Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscriptionmodel to cut off the costs and friction to get new blades and grooming products with a curated package.
Business Model Element
Analysis
Implications
Examples
Value Proposition
Dollar Shave Club’s value proposition is to provide customers with high-quality grooming products at an affordable price, conveniently delivered to their doorstep. The company emphasizes simplicity, offering a hassle-free solution for razor and grooming needs. Dollar Shave Club aims to save customers time and money while delivering a superior shaving experience. The service also includes a wide range of grooming and personal care products, catering to various needs and preferences.
Offers high-quality grooming products at an affordable price, delivered conveniently to customers’ doorsteps. Emphasizes simplicity and hassle-free solutions for razor and grooming needs. Aims to save customers time and money. Provides a wide range of grooming and personal care products. Attracts customers seeking cost-effective and convenient grooming solutions. Appeals to those looking for a superior shaving experience. Accommodates various grooming and personal care needs.
– Dollar Shave Club’s value proposition addresses the common pain points of expensive razor purchases and inconvenient shopping trips, making it an attractive option for cost-conscious and time-pressed customers. – The convenience of doorstep delivery and a wide product range enhances the overall grooming experience. – Offering high-quality products at an affordable price builds trust and customer loyalty.
Customer Segments
Dollar Shave Club primarily targets men of all ages who are looking for cost-effective grooming solutions. The service appeals to a broad demographic, including professionals, students, and individuals from various backgrounds. Additionally, Dollar Shave Club caters to those who prefer the convenience of subscription-based services and are seeking high-quality grooming products. The company also offers grooming products for women, expanding its customer base to include female consumers.
Targets men of all ages seeking cost-effective grooming solutions. Caters to a broad demographic, including professionals, students, and individuals from diverse backgrounds. Appeals to those preferring the convenience of subscription-based services and high-quality grooming products. Expands its customer base to include women with grooming products tailored for female consumers. Provides solutions for various grooming needs and preferences.
– Dollar Shave Club’s broad target audience allows for a wide customer base and increased market penetration. – Expanding its product line to include grooming products for women opens up new revenue opportunities and a larger customer base. – The convenience-focused subscription model aligns with consumer preferences for hassle-free grooming solutions.
Distribution Strategy
Dollar Shave Club’s distribution strategy revolves around the direct-to-consumer (DTC) model. Customers can sign up for subscriptions through the company’s website or mobile app, selecting the products and delivery frequency that suits their needs. Dollar Shave Club ensures that the grooming products are packaged and delivered directly to customers’ homes. Additionally, the company provides customer support for inquiries and assistance.
Relies on the direct-to-consumer (DTC) model, allowing customers to subscribe through the website or mobile app. Customers select products and delivery frequency. Packages and delivers grooming products directly to customers’ homes. Provides customer support for inquiries and assistance. Focuses on a seamless and convenient customer experience.
– The DTC distribution model simplifies the purchasing process for customers, allowing them to customize their subscriptions and receive products without the need for physical retail stores. – Providing customer support ensures that customers can easily resolve inquiries or issues, contributing to overall satisfaction and retention.
Revenue Streams
Dollar Shave Club generates revenue primarily through subscription fees paid by customers. Customers subscribe to receive regular deliveries of grooming products, and revenue is recurring based on subscription renewals. The company also offers one-time purchases of individual grooming products through its online store. Additionally, Dollar Shave Club may have partnerships with retailers for the distribution of its products in physical stores, contributing to sales revenue.
Relies on revenue from: 1. Subscription fees paid by customers for regular grooming product deliveries. 2. One-time purchases of individual grooming products through the online store. 3. Sales revenue from partnerships with retailers for distribution in physical stores. Ensures a steady income stream through subscription renewals. Diversifies income sources with one-time product purchases and retail partnerships.
– The subscription model provides a steady and predictable income stream, allowing Dollar Shave Club to plan and invest in product development and marketing efforts. – Offering one-time product purchases and retail partnerships provides additional revenue streams and opportunities for customer acquisition.
Marketing Strategy
Dollar Shave Club’s marketing strategy includes digital advertising, social media marketing, content marketing, and influencer partnerships. The company promotes its grooming products through online ads, engaging content on platforms like Facebook and Instagram, and collaborations with influencers and bloggers. Dollar Shave Club actively shares grooming tips, product reviews, and user-generated content to connect with its community. The company also offers promotions and discounts to attract new subscribers.
