You've probably heard of Dollar Shave Club.
What you might not know?
Unilever bought them for $1 BILLION in 2016. ...And the acquisition's been deemed a failure.
Here's the lowdown:
What you might not know?
Unilever bought them for $1 BILLION in 2016. ...And the acquisition's been deemed a failure.
Here's the lowdown:
Michael Dubin, a stand-up comedian & digital marketer who'd just lost his job, met Mark Levine at a party.
It came out that Mark had a unique problem: a surplus of 250,000 razors.
He desperately needed help selling them.
This inspired an idea in Michael's mind...
It came out that Mark had a unique problem: a surplus of 250,000 razors.
He desperately needed help selling them.
This inspired an idea in Michael's mind...
What if he started a service that cut the expense & hassle of razor blades?
What if they just showed up at your door each month – for $1 each?
He knew men were fed up with a ceratin razor monopoly that forced them to pay $20+ for just a few blades.
What if they just showed up at your door each month – for $1 each?
He knew men were fed up with a ceratin razor monopoly that forced them to pay $20+ for just a few blades.
Given his passion for improv comedy & experience in marketing...
Michael decided to create a launch video tototally differentiate their brand.
What resulted was one of the greatest video ads of all time:
Michael decided to create a launch video tototally differentiate their brand.
What resulted was one of the greatest video ads of all time:
That video went CRAZY viral.
It generated 12,000 $1/mo subscription orders within 48 hours & racked up 4.75 million views in three months.
But why did it work so well?
It generated 12,000 $1/mo subscription orders within 48 hours & racked up 4.75 million views in three months.
But why did it work so well?
Great storytelling:
• Michael is the hero & protagonist
• Us vs them narrative, where big razor companies are the enemy
• And of course – a level of humor Gillette could never hope to reach.
DSC = Michael = a real, relatable human. Which makes people more inclined to buy.
• Michael is the hero & protagonist
• Us vs them narrative, where big razor companies are the enemy
• And of course – a level of humor Gillette could never hope to reach.
DSC = Michael = a real, relatable human. Which makes people more inclined to buy.
They soon launched new plans to expand their product line.
And by 2016, DSC was doing $153M with 3.2M members.
They had an estimated 10% of the US razor blade market.
Happy ending. ...Right?
And by 2016, DSC was doing $153M with 3.2M members.
They had an estimated 10% of the US razor blade market.
Happy ending. ...Right?
Meanwhile, P&G-owned Gillette slowed. Of the men's razor market, they owned:
• 70% in 2010
• 59% in 2015
• 54% in 2016
In response, they launched a knockoff subscription ("Gillette On-Demand").
P&G's rival, Unilever, took notice...
• 70% in 2010
• 59% in 2015
• 54% in 2016
In response, they launched a knockoff subscription ("Gillette On-Demand").
P&G's rival, Unilever, took notice...
In 2016, Unilever bought Dollar Shave Club for $1B – one of the largest e-commerce transactions at the time.
So... was it a success?
So... was it a success?
It's D2C standard to balance customer acquisition costs with how much customers spend in a year.
But Dollar Shave Club, at the time, was using a five-year timeline.
Aka, spending 5 TIMES AS MUCH on customer acquisition as they should have.
This made profitability elusive.
But Dollar Shave Club, at the time, was using a five-year timeline.
Aka, spending 5 TIMES AS MUCH on customer acquisition as they should have.
This made profitability elusive.
To counter this, they've expanded their product line since the acquistion.
Including $50 cologne, hair cream for $10, $13 sunscreen...
But wait – what was DSC's original hook?
Including $50 cologne, hair cream for $10, $13 sunscreen...
But wait – what was DSC's original hook?
$1 razors...
So DSC's legacy customers don't spend on higher-end (high-margin) products.
Meaning: Unilever didn't study their customer enough.
So DSC's legacy customers don't spend on higher-end (high-margin) products.
Meaning: Unilever didn't study their customer enough.
Also: DSC was paid for entirely in cash.
Michael's upfront payout was ~$90M.
He contractually had to stay on as CEO for a period...
But this payment structure gave him little incentive to continue growing the business (vs equity, for example).
Michael's upfront payout was ~$90M.
He contractually had to stay on as CEO for a period...
But this payment structure gave him little incentive to continue growing the business (vs equity, for example).
For these reasons, Unilever themselves said last year:
"Dollar Shave Club has not delivered the results they were expecting."
But, it's still a functioning business.
Dollar Shave Club hasn't totally failed, and Unilever could still turn things around...
"Dollar Shave Club has not delivered the results they were expecting."
But, it's still a functioning business.
Dollar Shave Club hasn't totally failed, and Unilever could still turn things around...
Due diligence and second-order thinking are vital even in small biz acquisitions.
This shows the stakes at the billion-$ scale...
If you found this story interesting, share below & follow @Codie_Sanchez for more:
This shows the stakes at the billion-$ scale...
If you found this story interesting, share below & follow @Codie_Sanchez for more:
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