The razor wars have begun and somebody’s going to get hurt
For decades, Gillette has defined shaving. But upstarts like Harry’s may be doing more than getting under its skin.
A MAN DRAGS A RAZOR over his face 1.7 million times, give or take. That’s 170 strokes a shave, 10,000 shaves in a lifetime. Shaving is a habit, a ritual, an obligation that unites elites and the masses. And for more than a century after patenting the first disposable shaving device, Gillette has been the standard-bearer in things that scrape away men’s whiskers. The South Boston-based company dominates the $11 billion men’s shaving market by pouring millions into research and development as well as marketing (especially digital) and by getting products placed on brick-and-mortar retail shelves. New product development focuses on the closest shave possible, “the best a man can get,” as its ads used to spout, to successfully get customers to pay more than $5 for a cartridge whose materials costs pennies. Its market dominance and fat margins enticed Procter & Gamble — the Cincinnati, Ohio-based multinational parent of Tide, Pampers, and other household names — to purchase Gillette in 2005 for $57 billion. As recently as 2010, Gillette owned 70 percent of the US market for razors and blades.
But now Gillette is in a domestic scuffle over men’s stubble. New brands like Dollar Shave Club and Harry’s have gained millions of customers by selling no-frills razors at a discount, shipping them to customers’ doors instead of Walmart’s shelves, and undercutting what they’ve framed as Gillette’s wallet-emptying razor-industrial complex. And Gillette has suffered nicks and cuts: By 2016, its share of the $2.6 billion US market dipped to 54 percent. The same year, Harry’s and Dollar Shave Club’s combined piece of the pie grew to 12.2 percent. Meanwhile, Schick — Gillette’s long-time also-ran (Schick’s market share is also down, to 15 percent) — just launched discount blades that fit Gillette’s Mach3 and Fusion5 handles.
THE FORCES UNDERLYING this upheaval have implications across the consumer packaged-goods business, a trillion-dollar industry encompassing everything from toothbrushes to cosmetics to clothes, and Gillette is hitting back on all fronts. In recent years, its lawyers have filed suits for patent infringement and violating confidentiality agreements against Dollar Shave Club, Harry’s, and ShaveLogic, a startup that has yet to introduce a razor. Gillette even attacked Harry’s by name, a startling move, in a December 2016 advertisement. Earlier this year, Gillette revamped its online subscription service and cut retail prices. In a battle over razors and blades, one of Boston’s iconic businesses is using every edge it has.
I’m standing in a darkened room wearing 3-D glasses, surrounded by Portuguese-speaking women and a bald, bearded man. “Take the glasses off if you feel nauseous,” says the man, Gillette’s “virtual reality technical integrator.” (He declined to give his name.) We’re in the razor maker’s virtual reality studio, a Winnebago-sized space inside Gillette World Shaving Headquarters off Dorchester Avenue, a place seldom open to the general public. Its capacious 24-hour manufacturing center, where multiple hangars’ worth of automated machines turn spools of steel into billions of blades (Gillette won’t disclose precise figures), is off-limits to cameras, to prevent prying eyes from seeing proprietary technology. But I’ve been allowed to join a group of journalists from the Brazilian editions of Time and Cosmopolitan visiting on the occasion of Procter & Gamble’s 180th anniversary.
Our bearded guide toggles a control, and we’re barreling inside the handle of a Fusion FlexBall razor like we’re the submarine crew in a vaguely hallucinogenic Fantastic Voyage remake. VR lets Gillette’s designers get acquainted with a product in the making, watch how each just-so piece interacts with the rest of the assembly, and make adjustments, our guide says. “Single changes can lead to huge innovations,” he says.
