Today we will be going to know about a story where a billion dollar monopoly business lost their market share to a baby company of the market. We are talking about Men`s grooming industry leader Gillette with their small competitor Dollar Shave Club.
Gillette vs Dollar Shave Club
It is very surprising if we just overview the market. On one hand Gillette have billion dollars bank balance, most renowned scientists in their research and development group and also century old brand reputation. On the other hand dollar shave club company owner just had 35,000 dollar in his bank account and they did not have any brand value that time.
Rising story of DSC
Having so many obstacles, this baby company became so successful in just 5 years that they now have 3.5 million subscribers. They managed to sell more than 200 million dollars of male grooming product. Recently they are acquired by FMCG giant Unilever by astonishing 1 billion dollars.
Let us know what is so special about this dollar shave club and how they challenged the market leader with very limited resources without even manufacturing their own products.
Bad performance of Gillette
Lets go back in 2011 in America. That time Gillette had everything they need from brand value to well known brand ambassador to best scientist in their team. Still their market share fall from 70 percent to 54 percent in just 5 years. They tried to justify their results by saying the bad state of economy to male`s tendency to growing beard.
But at the same time, dollar shave club sold millions dollar products and became very popular in male grooming industry without even manufacturing their own razors.
Three mistakes of Gillette
The reason of the results are the three mistakes of Gillette which was found by the owner of Dollar shave club.
First of all, Gillette was using the technique of razor blade pricing model. In this model they sold their razor in extremely low cost and the blades in higher cost. Thus they get high income whenever you buy a blade.
Secondly, Gillette was making extra ordinary razors with the help of R&D team. But ironically people can`t distinguish the functionality of razors. There is a high price gap between the old and new razors but no extra visible differences. Even some juries told that the advertisements of Gillette were mostly exaggerated and false.
Lastly Gillette was spending ton of money in advertisements and marketing big names like Messi, Federer. In 2016 alone, they spend more 750 million dollars in advertisement.
For these, the price of Gillette products increased but not added that much value in their products. That time Dollar shave club become opportunist and solve the three problems of Gillette.
At that time, DSC started to buy razors from a south Korean company Dorco and instead of making ton of products and advertisements, they just offered 3 simple different types of razors in very reasonable price.
They made the whole system online so that neither they have to bear rental costs nor any complex supply system hurts the business. Instead of spending million dollars in advertisements and hiring big name, the CEO of the company himself made a fun youtube video which went viral. He put out all the three things in very fun manner.
Business Model of DSC
He also made a simple subscription model where people can get various surprise products along with the main products. In no time, they started to get million subscribers and also get the free mouth to mouth advertisement.
This is how this low budget company beat the industry leader in very gentle and efficient manner. So we can learn that a small company can grow without fancy advertisement and outstanding products. We just have to find out the pain point of the customers and solve in very simple manner.