Startup looking beyond the sink
Online razor companies have shaken up shaving
NEW YORK — What do you hate shopping for? Toothpaste? Sunscreen? The founders of Harry’s shaving club want to know.
Armed with US$112 million in new financing, the online startup that took on razor giants Gillette and Schick with its direct-toconsumer subscription model is investigating what other sleepy products might be ripe for disruption.
“It might be better products, a better experience getting the products or a brand that appeals to who they want to be as people,” said Harry’s co-founder Jeff Raider, who recently took on the role of CEO of Harry’s Labs, overseeing the development of new brands.
There’s a reason why Harry’s investors are betting that reinventing the razor was no flash-inthe-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.
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 & Co., a management consulting firm. Contract manufacturing, which allows companies to outsource production and defray costs, also has made it simpler.
Digital newcomers still represent only a fraction of the overall market share, according to the report. But such companies are capturing a disproportionate share of growth in recent years.
Harry’s has captured about two per cent of the $2.8 billion men’s shaving industry since its launch in 2013, according to Euromonitor market research firm. Its main rival, Dollar Shave Club, has about eight 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.
No. 2 razor maker Schick has also been squeezed, losing 3.6 per cent in net North America razor sales in the most recent quarter.
Both major brands now offer subscription services on their own direct-to-consumer sites.
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 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.
“Initially, the biggest players underestimated the potential of these brands, and when they reacted either by dropping prices or by launching their own subscription models, the damage was done,” said Fatima Linares, beauty and fashion research manager at Euromonitor International.
Harry’s says it now has five million customers in the U.S. and Canada. It says business has grown 70 per cent year-over-year, though it does not release sales figures.
For Harry’s and Dollar Shave Club, simplicity is the point. Harry’s sells just one five-blade razor with a choice of two different types of handles, priced at about $2 per cartridge under their subscription plan. Dollar Shave Club offers a four-blade and a six-blade razor, with the cheaper one priced at $1.50 per cartridge.
Like other insurgent companies, Harry’s and Dollar Shave Club took off because they tapped into shoppers’ grievances.
Raider said he hopes to mine the two million interactions Harry’s has had with customers to find more gripes. On Facebook, Harry’s told one customer shampoo and conditioner are planned. Another possibility? Sunscreen.