Gillette’s 40-ish-acre campus sits on the same ground where in 1903 traveling salesman (and then Brookline resident) King Camp Gillette manufactured the first razor blades meant to be thrown away, and thus turned face pruning into a mass business. Not that lots of men weren’t already shaving. By the time he started production, younger generations had traded beehive beards for baby faces, and industries were issuing corporate mandates for stubble-free employees. “Shaving was strongly associated with a man who was prepared to work with the team, as it were, to be orderly, regular, and reliable,” says Christopher Oldstone-Moore, a historian at Wright State University in Ohio who wrote Of Beards and Men: The Revealing History of Facial Hair. But instead of shelling out 10 to 15 cents for a barber shave, or sharpening a strop razor every day, men now could get 12 blades for $1, to use with their $5 Gillette handle. Gillette said its system provided 400 shaves for less than a penny each. King Gillette had developed a business model — discount a pricey platform technology (the handle and head cost half a week’s salary for average American men at the time) and then profit from refills (the disposable blades) — that now drives inkjet printers, video game consoles, and Keurigs.
My visit to Gillette includes a lengthy explanation of the science behind lube strips, pivot heads, and stainless steel blades cut with gothic-arch tips — the technical minutiae of shaving the 10,000 copper-wire-strong hairs sprouting from the typical male’s face. Gillette invests hundreds of millions in research and development. And the three-bladed Mach3 (1998) and the five-bladed Fusion5 (2006), both released after thousands of shaving tests — at Gillette facilities in Andover, South Boston, and the UK — sold remarkably well. Five blades really are better than three, says Amy Couture-Rizzo, a lab-coat-clad product researcher at Gillette. The reason involves something called the hysteresis effect: The first blade pulls the hair out of the follicle when it cuts, and each subsequent blade cuts the hair a little shorter before the hair retracts beneath the skin. To illustrate, she shows video clips of razors slicing bristles like prime rib.
Such technical innovation has been a reliable deterrent to low-cost challengers before: After disposable plastic razors encroached on its turf in the 1980s, Gillette spent at least $200 million on the Sensor — the first razor with now-standard blade springs that allow each blade to move individually — and relegated other budget brands to the bottom-shelf hinterlands. By the 2000s, the company was thriving on customers trading up to its higher-end products. Incidentally, Gillette is the industry leader in women’s razors, too — during my virtual tour, I also glided through a three-dimensional Venus — but since women typically don’t make shaving a daily habit, it’s a much smaller industry, valued at $1 billion in the United States, $3 billion worldwide. Men dominate manual shaving, and it remained a reliably profitable business: In 2004, before the P&G acquisition, Gillette reported a nearly 60 percent gross profit margin.
Then along came Dollar Shave Club.
“OUR BLADES ARE [EXPLETIVE] GREAT.” Deadpanned by recreational improv comic and Dollar Shave Club cofounder Michael Dubin, that profane catchphrase highlights the Venice, California-based razor company’s very first commercial, posted to YouTube on March 6, 2012. Since then, the 93-second video has been viewed nearly 25 million times. Where Gillette promos are macho — for the Mach3, a fighter jet accelerates until it shears apart and the pilot morphs into a lathered-up model — Dubin is goofy. He wanders through a warehouse full of cardboard boxes and a dancing bear, lampoons esoteric technology and celebrity endorsements, and gives his elevator pitch: razor blades shipped to your door for as little as a dollar per month.
Within two days of uploading the video, Dollar Shave Club gained 12,000 new customers; today, it has more than 3 million. Dubin’s pitch would not have worked even 10 years ago. He and his partner would have had to invest tens of millions in building a factory (he buys blades from Dorco, a South Korean manufacturer looking to expand its US sales). He probably would have had to spend even more on advertising and space on retail shelves. And who wanted to pay shipping and handling for a $1 item? But in a post-Amazon Prime world, subscriptions mean companies can negotiate bulk shipping rates, making it feasible to sell and ship single cartridges for as little as 60 cents.
