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I'm not sure why Gillette should be (very) afraid of DSC. Gillette had $7B of sales in 2015, compared to ~$240 million by DSC. The real questions that should be

I'm not sure why Gillette should be (very) afraid of DSC. Gillette had $7B of sales in 2015, compared to ~$240 million by DSC. The real questions that should be asked are: - Did Gillette's revenues decline because of DSC? If so, by how much? - What is DSC's growth now? - What is DSC profit margin? (Hint: it's < 1%) - With > $160 million in investment in DSC, what % did the 190 employees own? While DSC had $240 million in sales, a huge percentage of that money did not go into their bank account. Since they were buying razors from a 3rd party, easily 40-60% of the costs go to the razor manufacturer, plus shipping & handling costs, taxes, etc. According to Forbes they weren't even profitable! (http://fortune.com/2016/05/16/dollar-shave-club-2/ http://fortune.com/2016/05/16/dollar-shave-club-2/) Gillette's profit margins are ~30%, for comparison, even with massive marketing, sales and distribution costs. I do love DSC's model and attitude, but claiming the sky is falling because they were purchased for $1B is hyperbolic. Look at the numbers and do the real math :)

adrr 10y ago
Gillette was scared of DSC they started up Gillette Shave Club. That didn't work so they started attacking DSC in their ads which only helped drive brand awareness of Dollar Shave Club. Its seems they finally just gave up and sued DSC on patent infringement on a razor they don't even manufacturer. Also no VC backed company is going to be profitable if they have VC money sitting in the bank. It was less than a year since DSC raised cash.
- rdoherty 10y ago
  I agree no VC backed company will be profitable for much of its early life, my point was you can't compare apples to apples between Gillet and DSC. If DSC is spending insane amounts of money on growth and discounting their goods, at some point they have to start making money. And at that point I wonder what their retail prices will be for their blades if they are buying them from a 3rd party.
  - brianwawok 10y ago
    So what if they bring manufacturing in house? Same price more margin. Seems the obvious end game.
    - rdoherty 10y ago
      That definitely would help them, and it's something many companies do once they reach a certain size.
petra 10y ago
DSC has 15 percent of the market, by volume. The low revenue numbers is because they sell so cheaply . As for profits, it's hard to evaluate those since DSC is in growth mode. But in general DSC as the owner of the customer relationship will get all the market power and considering razors cost pennies to make , DSC will probably have a decent future. But that's outside of the matter. It's about turning a large market into a much small one, and in the process stealing leadership from gillete.
- dingaling 10y ago
  > DSC has 15 percent of the market, by volume. I'm struggling to see how that's possible. - The highest count of their subscribers I've seen is 3 million. Let's round that to 5 million. - There are about 160 million adult males in the USA. http://countrymeters.info/en/United_States_of_America_(USA) http://countrymeters.info/en/United_States_of_America_(USA) - Assume that only half shave with a cartridge razor: 80 million. - Using such conservative figures, at a ceiling that means DSC has 5 / 80 of the possible subscriber market, or 6.25%. Unless each subscriber is buying nearly three times as many blades as normal...?
  - petra 10y ago
    Yes, you're probably right, Stratechery which usualy does good work estimated this at 15%, but europmonitor - which this kind of thing is their job, estimate is at 5%.

adrr 10y ago

Gillette was scared of DSC they started up Gillette Shave Club. That didn't work so they started attacking DSC in their ads which only helped drive brand awareness of Dollar Shave Club. Its seems they finally just gave up and sued DSC on patent infringement on a razor they don't even manufacturer. Also no VC backed company is going to be profitable if they have VC money sitting in the bank. It was less than a year since DSC raised cash.

rdoherty 10y ago
I agree no VC backed company will be profitable for much of its early life, my point was you can't compare apples to apples between Gillet and DSC. If DSC is spending insane amounts of money on growth and discounting their goods, at some point they have to start making money. And at that point I wonder what their retail prices will be for their blades if they are buying them from a 3rd party.
- brianwawok 10y ago
  So what if they bring manufacturing in house? Same price more margin. Seems the obvious end game.
  - rdoherty 10y ago
    That definitely would help them, and it's something many companies do once they reach a certain size.

petra 10y ago

DSC has 15 percent of the market, by volume. The low revenue numbers is because they sell so cheaply . As for profits, it's hard to evaluate those since DSC is in growth mode. But in general DSC as the owner of the customer relationship will get all the market power and considering razors cost pennies to make , DSC will probably have a decent future. But that's outside of the matter. It's about turning a large market into a much small one, and in the process stealing leadership from gillete.

dingaling 10y ago
> DSC has 15 percent of the market, by volume. I'm struggling to see how that's possible. - The highest count of their subscribers I've seen is 3 million. Let's round that to 5 million. - There are about 160 million adult males in the USA. http://countrymeters.info/en/United_States_of_America_(USA) http://countrymeters.info/en/United_States_of_America_(USA) - Assume that only half shave with a cartridge razor: 80 million. - Using such conservative figures, at a ceiling that means DSC has 5 / 80 of the possible subscriber market, or 6.25%. Unless each subscriber is buying nearly three times as many blades as normal...?
- petra 10y ago
  Yes, you're probably right, Stratechery which usualy does good work estimated this at 15%, but europmonitor - which this kind of thing is their job, estimate is at 5%.