Unilever's acquisition of Dollar Shave Club (DSC) for $1bn may well prove to be a watershed moment in the consumables business.
While FMCG acquisitions are certainly nothing new – and this pales by size compared to P&G’s $57bn acquisition of Gillette in 2005 – what makes this a game changer is how it brings an entirely new business model into the belly of the Unilever beast.
DSC was the first company to successfully break the traditional balance of power in retail. Because it sat at the nexus of manufacturer and shopper, the retailer held all the power in the system. It controlled what prices the consumer paid and where they went to get the product, and equally wielded a phenomenal amount of control over the manufacturers.
DSC built an entirely new business proposition around a new kind of insight: American men were simply not changing their razor blades often enough. Rather than go the traditional route and add another blade – where we seemed to be on the verge of shaving with machetes – they identified a mechanism by which they could get products to consumers before the consumer even entered active shopping mode.
It’s simple to the point where you can’t believe it hasn’t been done before – plus the subscription based service is a great way for DSC to encourage a higher customer lifetime value and build an enviable CRM database.
DSC proves once and for all that brands cannot take preferential access to consumers for granted. This has been the competitive advantage of the legacy manufacturers who put armies behind ensuring they were serving the needs of the retailers – and what is interesting about DSC is that it circumvented the retailer in its entirety.
'Smug and self-effacing'
The other big disruption DSC drove was that instead of high-spec production of films for TV commercials, their initial marketing was a deliciously low-budget video, a reported mere $4,500 on YouTube that broke every creative guideline.
In just 90 humorous seconds DSC launched itself into the minds (and medicine cabinets) of men everywhere. While DSC is now a big TV advertiser, it also marks one of the first big brands to be built by digital video – and is an excellent example of the blurring of the lines between paid, owned and earned media.
It’s hard to argue with the fact that the video creates desirability for the product. Emphasising how consumers are not just buying razors in a more convenient way, they're buying into a cool, off-kilter world where you can be equal levels of smug and self-effacing, the combination of these factors has allowed DSC to achieve a reported 11% market share.
It is clear that Unilever is buying into a lot more than just razors. In addition to plugging a massive hole in their portfolio in the form of a strong men’s shaving and grooming brand, it gives them access to a business model that they have started to engage with but have not really embraced.
Subscription commerce may not be rolled out in a DSC-style way to say, Dove or PG Tips, but it will give Unilever a ring-side view of how subscription commerce works on logistics, production, fulfilment, packaging, CRM etc. and it is sure to take these learnings to the next time they sit down to discuss Subscribe and Save with Amazon. Oh, what I wouldn’t give to be a fly on the wall for that conversation.
Mudit Jaju is digital and data partner at MEC Global Solutions and head of MEC Commerce.