Gillette, then, is facing the same digital crucible that is giving consumers options like Blue Apron for cook-it-yourself meal delivery, Warby Parker for eyeglasses, Boka for toothbrushes, Casper for mattresses, and countless other e-tailers selling shoes, cosmetics, children’s clothing, underwear, and luggage. These companies can offer subscriptions as well as one-off purchases and, by virtue of selling direct instead of going through stores, gather valuable data about their buyers’ habits. As shopping shifts from malls to smartphones, giant markets are experiencing new competition, says Ken Cassar, an analyst at e-commerce market researcher Slice Intelligence. “There were a bunch of people thinking, ‘If we can just take one percent of this market, it could be extremely lucrative for us. And how hard could it be to take a percent?’ ”
Meanwhile, younger consumers are more willing to try new brands and increasingly skeptical of legacy products, says Lauren Lieberman, an analyst at Barclays. And they’ll settle for good enough, at the right price. These factors are major reasons why Procter & Gamble, Gillette’s parent, went through a 2015 restructuring, bringing in a new CEO and cutting more than 100 of its brands (it still has about 65). There are even calls for the venerable consumer goods company, whose stock is one of the 30 tracked in the bellwether Dow Jones industrial average, to break itself up, creating smaller companies that might be more nimble.
Had it been free from P&G’s lumbering management structure, Gillette might have been more aggressive about fighting its new rivals, says Ali Dibadj, a consumer products analyst at the research and brokerage firm Bernstein. “Frankly, Gillette should have taken out Dollar Shave [Club] in year one,” Dibadj says. To hear analysts tell it, Gillette’s response to Dollar Shave Club and its low-cost peers — Harry’s, Bevel, ShaveMob, and a litany of others — was a dismissive institutional smirk.
John Mang, global vice president of Gillette and The Art of Shaving (a store and spa also owned by P&G), admits that his brand was “slow to the online game.” He points out, though, that Gillette made blade subscriptions available through Amazon in 2007 “before Dollar Shave Club ever launched,” but customers hesitated. Still, even when it started the Gillette Shave Club, its online subscription service, in 2015, its core argument was the same old saw: Our blades cost more but last longer than those of the cut-rate guys. That strategy was no longer cutting it.
HARRY’S, THE COMPANY THAT SEEMS to give Gillette the worst razor burn, was inspired in 2011 when Andy Katz-Mayfield, a Brookline native and Stanford MBA then living in Los Angeles, stopped at a drugstore for razor blades on his way home from work. First, he tried to find a clerk to unlock them from a case. (“I wasn’t in some high-end jewelry store shopping for diamonds,” he says.) Then he glimpsed a big-brand package with a razor blade flying over the moon and felt infantilized. Finally, he paid about $25 for four razor cartridges and some shaving cream. “It was a feeling when you know you’re getting taken advantage of, when you know you’re getting ripped off,” he says.
He gave the razor blade aisle a closer look and imagined alternatives for a clean shave. In 2013, together with Warby Parker cofounder (and Wellesley native) Jeff Raider, Katz-Mayfield launched Harry’s. Ken Cassar, the Slice analyst, says New York City-based Harry’s splits the difference between Dollar Shave Club and Gillette, claiming higher quality than the former at lower price points than the latter (Harry’s cartridges sell for about $2 each). Its aesthetic is central to the approach: If Gillette’s razors look like Formula 1 cars, Harry’s handles, all flat colors and muted, convex curves, look more like tobacco pipes with a blade instead of a bowl.
Soon after it launched, Harry’s received an order from 1 Gillette Park worth “hundreds of dollars,” Katz-Mayfield recalls. (“It was noticeable because most of our orders at that stage were, like, fifteen dollars,” he says.) Gillette sued Harry’s for patent infringement but quickly withdrew the lawsuit.
Harry’s in 2014 spent $100 million to purchase a German razor factory, making it one of the few razor companies to own a manufacturing facility (Gillette has at least five). This gives it greater control over design and production. Last August, Slice Intelligence reported that Harry’s was growing even faster than Dollar Shave Club. (Harry’s now claims 3 million customers, up from 1 million in 2015.) That same month, Harry’s arrived in nearly 1,800 Target stores, elbowing in on Gillette’s brick-and-mortar bread and butter.
Then, in December 2016, Gillette went on the offensive again, attacking Harry’s in a 30-second ad — to the Welcome Back, Kotter theme — that claimed most Harry’s users defect from the service, recited grievances from past users, and offered deserters (from Harry’s and other shaving clubs) a free razor.
