Startups shook up the razor market. What’s next?
NEW YORK What do you hate shopping for? Toothpaste? Diaper rash cream? Sunscreen? The guys who founded Harry’s shaving club spend a lot time thinking about this question.
The startup, which took on razor giants Gillette and Schick with its direct-to-consumer subscription model, has since expanded into traditional retail and launched a line of body care products. Armed with $112 million in new financing to develop new brands, the company now is investigating what other sleepy products might be ripe for disruption.
“Our vision is to build a next-generation consumer brand company,” said Jeff Raider, who recently took on the role of CEO of Harry’s Labs, overseeing the development of new brands. “It might be better products, a better experience getting the products or a brand that appeals to who they want to be as people.”
There’s a reason why Harry’s investors are betting that reinventing the razor was no flash-in-the-pan idea. Insurgent brands are shaking up the way people buy everything from mattresses to prescription acne remedies, eating into the market share of big consumer product companies and leaving them scrambling to respond.
‘NO CATEGORY IS IMMUNE’
Eager venture capitalists, digital technology and social media make it easier for anyone with a good idea to enter the consumer goods market, according to a report on insurgent brands by Bain & Company, a management consulting firm. Contract manufacturing, which allows companies to outsource production and sometimes defray costs, also has made it simpler.
“The reality is that no category is immune to disruption,” the Bain & Company report said.
Digital newcomers still represent only a fraction of the overall market share, according to the report, which analyzed sales data from IRI market research firm for 90 goods categories. Startup brands accounted for only 2 per cent of market share across 45 product types they disrupted from 2012 to 2016, the report said. But such companies captured a quarter of the growth in that time.
Being small is often a tactical advantage, allowing fledgling companies the freedom to focus on a core product, shoring up visibility among a targeted group of consumers, while bigger brands are forced to defend their market share across a wider base.
Harry’s has captured about 2 per cent of the $2.8 billion men’s shaving industry since its launch in 2013, according to Euromonitor market research firm. Its main shaving club rival, Dollar Shave Club, has about 8 per cent.
It’s been a gut punch to the industry leaders.
Gillette controlled about 70 per cent of the U.S. market a decade ago. Last year, its market share dropped to below 50 per cent, according to Euromonitor. The company, owned by P&G, was forced to slash its razor prices by an average of 12 per cent last year. No. 2 razor maker Schick has also been squeezed. Parent company Edgewell Personal Care reported a 3.6 per cent drop in net sales from its North America shave business in its most recent earnings report.
Both major brands now offer subscription services on their own direct-to-consumer sites, which they are leveraging to promote their lowerend razors while also showcasing their edge in technological innovation.
“Our blades are known for their long-lasting quality, which means you need less cartridges per year as compared to the other shave clubs in the market,” said Stephanie Lynn, vice-president of Global eCommerce for Edgewell.
Pankaj Bhalla, brand director of Gillette North America, said increasing its online sales is a “key part of our strategy.” He offers a reality check for the shave clubs: While Gillette might be new to the direct-to-consumer game, the brand says it has 70 per cent of the market share on online retailers like Amazon and Jet.com.
But critics say both incumbents were slow to respond to the new competition. ‘WHAT UPSETS YOU?’ Like other insurgent companies, Harry’s and Dollar Shave Club took off because they tapped into shoppers’ grievances.
Casper’s, which lets customers try mattresses at home for 100 nights, grew out of the premise that it’s no fun shopping for a big, bulky item that’s hard to test out.
The start-up Hims, which counts Harry’s as a minority stakeholder, launched last year to give men a more comfortable way to shop for hair growth and erectile dysfunction drugs.
“What sets them apart is a compelling offer that addresses a real unmet consumer need,” said Bain & Company in its report.
Raider said he hopes to mine the 2 million interactions Harry’s has had with customers to find more gripes.
On Facebook, Harry’s told one curious customer that shampoo and conditioner are in the works.
Another possibility? Sunscreen. Raider says it’s expensive and should be marketed for everyday use, not beach trips.
“A lot of just comes from talking to people, like, ‘hey, what do you want to be better in your life?’” Raider said. “What upsets you?”
They’re also not ruling out products to help men take care of beards.
“It will take time for us to understand those guys,” the clean-shaven Raider said. “Maybe Andy and I will have to grow big beards.”
“Our vision is to build a next-generation consumer brand company.” – Jeff Raider, CEO of Harry’s Labs