If Gillette ever loses its dominance of the $2.4 billion razor market, it may trace the unwinding to the day a 33-year-old entrepreneur uploaded a cheeky — and cutting — critique of the Boston company's famous business model on YouTube.
For decades, Gillette sold its razor handles for a small price but charged much more for the blade cartridges that must be replaced after several shaves. Gillette also reinforced its ownership of the US consumer market with massive marketing and advertising.
But in 2012 Michael Dubin introduced Dollar Shave Club, a subscription service that sells a month's worth of razors for a few dollars, with a video in which he mocked Gillette. The commercial — and its memorably profane tag line — went viral on social media, and the volume of customer traffic crashed Dollar Shave Club's website within hours. In the first two days, roughly 12,000 customers signed up.
At the time, Gillette publicly brushed off the new company, saying it wasn't worried about losing business to such a small competitor. Subscription services had been tried before, Gillette sniffed, and had failed.
Yet Dollar Shave Club has continued to trim away Gillette's dynasty. Today, the company says it has 2.4 million members, and Dollar Shave and other competitors such as Harry's have become enough of a force that Gillette launched its own shave club earlier this year.
"With more men purchasing their blades and razors through e-commerce, it's critical that Gillette establishes itself as the online leader," Jon R. Moeller, chief financial officer at Gillette's corporate parent, Procter & Gamble, said in a recent earnings call.
And in what analysts said is a not-so-subtle admission that its competitors are shaving off some of its business, Gillette has aired advertisements that contend its more expensive blades are a better value because they are sharper and last longer.
"These smaller competitors are unimportant until they become important — that's where you're at right now," said Ali Dibadj, an analyst at Bernstein Research in New York. "These smaller guys are meaningful enough in the consumer purchasing cycle that they have to respond. This is a disrupter."
Even now, Gillette remains careful about how it acknowledges the competition, making only oblique references to Dollar Shave and Harry's in explaining why it launched its own shave club.
"It's a reaction to an opportunity to deliver more convenience" to customers," spokeswoman Kara Buckley said. "We also see that many guys aren't satisfied with other shave club razors. We think we owe it to them to let them know they can get a better quality shave with our razors via subscription if that's how they prefer to shop."
Dubin, meanwhile, said that it is "a huge compliment" if Gillette's shave club is a response to the popularity of Dollar Shave Club and Harry's. Executives at Harry's did not respond to requests for comment.
In October, P&G reported that net sales in its grooming business, which includes Gillette, Braun, The Art of Shaving, and Venus, fell 14 percent in its most recent quarter, to $1.7 billion, compared to the same period in 2014. Net earnings for grooming fell 16 percent. P&G does not separate out Gillette's shaving sales in its reports.
Analysts said that Gillette is trying to adapt to an e-commerce evolution that has changed the way men buy razors, blades, and most other consumer products.
For years, Gillette's Mach 3 and Fusion razors have dominated the shelves at retailers, making it nearly impossible for new companies to enter the market. Analysts said that lack of competition allowed Gillette to charge premium prices. Today, Gillette has 68.2 percent of the market for men's blades and razors in the United States, according to Euromonitor International.
But the rise of e-commerce has allowed competitors to bypass retail stores and deliver razors and blades directly to customers at much lower prices.
Dollar Shave Club, in particular, positions itself as a high-quality and less-expensive alternative to Gillette. The company says its customers are men of all ages who are fed up with paying high prices for shaving tools.
Sales of razors and blades online climbed 70 percent to $189 million from 2013 to 2014, according to Slice Intelligence, a market research firm in Palo Alto, Calif., and the figures are expected to grow this year.
Dollar Shave Club has more than doubled its membership in the last year. The company said its share of the US cartridge market also doubled in the same period, to 16 percent by volume.
"The way the Dollar Shave Club has been able to win is to say, 'We can provide the same products at less cost and more convenience to you,' " said Tim Barrett, a retail analyst at Euromonitor International. "This is a category that five years ago people would have said you couldn't even enter."
Meanwhile, Barrett and other analysts said customers have gotten tired of another classic sales technique: new shaving systems that cost more than their older-model razors.
Another challenge for Gillette: the millennial-aged male's current infatuation with beards.
Indeed, Gillette's shaving troubles may owe as much to cultural shifts: a generation of consumers who are reached by other technology channels, not just television.
"I just don't think [Gillette] saw the shift to social [media] the way many millennials and digital natives did," said David Pakman, whose venture capital firm, Venrock, invested in Dollar Shave Club after he saw Dubin's YouTube commercial. "Dollar Shave Club is a shining example of a company that is reinventing an existing category in by working directly with its consumers."
Dubin, meantime, said that Gillette's introduction of its shaving club has boosted his own business, as more consumers learn about subscription razor services. He said his company has gained a half-million customers since Gillette launched its subscription service in June. Revenue for 2015 is projected at $150 million, Dubin added, up from $65 million last year.
"Getting your grooming products shipped directly to your door on a regular basis makes things easier and more convenient," Dubin said. "Other companies have seen the positive reaction to our model and clearly want a piece of the success."
Each shaving club offers different features and numbers of blades per cartridge:
Gillette Shave Club
Classic: $16.99 for five cartridges
Advanced: $17.75 for four cartridges
Ultimate: $19.49 for four cartridges
*Prices at gillette.com
Dollar Shave Club
The Humble Twin: $3 for five cartridges
The 4X: $6 for four cartridges
The Executive: $9 for four cartridges