper technique.
- 10y ago
- brianpgordon 10y ago> That’s exactly what had happened with the Mach 3, Gillette’s previous top-of-the-line model: Gillette increased blade and razor revenue by nearly 50% with basically no change in underlying demand, easily making back the $750 million it cost to research and develop the razor That number is staggering. How can that possibly be right?
- dsr_ 10y ago"research and develop", in this case, means: - artistic renderings - engineering diagrams - material choices - marketing research - prototypes - test groups - safety inspections - more prototypes - supply chain gear-up - packaging decisions - artwork - translations - international marketing research - factory conversion - tooling, dies and stamps - training - safety inspections - package production lines - advertising campaigns - distribution tuning and then Gillette can start producing and selling them. By comparison, DSC picked a manufacturer, asked them for some tweaks, and set up a fulfillment and reshipment operation.
- nosuchthing 10y agoSurprised there's no mention of the safety razor renaissance.. Nickle shave club.
- Grishnakh 10y agoYep. I jumped on that small bandwagon around 4 years ago, and though the initial learning curve was a little steep, I stuck with it and I wouldn't go back. My total cost for 4 years: around $35 (I think) for a premium Edwin Jagger DE razor handle, and about $8 for a 100-pack of Derby Extra blades (which I've only used 75% of so far in 4 years). That's just over $10 per year, and about 3 cents per day. And most of that cost is in the razor itself, which doesn't wear out. So over 10 years, I expect the total cost per day to be around 1.5 cents.
- deleted 10y ago[deleted]
- pbreit 10y agoI had trouble getting past the "shockingly low" valuation. Gillette is a terrible comparison since leaders earn premiums, Gillette's distribution is unparalleled, included awesome brands Duracell & Braun and makes its own products. DSC is a mediocre brand that primarily resells a crappy product at cost.
- bambax 10y ago> $1 billion for a 16% unit share of a market dominated by a brand that cost $57 billion is startlingly small Indeed! By that (disputable) metric, it's 9 times too small: 57/100*16=9.2
- ivv 10y agoIf Unilever wanted to get into the shaving business they would've bought Dorco and not the distributor. The $1b is for the mailing list to which Unilever can upsell Axe and Dove for Men.
- limeyx 10y agoCue this now becoming the "$20/month shave club"
- sage76 10y agoI don't get this acquisition. They are in losses and there is no intellectual property to speak of. A somewhat funny video and a mailing list are now worth a billion dollars?