Utilizes digital advertising, social media marketing, content marketing, and influencer partnerships to promote grooming products. Showcases products through online ads and engaging social content. Collaborates with influencers and bloggers for broader reach and credibility. Actively shares grooming tips, product reviews, and user-generated content to connect with the community. Runs promotions and discounts to attract new subscribers. Focuses on building brand awareness and fostering user engagement through creative content marketing.
– Digital advertising and social media marketing help Dollar Shave Club reach a broad online audience interested in grooming solutions, especially those looking for affordability and convenience. – Collaborations with influencers and bloggers not only promote the grooming products but also add credibility and trustworthiness to the brand. – Sharing grooming tips, product reviews, and user-generated content creates a sense of community and encourages customers to engage with the brand. – Promotions and discounts can incentivize trial subscriptions and attract new customers.
Organization Structure
Dollar Shave Club operates with a structure that includes teams responsible for product sourcing, logistics, marketing, customer support, technology development, and product development. The company’s logistics and sourcing teams ensure timely and efficient delivery of grooming products. Product development teams work on creating new products and improving existing ones. Marketing teams focus on user acquisition and engagement, while customer support teams assist customers with inquiries and issues. Technology development teams maintain and improve the online platform and mobile app.
Employs a structure with specialized teams for product sourcing, logistics, marketing, customer support, technology development, and product development. Prioritizes timely and efficient product delivery through logistics and sourcing teams. Regularly creates new grooming products and improves existing ones through product development teams. Focuses on user acquisition and engagement through marketing teams. Assists customers with inquiries and issues through customer support teams. Maintains and improves the online platform and mobile app through technology development teams.
– Timely and efficient product delivery is crucial for customer satisfaction and retention, making logistics and sourcing teams essential to Dollar Shave Club’s success. – Continuous product development ensures that the company can offer innovative and appealing grooming products to its customers. – Marketing teams play a vital role in acquiring new users and fostering engagement within the Dollar Shave Club community. – Customer support ensures that customers can easily resolve inquiries and issues, contributing to overall satisfaction and retention. – Technology development teams work to maintain and improve the online platform and mobile app, enhancing the user experience.
Competitive Advantage
Dollar Shave Club’s competitive advantage lies in its ability to provide high-quality grooming products at an affordable price, delivered conveniently to customers’ homes. The subscription model ensures recurring revenue and customer loyalty. Collaborations with influencers and bloggers enhance the brand’s credibility and reach. The company’s focus on a wide product range caters to diverse grooming needs. Dollar Shave Club’s emphasis on simplicity and hassle-free solutions differentiates it from traditional retail options.
Derives a competitive advantage from providing high-quality grooming products at an affordable price, delivered conveniently to customers’ homes. Ensures recurring revenue and customer loyalty through the subscription model. Enhances brand credibility and reach through collaborations with influencers and bloggers. Caters to diverse grooming needs with a wide product range. Differentiates from traditional retail options with simplicity and hassle-free solutions. Stands out as a trusted and reliable grooming product provider.
– Dollar Shave Club’s affordability and convenience-focused value proposition make it a strong competitor in the grooming and personal care market. – The subscription model ensures a recurring and predictable income stream while fostering customer loyalty. – Collaborations with influencers and bloggers add credibility and help attract a broader customer base. – Offering a wide product range caters to diverse grooming needs and preferences. – Simplicity and hassle-free solutions differentiate Dollar Shave Club from traditional retail options and resonate with modern consumers.
Table of Contents
Origin Story
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly.
The company was founded by Mark Levine and Michael Dubin in 2011.
Dubin in particular was frustrated at the expense associated with purchasing new razor blades. He also noted that having to frequently replace used blades was inconvenient and time-consuming.
To test the viability of the idea, a now-infamous explainer video was uploaded in March 2012 with just $4,500 in funding.
The video quickly went viral, enabling Dollar Shave Club to make $4 million in revenue during its first year in operation.
Three years later, revenue had increased to $65 million and the product range increased to help men look, feel, and smell their best.
In the book Unlocking The Customer Value Chain, professor Thales Teixeira explains it as a framework for all the steps or activities that customers must go through to acquire products and services. The customer value chain then helps map our customers’ journey from their viewpoint.
When it comes to creating new disruptive business models, the process is simple.
Take the steps customers make with existing, dominating players and understand which steps can be “decoupled” from the process, thus building a whole company on top of that.
