Are Companies Like The “Dollar Shave Club” The Future Of Commodity Products Selling?

The personal care giant, Unilever, bought the Dollar Shave Club company for US$ one billion. Now, there is nothing new about big companies buying much smaller companies, but it must be emphasized that Dollar Shave Club was in existence for barely five years then.

So what makes Dollar Shave Club or DSC so valuable that it was worth US one billion in just a short five years? IMD or International Institute for Management Development, an award winning business think tank, reported that:

“Dollar Shave Club has ten percent of the market for razors before they were acquired by Unilever.” At present, DSC has branched out to other markets which includes not only the US but also Australia, Canada and the UK.

Its former owner and founder, Micheal Dubin likes to publicly state that the success of Dollar Shave Club was a result of pure luck. But is it really just luck or Dubin has something going for him?

I think one of the best explanations on why DSC’s launch video became viral and resulted in thousand of orders for the company on the first day can be explained by this video by John Coogan titled: How Razors Broke the Facebook Algorithm.

In the video, Coogan explained that Dubin used his past experience in being a comedian to create a very entertaining sales video. Coogan also went further to explain that Dubin also used visual psychology to keep the viewers continuously hooked in watching the video.

Another thing which Coogan explains is how Dubin successfully leveraged the power of Facebook Ad Marketing. Incidentally, Dubin also worked in marketing before he started DSC.

Now, back to Facebook Ad Marketing: According to Coogan the difference between Google Ads and Facebook Ads can be likened to fishing. Coogan made the analogy that Google Ads is like a net while Facebook Ads is like a speargun when targeting customers.

Lastly, Coogan stated that there is nothing special about DSCs business. It’s just your average direct to consumer product with a sound business strategy. But there is one thing more going for DSC: its because they’re selling commodity products…

Before Dubin came along with the idea of DSC, nobody thought of the idea to sell cheap razor on a direct to consumer basis. It used to be that the razor industry used retailers to sell their razors.

Competing razor companies would concentrate on making more and more sophisticated razors in the hopes of attracting customers. It was a virtual arms race between razor companies when in truth most consumers only wanted a basic cheap razor.

And this is what Dubin must have realized. I would like to think that Dubin also did extensive market research on the razor industry but this cannot be proven at the moment, what is true however is that Dubin understood what the consumers wanted.

People just want their commodity product to be delivered to them at a cheap price on a regular basis. This is also happening to the food delivery service where food delivery companies offer an almost cheap hassle free experience in ordering food online.

Imagine if all commodity products would be sold this way one day. Imagine if all your groceries, toiletries and personal care products would be a cheap subscription based service. I believe that DSC is just one of the companies who would be offering such services in the future.

Before e-commerce came along, people were content with the idea that if you wanted to buy something, you would have to bathe, dress up, drive and walk for almost hours in a mall before you actually got the item you wanted to buy.

But e-commerce eliminated all those boring and tiring activities and delivered all the shops in the world directly in your computer or mobile. Before, music lovers hated on digital music files because they delivered inferior music quality as compared to physical music media.

Now, everybody has become satisfied with the so-called inferior quality digital music. People used to go to supermarket, malls and restaurants for groceries and meals. Now a lot of these activities can be done through mobile apps.

This should be a warning to people who are still selling products the traditional way. Tech companies are fast taking over your market share. Time might come when vegetable and meat shops for example would be under the control of a tech company.

And this is the power of convenience which tech companies wield by a very big degree. In the future, tech companies might not only want to control physical businesses but eliminate them altogether. An example would be self driving technology which could replace drivers.

Do you know that DSC doesn’t have a factory that produces its razors? This is hard to imagine considering that DSC have over three million customers. But this is the truth, the DSC razors are made in South Korea by a company named Dorco.

And here’s another interesting fact: DSC used to handle the distribution of their razors but it was eventually contracted to a third-party company in Kentucky. All in all, DSC only has about 190 employees.

Just imagine, a one billion dollar company only having 190 employees, what’s even more interesting is the fact that the razors are not made in the US but are rebranded South Korean razors.

The key takeaway from this is that many companies of today don’t necessarily need to have their own manufacturing and logistics facilities just to operate. Many countries and most especially China have enabled many companies to outsource their manufacturing operations.

Another takeaway is that you don’t need to create a new product anymore. You can rebrand another product from another country in your own name and sell it for a much bigger profit. This is so rampant that even the Chinese are buying legacy brands from other countries.

It used to be that in the world of business, you needed to spend a lot of money: in the thousands and even to the millions just to have a significant marketing reach with your customers.

But with the advent of the internet and social media, you could pretty much create a cheap and even free advertising campaign and still become viral. This is because more and more people are abandoning traditional media like television and radio in favor of the internet.

Just like Dubin, you could make a well crafted YouTube video that would have more viewer engagement than traditional television and radio advertising, and this scenario is happening more often than you think.

So much so that traditional television and radio advertisers are abandoning this medium in favor of internet advertising. According to industry statistics website, Statista, it is predicted that in 2023, the average time spent by people online would be 500 minutes/day.

Compare this with traditional media where it is predicted that the average time spent by people would only be 285 minutes/day. This should be a warning to any companies still largely depending on traditional media for advertising.

The Dollar Shave Club is just one company example proving that the era of traditional marketing, manufacturing and distribution is already dying. Companies today can concentrate on marketing while outsourcing their manufacturing and distribution activities.

There also seems to be a need these days for your product’s video or videos related to your company or product to become viral. This is because more consumers spend their time using the internet and online content that goes viral leave an instant impression in their minds.

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