From a tiny startup founded in 2011 to a safe landing at USD 1 billion in 2016 when it joined Unilever, Dollar Shave Club (DSC) is living proof of smart selling.
Simple but good
Considering only the business model, Dollar Shave Club’s could be described as extremely simple:
- DSC is simply a trading company. All the products DSC supplies to customers are purchased in bulk at substantial discounts from various suppliers (such as razors from Dorco USA).
- The ‘DSC Club’ is simply a place where customers sign up as members and pay a fixed amount each month to receive products from DSC.
But what makes DSC distinctive is that it devotes most of its spending to customer satisfaction. The ‘club’ is willing to incur losses to gain new members.
A prominent example is the “Everything for just 1 dollar” strategy. Upon joining, customers can try DSC products ranging from budget to premium for just USD 1.
So How Does Dollar Shave Club Make Money?
As mentioned above, DSC combines commerce with a membership-subscription model.
DSC does not manufacture products directly. The products it supplies are bought in bulk and redistributed to club members. The difference between the purchase and sale prices becomes DSC's profit, while club members automatically “have” an amount deducted from their accounts each month to receive products regularly.
The cost of a DSC product package includes:
- The product's purchase cost.
- Logistics costs: transport + packaging + printing…
- Administrative and selling expenses, including marketing fees, company operating costs, and other miscellaneous expenses.
DSC is often “generous,” waiving logistics and product purchase charges on customers' first orders. These charges (and profit) are added only after customers are satisfied and continue using the service.
This seemingly simple tactic helped DSC attract many trial customers who became loyal members.
How Is Dollar Shave Club Different from Other Companies?
From its very name, Dollar Shave Club has always positioned itself as a ‘Club,’ rather than an ordinary company. DSC recognizes men's needs and common personal hygiene problems and works hard to solve them. Although its business model is not new, smart selling is what creates differentiation and an advantage for DSC.
With marketing minds that analysts praise generously. DSC's advertising content always hits the target, reaching the right audience with precisely the products they need.
The ‘men’s club’ has always taken pride in its ‘excellent’ products and stands ready to offer customers an option that is both good and affordable.
Although DSC offers customers substantial value, it still needs an effective sales plan to take off. Ultimately, low prices and quality are possible only when revenue is strong enough to give DSC bargaining power over partners and preserve its competitive advantage for customers.
Necessity sparked ingenuity: DSC chose a sales strategy based on videos and viral content. In 2012, its first video exploded in popularity as the CEO humorously explained the product’s pricing and excellent quality.
In its first 48 hours alone, the video brought DSC more than 12,000 new customers, who needed just 1 minute and 33 seconds to feel that DSC offered exactly what they needed.
And beyond supplying products, DSC focuses on developing its customer relationships. The ‘DSC experience’ is one factor that makes the company part of customers’ everyday lives.
With every shipment, DSC includes a “Bathroom Magazine” containing humorous material, men's grooming tips, and wildly wide-ranging articles such as “How to Shave Without Glasses” or “Can a Toilet Lid Be Used as a Shield?”.
According to a recent survey, some loyal DSC customers say they cannot bring themselves to cancel its service because the club is too “interesting.”
Dollar Shave Club skillfully combined financial benefits with an extremely smart sales model, quickly becoming a counterweight to industry giants such as Gillete. Gillete even had to create its own “Club” to avoid losing more market share to its rival.
“Explosive” success and a “billion-dollar” conclusion with Unilever
Dollar Shave Club is not only popular with customers but also supported by dozens of investment funds through successive injections: 1 million USD in 3/2012, 9.8 million USD in 10/2012 and 12 million USD in 2013.
In 2014, DSC began adding dozens of products to accompany its razors and provided customers with a complete “grooming package.” In June 2015, DSC received an additional 75 million USD in investment.
Since its founding, DSC has gained over 3.2 million members across America. Although its products have always targeted men, over 20% of current customers are women, showing that the products' appeal transcends gender.
In 2016, Dollar Shave Club was acquired by Unilever, the world's largest consumer-goods group, for as much as 1 billion USD—5 times DSC's projected revenue that year. Although the announcement attracted considerable skepticism, only a short time later Unilever comfortably became a counterweight to its formidable rival P&G, which owns the Gillette brand.
Collected.
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