If you haven't heard the news, Dollar Shave Club (DSC) was purchased by Unilever for $1 billion. It marks the largest acquisition in the ecommerce space, and is seeing all sorts of praise from experts, considering the DSC company is not only fun, but revolutionary. Not only that, but $1 billion dollars is five times more than sales at the company. That said, what does this mean for the ecommerce world? Will it effect the way you do business, and can it help you if you eventually find yourself in a position to sell? Let's take a look.
Finding New Ways to Sell Consumer Goods Shows Great Potential
It's clear that the direct-to-consumer, subscription business model works, sometimes. Companies like Birchbox are seeing massive layoffs, but others are finding a comfortable space with massive growth. DSC is clearly one of them, and it all comes down to their strategy of cutting out the overhead that comes with brick and mortar stores. What's more is that the company is still gaining popularity, even though they have stiff competition from companies like Harry's.
Another notable business for some inspiration is Warby Parker, a direct-to-consumer eyeglasses and sunglasses brand that designs its own frames. It's all about finding new ways to get the products to customers, while also providing similar aspects of physical stores. For example, Warby Parker lets you choose five frames to be sent to your home. You try them on and send back the ones you don't like, simulating the whole reason people go into stores to try on glasses.
Creating Deep Connections With Diverse and Highly Engaged Customers is Key
If you've ever watched an episode of “Shark Tank,” you know that whenever a box-shipping, subscription-based company comes on the show, the investors talk about how low the customer retention rates usually are with similar brands. DSC is different because they've managed to maintain highly engaged customers, while creating connections through funny videos, creative newsletters and blunt, yet hilarious quotes on all razor boxes.
Humor Can't Hurt
You don't even have to go with humor, but a unique voice is bound to generate more engagement. Whether you're trying to let off a cool, funny or smart vibe, pick one and run with it.
Expect to See Similar Sales for Comparable Companies
Once the ice is broken, anything can happen. Some publications suggest that even though the purchase is five times the sales brought in by DSC, it wouldn't be strange to see a Unilever competitor like Procter & Gamble give a large offer to Harry's.
Raising Money for Subscription Companies is Becoming Harder
Investors state that accumulating interest for DSC was far more difficult than most expected. The reason? Because the market quickly became popular. Lots of companies were going under, and it was unclear which of them would succeed. So if you're in a subscription-based market, understand that your work is most likely going to be more difficult than that of another market.
Although the idea of receiving a huge sum of money is enticing (because this acquisition should open some sort of floodgate,) it's launching with a decent amount of capital that's the hard part.
Inspiration from the DSC Subscription Business Model
That Famous YouTube Marketing Plan
In the initial 48 hours of the guerrilla marketing campaign, around 12,000 users signed up for DSC. What's more is that the only other marketing they did was through Google Ads. Since Dubin has some connections he managed to produce a professional video for only $4,500. Don't think for a minute that the video was made overnight either. The connections were truly key here, since most experts say that it should have costed Dubin around $50,000.
Anyway, the point is that keeping costs low through any means possible in the early stages can work wonders, and it doesn't mean you have to skimp on quality. However, it also helps to create a marketing product so unique that people look at it over and over again.
Proposed Partnerships Could Lead to More
Reportedly, this all started with a simple dinner meeting between DSC CEO Michael Dubin and Kees Kruythoff, the president of Unilever’s North American operations. They hit it off and eventually talked about having Unilever as an adviser, investor or partner. That all turned into something completely unexpected, as they agreed to the largest ecommerce transaction to date. Basically, you never know where a simple friendship or dinner date could lead to.
Having a Diversified Selection Helps with Negotiations
Yes, DSC started as an inexpensive razor mailing company. But it has since expanded to offer various other products to bring in more revenue. For example, you can find items for male grooming, hair care, mens wash and skincare. It seems a little strange that DSC was bought for so much, since most people think of them as a one product company. However, that's far from the case. One would expect them to generate even more ideas for the future. In other words, DSC has shown that it can scale up without any problems.
Customer Data Holds Strong Weight in Negotiations
The New York Times, and just about every publication that wrote about the acquisition, states that one of the main reasons the purchase came through was because of the customer data and existing customer base. A company with fragmented customer data and low customer retention rates is not going to have the same pull as a company like DSC.
Want to Remain CEO? Be the Creative Face
One fear that all startup CEOs have is that they'll eventually be pushed out of the company by blood-sucking investors. However, in the case of DSC, both Unilever execs and the folks at DSC strongly supported keeping Dubin as the CEO.
Why?
Because Dubin has been the creative face for the brand from the beginning, staring in the YouTube videos, sending out personal newsletters and merging himself so nicely with the brand that it would seem strange to remove him.
Over to You…
If you have any thoughts about the acquisition of DSC by Unilever, feel free to drop a comment in the section below.
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