Dollar Shave Club has come a long way in just four years and is the most oft-cited direct-to-consumer model in FMCG.
The brand had a wildly successful viral ad and sells a subscription to razors for as little as three dollars per month – its sales reached $152m in 2015.
Recently, the company’s success was cemented when Unilever snapped it up for a cool $1bn.
For Dollar Shave Club, an opportunity to be part of the Unilever conglomerate clearly proved irresistable.
Currently operating in the US, Canada and Australia – the deal enables the brand to become truly global, yet still retain its existing 190 employees.
A significant shift in the market?
Some have suggested that the acquisition is merely a reflection of the company’s increased focus on personal care. Male grooming is a huge driver for Unilever, with prestige brands in particular experiencing rapid growth.
However, the deal also suggests a significant shift in the consumer products industry as a whole. Namely, towards manufacturers selling directly to consumers, and bypassing traditional retailers.
This can only be done by building a greater digital connection with consumers – something that Dollar Shave Club certainly succeeded in doing.
With its humourous tone of voice and heavy social media presence, it has managed to build a large and loyal customer-base.
“My advice? Vacation while you look good for the photos. I should’ve come here when I had surfer hair.” – Larry, 78 pic.twitter.com/hH4qspRMSr
— Dollar Shave Club (@DollarShaveClub) July 20, 2016
Rise of the direct-to-consumer model
Dollar Shave Club won’t be the first Unilever brand with a direct-to-consumer channel. In 2014, it launched an ecommerce site for mustard brand Maille.
Likewise, its premium tea brand T2 is now sold in individual stores in England and Australia as well as on its own website.
Unilever aside, we’ve also seen other brands like Amazon disrupt traditional retail models with the introduction of its own private label goods.
By selling perishable items such as baby food, nuts, tea and laundry detergent, Amazon is hoping to disrupt the shopping behaviour of consumers who would otherwise visit supermarkets or grocery stores.
Benefits of selling direct to consumers
For the likes of Amazon and Unilever, the direct-to-consumer model has many advantages.
First, it allows brands to discover greater insight into consumer behaviour. By delving into when and what people are buying online, companies can tailor the consumer journey like never before.
In turn, direct-to-consumer sites also enable a more streamlined strategy. In taking away the concept of the supermarket shelf, there are no competitor brands to deal with, resulting in greater control over how brands are marketed.
Lastly, and undoubtedly the biggest benefit, is the greater profit margin. Without the cost of dealing with retailers, brands can invest more heavily in online efforts and concentrate on building consumer loyalty.
Other brands building on similar success
The key to Dollar Shave Club’s success has been in its disruption of an established market.
By identifying that it could provide the same product as its competitors for a much cheaper price, it offered consumers something that was too good to ignore.
Another brand to offer a similar model is Warby Parker, a company that sells high quality eyewear at a fraction of the price of traditional stores.
It also has the added bonus of a ‘one for one’ business model, similar to that of TOMS.
Likewise, US brand Caspar is also utilising the direct-to-consumer model to sell its product – a high quality mattress that’s compressed for easy delivery and a 100 day free trial.
The one characteristic that many of these companies share is simplicity – something that is increasingly valued in today’s saturated market.
With much debate over who is going to be the next Dollar Shave Club, the original brand and its business model is sure to have inspired many.