The scene has been set for a showdown between Procter & Gamble and Unilever now that the Anglo-Dutch giant has acquired Dollar Shave Club, which will go head to head with P&G’s Gillette division.
The deal, at a reported price of $1 billion, moves Unilever into the razor category with access to Dollar Shave Club’s preexisting online customer base.
“It is giving them access to a broad-range customer that certainly includes Millennials and Gen X-ers,” said Andrea Weiss, founder of the O Alliance. “It’s got a compelling market message…and a really brilliant, loyal customer. They have very few cancellations, so I think it’s that customer base that they’re getting.”
Dollar Shave Club boasts 3.2 million members. Its product range extends beyond shaving to include Wanderer personal wash, Big Cloud skin care, Boogie’s hair styling and One Wipe Charlies daily wipes.
Last year, the company claimed a 16 percent market share of the U.S. blades category overall and a 69 percent share of that segment online.
Dollar Shave Club’s market slice compares to Gillette’s 65 percent global market share in blades and razors. Gillette holds over 20 percent of the male shavers market and almost 50 percent of the female epilators market worldwide. Gillette is behind the Fusion, Mach3, Prestobarba and Venus brands.
“They’ve already been competing with them. That’s why you’ve seen businesses like Gillette try to start shadow versions of Dollar Shave,” Weiss said.
In June 2015, in the wake of Dollar Shave Club’s success, Gillette launched a Shave Club that allows people to sign up for blades at a frequency that serves their needs.
Michael Dubin founded Venice, Calif.-based Dollar Shave Club in 2012. Since its founding, the business has since been backed by both venture capital and private equity. Dubin will stay on as chief executive officer of the brand under Unilever.
The business registered sales of $152 million for 2015, up $4 million in its first year of trading. For 2016, the business is set to post revenues of more than $200 million, Unilever said.
Unilever stated Dollar Shave Club brings to its personal-care category “a unique male-grooming perspective.”
“In addition to its unique consumer and data insights, Dollar Shave Club is the category leader in its direct-to-consumer space,” said Kees Kruythoff, president of Unilever North America. “We plan to leverage the global strength of Unilever to support Dollar Shave Club in achieving its full potential in terms of offering and reach.”
Part of the secret to Dollar Shave Club’s success is its tongue-in-cheek brand message that makes it easier for men to relate to buying grooming products. Its tag line, for instance, reads: “Shave time. Shave money.” Its product packaging reminds users that: “Your mother-in-law should be irritating, not your razor. Change your blade every week.”
The company offers accessible pricing. Its three different blades, ranging from $1 to $9, can be sent to a club member monthly with no commitment.
Dubin recently said at the Las Vegas Shoptalk conference: “We’re not the first company to ship razors on the Internet. We’re not going to be the last company to ship razors on the Internet. But what we’re doing differently is we’re holding guys’ hands and speaking to them…helping them decode their grooming lives.”
“Decoding” for the company is about building an experience. Late last year, Dollar Shave Club launched a twice-weekly newsletter called Mel.
“I think what we’re doing for razors is very much like what Starbucks did for coffee, which, before Starbucks, what was there? There was Folgers. There was Maxwell House,” Dubin continued.
Dollar Shave Club recently brought fulfillment in house to rein in shipping costs — a constant challenge for any e-commerce business. The facility in Torrance, Calif., services orders west of the Rocky Mountains. A second, in Ohio, will be operational a few months from now.
Unilever has been developing its beauty business. In early 2015, for example, it made a series of acquisitions, including REN, Kate Somerville, Dermalogica and Murad, which signaled its intent to play in the prestige skin-care category.
Unilever’s Dollar Shave Club acquisition is expected to close during the third quarter of this year.
“They are getting the customer base, the access model and then they can leverage their core competency in grooming,” Weiss continued. “It looks like a great marriage.”