Disrupting a dominant market position - The Dollar Shave Club

Pete Saunders

There was yet another product launch in 2006 that I’m sure no one immediately noticed: Amazon Web Services. AWS made it easy and cheap to start an online company. YouTube, which launched a year earlier, made it cheap and easy to share video; Facebook, launched in 2004, made it possible to spread video to millions of people. All three came together to support with the 2011 start-up of Dollar Shave Club and its 2012 launch with one of the best introductory videos of all time:

Please watch if you haven’t — it’s that good, generating 22 million views in its first weekend of release and generating 12,000 orders!

In short, they successfully attacked the established market leader, Gillette, and its approach of over-serving the shaving market. They attacked Gillete's owner, Proctor & Gamble, for their strategy of spending money on research and development, because ... razors are already good enough!

Based on the traditional measure of market share (revenue), Dollar Shave Club only has 5% of the U.S. market, due to the massive price difference between Dollar Shave Club and Gillette. However, the price difference is the point: in a world with good enough products that can be shipped to your home directly, there is no reason to charge more. The implications of this go far beyond Proctor & Gamble: fewer Gillette razors also mean less TV advertising.

You can see why razors with their huge gross margins and high replacement rate were a particularly good match for the Dollar Shave Club subscription model. So good that Unilever decided to buy the company for $1 billion in 2016!

From nothing to $1billion in 5 years is a pretty good return on market disruption, don’t you think!!

This sort of disruption will not be a one-off: we all know the Internet has changed the economics of business; that it is only a matter of time before further product categories are impacted. In truth, it’s not just the internet though, new technologies have always provided the opportunity for market disruption, as well as a clear understanding of a given marketplace.

Where are your opportunities to take your own market by storm? You may be pleasantly surprised or horrified to discover they are closer at hand than you think.

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