Often, the best businesses are boring.
While the current entrepreneurship wave continues to mythologize Silicon Valley startups and “unicorns” – those VC-backed private companies valued at $1 billion or more – I think most sustainable businesses are far more likely to be closer to your neighborhood hamburger joint that slowly expands – perhaps franchising to 3-4 locations – than to a scalable tech giant like Uber of AirBNB.
Thus, it took many by surprise last week when mail order razor company Dollar Shave Club officially joined the ranks of the unicorns when it was bought for $1 billion by consumer products giant Unilever.
You know Unilever – it’s the umbrella company of such household products as Lipton (tea), Dove (soap) and Hellmann’s (mayonnaise). The list goes on and on: Klondike, Popsicle, Suave, Axe, Noxzema, Marmite, Jif, Vaseline, and more.
In an era when over-hyped apps are aiming to take advantage of the new “sharing economy,” Dollar Shave Club dared to try something different – mail-order subscription men’s razor for as little as $3 per month (including shipping and handling).
Founded in July 2011, the company’s official debut came in March 2012, when its introductory YouTube video went viral
(Ahem – Not Safe for Work!)
In just four years, Dollar Shave Club has grown to more than 2 million members (20 percent of them women) and revenues of ~ $200 million annually.
5 Reasons Unilever Bought Them
1. It’s a strong brand with easily-predictable sales.
Services firms (i.e., marketing, public relations, and law firms) are notoriously hard to value for acquisition. This is because so much of the clientele may be loyal to specific partners or employees – if those key people leave, so will the client.
Likewise, even social media companies and apps can be hard to value from a predictable revenue perspective, as consumer tastes shift rapidly.
In contrast, Dollar Shave Club’s mail order revenues are stable and show proven growth over more than 40 months.
It’s this type of tangible sales and predictable accounting that makes revenue forecasts far simpler than with say…digital companies.
2. It gets Unilever, a European company, into the U.S. men’s goods market.
Unilever is unabashedly European.
It’s co-headquartered in London (UK) and Rotterdam (The Netherlands). While it counts dozens of U.S. brands in its portfolio, Dollar Shave Club is its first overtly American men’s brand since it introduced American boys to the British Lynx body spray under the new name Axe.
3. It keeps Dollar Shave Club out of the hands of Procter & Gamble.
Procter & Gamble bought Gillette, the leading brand of razors, in 2005.
I have a special affinity for Gillette razors, as the company sent me a free one in the mail three days before my 16th birthday. This simple act bought my brand loyalty for the next 20 years.
But Dollar Shave Club was founded specifically to provide a low-cost alternative to the pricey (and dominant) Gillette brand.
The last thing Unilever wanted was to see the innovative and popular Dollar Shave Club brand in the hands of Procter & Gamble, one of its biggest competitors.
4. Dollar Shave Club knows digital.
Perhaps the biggest value that Dollar Shave Club brings to Unilever is its digital and social media prowess.
More than simply its mailing list of razor subscribers, Dollar Shave Club has shown to be an innovative and effective digital marketing brand.
From its introductory (and irreverent!) YouTube video in 2006 to its success on platforms like Twitter (81,000 followers) , Facebook (2.8 million likes), or (especially) YouTube (more than 60 videos, including 8 in the last month), Dollar Shave Club has shown itself to be one of the more innovative major brands on social media, a statement even more impressive given its small size relative to top consumer brands like Coca-Cola or Procter and Gamble.
5. Strong brand loyalty
Men (and increasingly, women) like Dollar Shave Club.
It’s not just a good product – quality razors delivered conveniently to your home at an affordable price – it’s fun.
The true value in Dollar Shave Club lies not in its products but in its approach: Just as Red Bull sells a lifestyle rather than an energy drink, Dollar Shave Club’s primarily differentiator is its entertainment value.
Its videos are funny, hip and self-aware.
And it is those qualities, far beyond the razors themselves, that have built Dollar Shave Club such a fiercely loyal tribe of fans.