Perhaps in the case of Dollar Shave Club, as we’ll see, Gilette had become an expensive option for many new generations, where the blades cost had become frustratingly high, and Gillette itself was incentivized to launch newer and newer models, with more and more blades, so that customers could continuously upgrade to these.
Dollar Shave Club saw the opportunity by flipping the Gillette model upside down.
Flipping The Razor and Blade Model upside down
As the story goes, King Camp Gillette, founder of Gillette, had popularized the model for which blades would be sold at high margins, while razors would be sold at cost.
Apparently, Gillette might have not used that model straight on, instead of as its patents were coming to expiration, to gain as much market shares, and maintain competitiveness, it started to roll out at scale the razor and blade strategy, where razors would be given almost away, to create demand for the blades.
This model is extremely important as many tech companies have also used it to drive demand for the ancillary products sold on their platforms, marketplaces.
The Razor and Blade model which Gillette mastered over the years has become a standard in many industries.
Also, tech companies have learned how to use it.
Perhaps, Apple uses a reversed version of it, where the iPhone is sold instead at high margins, as apps were mostly free.
Other players like Amazon or Microsoft also use the razor and blade model.
For instance, Amazon sells its Kindle devices at cost while making money on the sales of ebooks and subscriptions through its digital products marketplace.
Microsoft, with Xbox, sells the console at cost (or perhaps at loss) while making high margins on the sale of games.
In the same way, Dollar Shave Club reduced the cost, friction, and stress of having to deal with continous upgrades, with a simple subscriptionmodel, where consumers could get a curated package of blades and grooming products. The model worked wonders!
Dollar Shave Club revenue generation
Dollar Shave Club sells subscriptions for razor blades and other grooming products.
Each subscription is tailored to the personal grooming needs of individual customers.
In terms of razorblade subscriptions, there are two options:
6 Blade Extra-Close ($10/month) – for those who desire a quick and detailed shave with a precision trimmer.
The 4 Blade All-Terrain ($8/month) – featuring 4 optimally spaced blades for easy rinsing.
Starter set
For those wishing to try the service, the company also offers a starter set for $5 with free shipping.
This set includes:
A weighty, diamond-patterned razor grip handle.
Two replacement cartridges for the 6 Blade Extra-Close razor.
One ounce samples of shave butter, post-shave dew, and prep scrub.
Two weeks after the starter set is shipped, the company will periodically send the consumer razor refills.
This service is charged at $20 every 2 months. Customers can alter the frequency of refills according to their needs, or cancel the service entirely.
They may also add or remove other products to their regular delivery, including hair gel, moisturizer, toothpaste, deodorant, shampoo, conditioner, and hand cream.
MEL Magazine
MEL Magazine is an online magazine helping men navigate modern notions of masculinity.
The magazine, which launched in 2015, is owned and funded by Dollar Shave Club. While the site does not host sponsored content, Dollar Shave Club members are mailed a physical copy of the magazine
CEO Dubin sees the magazine as a way for the Dollar Shave Club brand to “develop a deeper connection with its customer base, or member base in our case.” This deeper connection fosters a stronger sense of community among members.
Consumer trust in the brand is also increased because MEL Magazine does not produce content that sells Dollar Shave Club products directly.
Instead, content is geared towards shaping the sort of consumer who would be motivated to spend money on a razor or self-care subscription.
Key takeaways
Dollar Shave Club is an American online subscription service for men, delivering grooming and personal care products regularly. Co-founder Michael Dubin got the idea for the company after becoming frustrated at the expense and hassle of frequently purchasing new razor blades.
Dollar Shave Club charges for two, dedicated razor blade subscriptions. They also offer a starter set with includes samples of additional face care products. Customers can then add or remove other products to their regular delivery for an additional cost.
Dollar Shave Club also owns and funds content produced by MEL Magazine. While the magazine is free from sponsored content, it does seek to complement Dollar Shave Club products by creating a target audience of men who care about personal grooming.
Dollar Shave Club: Key Highlights
Founding and Innovation: Dollar Shave Club, founded in 2011 by Mark Levine and Michael Dubin, revolutionized the razor industry by introducing a subscription-based model that delivered razor blades and grooming products directly to customers’ doors.
Business Model Transformation: The company disrupted the traditional “razor and blade” model by offering a subscription service that eliminated the high costs and inconvenience of purchasing new razor blades. This model contrasted with Gillette’s approach of selling razors at cost and generating profits from expensive blades.
