Content And Commerce Fuels Unilever’s Buy of Dollar Shave Club
Can a start-up that sells razor blades online be worth $1 billion? Unilever believes so. Last week, the consumer products goods (CPG) behemoth Unilever purchased company Dollar Shave Club (DSC) for that amount. What it got in return is a prototype for great content and commerce integration.
While at first glance this may seem another example of an established company buying an overvalued start-up, it is much more than that. Unilever, like many CPG companies, is looking for new sources of growth, and one of those paths is through selling directly to consumers. In this light, DSC is not just another brand for Unilever. Rather, it is a model for how Unilever can blend content and commerce in order to fuel growth. If Unilever plays its cards right, this purchase could be viewed in a couple of years as the bargain of the century.
Blades in a box = great customer experience
For the unaware and whisker-free, DSC is an online subscription service based in the U.S. where you pay a monthly fee of between $3 to $9. In return, you receive a free razor and a box of razor blades. The four-year old company launched with a 1:33 YouTube video from the company founder who delivered a simple message: that “the blades are f**king great.” The blades sold out in six hours (even though the website crashed). But over the next few years DSC grew like crazy, from $4 million in 2012 to $65 million in 2014.
Helping to fuel that growth is the company’s positioning, which is from the customer’s perspective:
- The company has a clear brand promise: “A great shave for a few bucks a month. No commitment, no fees, no BS.”
- The focus of the company, and its website content, is on solving a specific problem its customers have: razors are expensive in the store and going to buy them can be a frustrating experience. The products solve that problem: for a few dollars a month and the first month being free, you get a free razor and blade refills. No more spending money on expensive razors, no more trips to the store when you run out, no more shaving with blunt razors because you forgot to go to the store in the first place. Result? Improved experience for customers of shaving products, predictable revenue stream for DSC.
- The product catalogue is easily searchable and almost unbelievably simple: 3 razors, a few different box combination options. There is also a selection of complementary products, like shaving cream, for additional purchase.
- The company blog features regular short, irreverent pieces targeting its primary customer segment around shaving-related common topics (and thus contributing to the site’s SEO rankings) like skin care, hair care, and body and mind.
Content and commerce can fuel CPG growth
In addition to positioning from the customer’s perspective, DSC has been adept at using content across social channels to engage with customers. Facebook, Instagram, Pinterest, you name it: DSC not only has a presence there, but is gathering valuable customer information on use of its products and providing a direct channel for users of those platforms to interact with customer service.
Viewed in this light, the 5x multiple that Unilever paid for Dollar Shave Club was worth more than worth it, because it is acquiring this know-how that can be applied to the other thousand brands it currently owns. Indeed, Unilever claims that its brands, which include household names such as Q-Tips, Popsicles, and Lipton, touch two billion consumers every day. And at $58.2 billion in revenues, and a billion spent every year on R&D, Unilever can well afford the DSC price tag.
The challenge for Unilever, as with so many of these acquisitions, will be to figure out how best to transfer the knowledge and expertise of DSC to other brands and business units amongst its 168,000 employees around the globe, while still maintaining DSC’s image as a customer-focused brand. One way might be to make DSC a “customer experience center of excellence,” and its operations and customer service practices part of training for other brands in its portfolio.
Will this result in other CPG conglomerates rushing to acquire other e-commerce start-ups? Probably. CPG companies such as Mondelez and General Mills have been open about how they are looking to increase the proportion of revenues they get from online sales, which in the last year hovered just around the 1 to 5% mark. Yet those companies need to be careful that they are acquiring actual best practices and innovation that they can put to use, rather than a well-funded but not unique brand with a cool office.
Interested in learning more about how a brand can sell directly to consumers in the model of DSC? Check out our recent report A Brand Manufacturer’s Guide to Direct-to-Consumer E-Commerce (registration required).