NEW YORK — At 6:15 in the morning on March 6, 2012, Michael Dubin woke up and checked his computer. He was puzzled by what he saw — actually, by what he didn’t see. Before going to bed, he had posted a video about his startup, a company that virtually no one had ever heard of.
But his venture’s website wasn’t working. Even though everything had been set the night before, the site had crashed.
So he hopped into the shower before heading to sort things out at the cramped office he shared at a startup incubator with other entrepreneurs who couldn’t afford to rent space themselves.
Dubin was 33 years old. He was at this point an unsuccessful — well, failed — entrepreneur.
A few years earlier, after the financial markets’ meltdown, he had been laid off from a digital marketing job at Time Inc.’s “Sports Illustrated Kids” and applied to Columbia, New York University, UCLA, and a few other business schools to get an MBA, but he was turned down. By all of them.
His family and friends wondered if he’d ever find something he was both good at and liked.
Now Dubin was working on his most ambitious idea yet. Or perhaps quixotic would be a better word to describe it.
His startup was named Dollar Shave Club. It would take on Gillette by selling blades — purchased from a South Korean supplier at just half the price of Gillette’s. He had already spent more than a year’s time on it, but the business had gotten off to a slow start.
What happened the morning of March 6 would change that, thanks to his startup’s one-minute, 33-second video.
The good news was that the video was going viral, and a whole lot of people had been watching it. The bad news was so many people were trying to watch it that the computer server was crashing at times, or sluggish when it worked.
What he didn’t know at the time, what no one knew, was that the humorous video would humble one of the most dominant consumer companies in the annals of American business. Painstakingly written and rewritten over months, and then shot in a single day at a cost of just $4,500, it became an instant classic, thanks to a now famous punch line: “Are the blades any good? No,” he says with a deadpan delivery, pausing briefly before adding: “Our blades are [expletive] great!”
Against all odds, Dollar Shave Club would go on to succeed wildly, with annual sales approaching $200 million when it was acquired by Unilever for $1 billion in 2016.
Dubin helped usher in a business model for 21st century entrepreneurs to take on previously unassailable consumer brands: Technology had the potential to change the world of physical goods and the way brands are created.
By targeting a corporate giant’s weakness — high prices or inconvenience or a stodgy image — a clever startup with the right strategy, the right message and the right product value could create a new national brand virtually overnight. All this was happening at a time that more consumers in their 20s and 30s were up for grabs. They lived digital lives, so were accustomed to — happy to! — buy things online.
Not long ago, it would have been difficult to imagine that a startup company could take significant sales from Gillette, a giant Boston-based global corporation that had long controlled 70 percent of the country’s sales of razors.
Astonishingly, Dollar Shave Club and Harry’s, a rival launched a year later, have done just that. By 2018, the two startups together had grabbed nearly 14 percent of US razor blade sales.
The direct-to-consumer brand revolution is one of the most dominant forces in the retailing business today. It began with a handful of startups, then grew to dozens, then hundreds — from mattresses (Casper) to bras (ThirdLove) to electric toothbrushes (Quip) to vitamins (Ritual) to tampons (Lola) to luggage (Away) to sneakers (Allbirds) to makeup (Glossier) to hair color (eSalon) to pet food (Farmer’s Dog) — and even thousands, counting the brands filling the endless digital aisles and shelves of Amazon Marketplace.
Entrepreneur Jeffrey Raider has observed the brand revolution from a front-row seat. He started not one but two direct-to-consumer unicorns before he reached his mid-30s.
He cofounded Harry’s in 2013 and sold it to Edgewell for $1.37 billion six years later. Earlier, he had cofounded Warby Parker, which is worth $1.75 billion.
Harry’s and Warby Parker, along with Dollar Shave Club and many of the other new successful direct-to-consumer brands, share a strategy: Each saw an opening to challenge entrenched market leaders with quality products at a much lower price.
In Raider’s view, however, what catapulted each to become a billion-dollar brand is an obsession with connecting with the customer. Everyone who joins the staff of Harry’s, no matter what the job, has to spend a day working in the call center as part of the customer experience team.
Yet Raider understands that the proliferation of startup brands has fragmented the consumer product business, and that could make it harder than ever to create mass brands in the mold of Serta or Victoria’s Secret or Gillette.
In the old world, once a popular mass-market brand was established, it could count on a long reign.
In the new world, this is no longer true. Brand loyalty is declining as never before. One report on the 100 top consumer product brands found that 90 percent had lost market share in recent years.
The decline in brand loyalty, of course, has helped power the rise of the new direct-to-consumer brands
This development hasn’t gone unnoticed by Neil Blumenthal, another founder of Warby Parker.
“It’s never been cheaper to start a business, although I think it’s never been harder to scale a business,” he says. Warby Parker is the most prominent new eyewear brand, but its market share is still less than 5 percent. And in the years since it sold its first pair of eyeglasses, in 2010, other startups have launched well over a dozen new online eyeglass brands.
Many of the newcomers are copycats with essentially the same business model as Warby Parker, but others are niche players, such as Lensabl, which will make prescription lenses for your frames so that you don’t have to buy new ones — “Our Lenses, Your Specs” — or Pixel, which sells eyeglasses with a pigment in the lenses, so they filter out “blue light” from computer screens, which can cause eye strain; or Topology, which makes frames custom-fitted to your face using an iPhone’s 3-D scan technology.
How many of these startups will succeed?
To some, the constant influx of new entrants offering eyeglasses and other products underscores that the direct-to-consumer frenzy has elements of a bubble — much like the dot-com boom of the 1990s, with venture capital firms financing rival brands that are chasing the same customers.
But while not all will survive, it’s possible that many will.
The good news for brands, new and old, is that the market for consumer products isn’t just tens of billions or even hundreds of billions of dollars a year, but several trillion dollars a year in the United States alone.
That leaves plenty of room for startups, with the most successful ones joining the billion dollar brand club. After all, they could be a $1 razor blade and a one-minute, 33-second video away from making it happen.
This was adapted from “Billion Dollar Brand Club: How Dollar Shave Club, Warby Parker, and Other Disruptors Are Remaking What We Buy,” which will be published Jan. 28 by Henry Holt and Co.