Origin Story and Viral Video: Dollar Shave Club gained attention through a viral explainer video in 2012, which highlighted the company’s value proposition. The video’s popularity led to $4 million in revenue during the first year of operation.
Acquisition and Growth: In 2016, Unilever acquired Dollar Shave Club for $1 billion in cash, showcasing the success of the company’s disruptive business model.
Customer Value Chain Approach: Dollar Shave Club reshaped the customer value chain by identifying steps in the existing process that could be “decoupled.” This approach allowed the company to build its entire business model on these separated steps, offering convenience and cost savings.
Flipping the Razor and Blade Model: Dollar Shave Club inverted the traditional razor and blade model, where razors are sold cheaply while blades are sold at high margins. This approach resonated with consumers frustrated by expensive blades and frequent upgrades.
Revenue Generation: Dollar Shave Club generates revenue through subscription plans tailored to customers’ grooming needs. It offers razor blade subscriptions with options like the 6 Blade Extra-Close and the 4 Blade All-Terrain.
Starter Set and Customization: Customers can start with a $5 starter set that includes a razor handle, replacement cartridges, and samples of grooming products. They can adjust the frequency of refills and add/remove products according to their preferences.
MEL Magazine: Dollar Shave Club owns and funds MEL Magazine, an online publication aimed at helping men navigate modern masculinity. The magazine fosters a sense of community among members and complements Dollar Shave Club’s products.
Deeper Connection: CEO Michael Dubin sees MEL Magazine as a means to deepen the brand’s connection with its customer base, enhancing trust and community engagement.
Business Impact: Dollar Shave Club’s innovative subscription model challenged industry norms, altered consumer behavior, and contributed to the evolution of the grooming and personal care industry.
Legacy: Dollar Shave Club’s success serves as a prime example of how disruptive business models can reshape traditional industries and create new paradigms for customer engagement and value delivery.
Subscription-based business models are built on a recurring customer base, where customers usually have access to the product or service rather than their own. The customer can have the upside of the service without owning the good underlying it, which is maintained by the company running the subscription-based business.
Ipsy is a monthly subscription service for cosmetic and beauty products founded in 2011 by Michelle Phan, Marcelo Camberos, and Jennifer Goldfarb. Phan used her large YouTube following to launch and grow the platform. Ipsy makes money by charging customers monthly for beauty subscription boxes. Various subscription plans are available depending on the beauty product size and customization level. Ipsy also operates an eCommerce store selling branded and in-house beauty products. The company also sells product placement spots to brands eager to receive highly targeted exposure.
Birchbox is an online American monthly subscription service for skincare, perfume, and other cosmetic items. Birchbox was among the first players to start leveraging a subscription-based model to reshape how value is delivered to customers. Instead of a one-off purchase, Birchbox curates a set of samples that each time are sent to its subscribers, enabling them to discover new cosmetic products while reducing the friction and cost of discovery for new products.
FabFitFun is an online subscription box service sending electronics, cosmetics, fitness, wellness, and fashion items every quarter. Founded in 2010, it started as a simple website, and as it gained popularity, thus following later on a similar subscription-based model to Birchbox. It now generates revenues through membership services and brand sponsorships.
Dollar Shave Club is an American online subscription service delivering razor blades and grooming products monthly. The Dollar Shave Club business model flipped upside down the “razor and blade” model popularized by Gillette. In short, where Gillette sold its razors at cost while making fat margins on its blades, Dollar Shave Club offered a subscription model to cut off the costs and friction of getting new blades and grooming products with a curated package.
BoxyCharm recognized a gap in the popular beauty subscription box market. Most companies were shipping boxes with sample-sized products that were not on trend or seasonally appropriate. As a proponent of the subscription box business model, BoxyCharm makes money via subscription revenue.
The razor blade business model, also known as the razor-razorblade model, involves selling a product at a lower price to sell a related product later for a profit. The razor and blade business model was popularized by King C. Gillette, founder of the safety razor company Gillette, which sold a durable razor at cost while selling disposable blades at a premium.
HelloFresh is a German provider of meal kits founded by Dominik Richter, Thomas Griesel, and Jessica Schultz (née Nilsson) in 2011. HelloFresh has a relatively simple revenue generation model. The company makes money by charging users a weekly subscription fee for meal deliveries.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
