Out of the Shadows: Part II
Posted: Jul 31 2014
After years of being treated as a chore, and a hated one at that, shaving is slowly winning over the hearts and minds of many men all over the world. And the leaders of this “revival” aren't your typical, big name brands either. It's the little guys who are leading shaving from out of the shadow and today we're going to examine two of these disruptive companies.
Harry's is a men's shaving company (ironic, right?) that was started by one of the co-founders of the fast growing, incredibly successful eyewear company, Warby Parker. And while there are a lot of interesting things to discuss when talking about Harry's, today we're going to focus on some of the most fundamental aspects of the business including what they sell, how much it costs, and a strategy that it has adopted that places the company in a very different class than its startup competitors.
So, first things first. Just so we're clear, Harry's sells exactly what you'd think a men's shaving company would sell: razors, blades, and shaving cream. They're not a clothing company in disguise and they don't even venture into tangentially related products, like cologne or hand/face lotions. Instead, they stick to the basics.
To make matters even more vanilla, Harry's pricing strategy isn't all that crazy. It sells its razors individually (at $10 and $20, respectively), blades individually (at $2 or less), or in sets that come with varying numbers of blades and shaving cream. These sets range from $15 and $25. And recently, Harry's launched a subscription-esque offering. One can purchase 8 blades and 2 creams every 2 months; 8 blades and 2 creams every 4 months; 8 blades and 2 creams every 6 months; or build their own subscription at $1.88 per blade and $8 per cream.
So what's special about Harry's? Well, Harry's “uniqueness” is evidenced in the quality and design of their products. In fact, Harry's is so committed to excelling and differentiating itself along these lines that it has done something that very, very few startups have been able to do: completely and entirely vertically integrate.
What's that mean? Well, vertically integrating, in the case of Harry's, means owning, controlling, and managing its supply chain (including manufacturing). And why would one do that?
Perhaps the best way to illustrate “why” one would adopt this strategy is through a discussion of another company that chose to vertically integrate, in contrast to its competitors: Apple. “Under the hood” of Apple's beautifully designed products are engines. Engines that power these gadgets. Engines that often go unappreciated. Engines that are remarkable in their capabilities and performance. Engines that are designed and spec'd out by Apple. Engines that are Apple's proprietary creations and ones that are often years ahead of competitors'. The reason? When other companies chose to outsource chip development, Apple invested in it and bought a chip company, PA Semi. In doing so, Apple sent the following message: Apple products are Apple products, inside and out.
But what that has meant from a practical standpoint is that Apple has ultimate control over the destiny of its products. Its products, the software they run on, the chips that power them, and their casing, are all Apple designed, built, and controlled. And the result is an experience that is fluid. In which all elements of the system complement and enhance one another. And it also allows Apple to push the limits and boundaries of its products. Apple doesn't have to scale back or rush features because it is not beholden to third party chip designers/manufacturers. It can innovate at its own pace, which is a fast pace, and push limits and boundaries all in-house.
Furthermore, Apple has incredible quality control over these things. It specs out its own chips, it builds them. It knows what works best in the system it designs and how to maximize performance. Apple is truly a Silicon company.
From an economic standpoint, Apple also benefits from this huge investment by reclaiming the negotiating power that factories typically have over electronic manufacturers.
But there is a downside to this strategy. Well, for one thing, it's incredibly expensive and requires a huge investment of capital. That part right there is a barrier for many companies. Also, in order to make it economically worthwhile, a company really has to buy into it and adopt it 100%. Not just halfway. Finally, adopting the strategy is making a big bet on yourself and your ability to innovate and grow. While you're no longer beholden to third party suppliers, if you 100% buy into the strategy and implement it, that also means that you're denying yourself access to third party suppliers' newest and leading edge technologies.
So how does this apply to Harry's? Well, it's vertically integrated and that's a big deal for an early stage company. It chose to do so because it believes that the best and only way to truly guarantee high quality goods is to have 100% control of every part of the razor blade and handle manufacturing process. That means designing, building, and manufacturing. Everything.
But the choice that Harry's has made came at a cost. And the investment it made to live in accordance with this belief was expensive. $100 million expensive.
Yup, after only 10 months of launching, Harry's raised $122.5 million from Tiger Global, Thrive Capital, Highland Capital, SV Angel and a handful of others, of which $100 million went to to purchase Feintechnik, a company and factory that have been manufacturing razor blades since 1920 and the source of Harry’s shaving products.
So when we say that Harry's is committed to excelling and differentiating in its design and quality, we mean it. And so do they.
Dollar Shave Club
Dollar Shave Club is definitely disrupting the men's shaving industry, but not quite in the way that Harry's is. In fact, Dollar Shave Club is bringing the fun back into shaving by acknowledging that shaving sucks and focusing on making it so damn easy to do. I guess that's one way to make it fun, right? If not Dollar Shave Club's videos definitely bring some humor back into shaving. So definitely check out the videos.
As for the company's business model and product offerings...it's all pretty much as simple as the name suggests. At Dollar Shave Club, you pick from three different monthly subscription packages ranging from $1/month to $9/month and that's it. You can renew and/or change your subscription whenever you feel like it, and you can even buy some other products (like pre and post shave lotions, etc.), but there aren't really any frills. Also, the focus is on convenience and ease, not on design and quality like Harry's. In fact, in stark contrast to Harry's, Dollar Shave Club gets its razors from a Korean company and simply sells them, but at a cheaper price than its big brand competitors. If you want to learn more about Dollar shave club click https://www.dollarshaveclub.
So, though in two different ways, these vastly different companies are both accomplishing one common goal: altering the way men feel about shaving.