How do we put these guys out of business now?
Put five or 10 guys in a room and figure out how to beat them.
That would have been the advice, activist investor, Nelson Peltz would have given to the Proctor and Gamble management when Dollar Shave Club started in 2011. But no that is not how it played out.
We have of course previously written about Dollar Shave Club and their subscription pricing model. I was an avid user, enjoying the regular deliveries and of course cost savings. And while I know their blades are Dorco blades and are available cheaper on Amazon, I enjoyed the process. However, now that I’m sporting the on trend slightly balding shaved head and almost hipster beard I don’t have a need for the blades.
But back to the story, while Gillette remains the top US razor brand, its share is languishing online at only ~23% share with Dollar Shave Club at ~47% and Harry’s shaving club has a respectable ~12%. Again I think Dollar Shave Club’s accomplishment is even the more amazing as they effectively did it with an undifferentiated product.
We’ve all been there before and heard all of the excuses, I’m sure these will sound familiar:
- If we do an online version we will have channel conflict.
- We have these existing relationships and we can’t upset those as they are 80% of our business – (until they’re not).
- We need to be careful about competing against ourselves – (but you will happily let the competition compete against you).
- It’s ok, what they don’t understand is we have this competitive advantage we’re protected – (or not).
- That is not how this market works – (well it may not be how it works today, but what about tomorrow?).
- We have a complex channel structure where we have a franchised network, they won’t be happy if we do this or that.
- Look they are small, at best they will be the size of one of our smallest stores we don’t really need to worry.
- It’s ok, they are only taking the low-value customers – (today that is).
- They can’t sustain their business model with this irrational pricing – (no you can’t sustain the market at that price with your business model).
I know it’s hard and bloody complex. Work it out, that is what you are paid the big bucks to do.
As an incumbent or big fish you will afford yourself some luxury against the smaller upstart. You have the resources, you have the channels sewn up, you’re in a good position.
I would warn you that while it used to be Big beats Small, now it is fast that beats slow.
Every day you wait, argue, bury your head in the sand, your competition is getting stronger, faster, taking your customers off you. And you, well you are heading for stasis, followed by irrelevance.