On its face, Harry’s was a peculiar target to call out by name, since the ad aired just months after Unilever — P&G’s global archrival — purchased Dollar Shave Club for $1 billion. “We take all competition seriously,” John Mang says. “The idea was we were seeing — from Harry’s and from a lot of these online competitors — a tremendous amount of trial, a tremendous amount of press, and we also saw a lot of guys had tried these things. I think a lot of guys will try anything once, but a lot of them were coming back to Gillette.” After the commercial aired, Harry’s sent Procter & Gamble’s chief legal counsel a somewhat tongue-in-cheek letter accusing Gillette of false advertising: Harry’s says of 375,000 potential customers who signed up for its free trials between May 2016 and October 2016, about 81 percent bought additional products.
In March, Katz-Mayfield and Raider spoke at an industry conference, where they framed their clashes with Gillette as a David-and-Goliath battle, alleging that Gillette paid for negative testimonials and ripped off their website design and that Gillette’s price cuts were evidence that Harry’s business model unnerved Big Razor. They also emphasized something other than price. “It’s not about two dollars a blade or three dollars a blade or four dollars a blade,” Raider said. “It’s emotional. It’s about making customers feel like they’re being treated fairly, like they’re getting a good deal.”
That’s not how traditional consumer products companies talk. “The whole history of consumer packaged goods in the United States has been to ‘innovate,’ charge more, and convince the consumer it’s a better product,” Ali Dibadj says. But take Gillette’s Fusion ProGlide FlexBall razor: Its practical innovation is that it cuts hairs 23 microns shorter than its previous iteration, a difference of half the width of a human hair.
I ask Katz-Mayfield if the rise of good-enough razors means innovation is obsolete. Product quality is still important, he says, since “you are literally taking a knife to your face.” But, he adds, razor brands have to find other ways to advance beyond micron-sized changes in the product itself. “I don’t think that innovation is going to somehow stop or cease. It won’t just be product changes like adding more blades and getting closer by a few microns. This could mean changes in packaging, the customer journey, or the way brands interact with their customers.”
JOHN MANG HAS A MESSAGE for critics of Gillette’s price points. “Frankly, I think some of it’s deserved,” he says in a conference room inside World Shaving Headquarters. “When you’re in a situation where you have such a large portfolio of products but you only focus on the really top end, at some point I don’t blame guys for having the perception that Gillette is only selling the most expensive razors on the planet. . . . That’s something I take responsibility for, and that’s the reason why we’ve changed our strategy.”
Along with retail price cuts averaging 12 percent — Gillette has dropped the MSRP of a Fusion cartridge even more steeply, from $4.99 to $3.74 — Gillette rejiggered its online shave club for the May launch of Gillette on Demand. The service’s subscriptions ship at intervals from one to six months (and ship every fourth order for free), and customers can also order several types of its razor blades a la carte by texting the word “BLADES” to a specific number. “Guys want to be able to get blades wherever and whenever, and that’s one big void we’ve worked really hard to fill over these past couple years,” Mang says.
In brick-and-mortar retailers, Gillette has unveiled new packaging to highlight the technical differences across its product line. Back in South Boston, it’s investigating the less-explored frontiers of men’s shaving — think armpits — and countering perceptions of it as overpriced by introducing improvements to blades across its portfolio.
Top-end innovation isn’t dead, either. “When you can sell 40 million new FlexBall handles globally in one year” — 2014 — “that to me says on our most premium range of razors that innovation can still drive a lot of excitement,” Mang says. Even so, P&G’s April earnings report showed a 6 percent drop in grooming products revenue, though the numbers don’t reflect the new price cuts or Gillette on Demand.
For all the burdens facing traditional consumer packaged goods companies, there are also advantages to the old school. Gillette is the largest and most efficient maker of razor blades, giving it design control that Dollar Shave Club doesn’t have and the ability to fight a price war if it wants. Gillette can draw on a worldwide distribution network, a customer base of 750 million men, and almost 65 percent of the world’s razor market. Internet startups pose a threat only in the United States, at least for now, though Unilever could bring Dollar Shave Club into other markets. Meanwhile, for all their growth, it’s unclear whether Dollar Shave Club or Harry’s is profitable.
Lauren Lieberman and Ali Dibadj remain skeptical of Gillette’s long-term trajectory but encouraged by its latest moves. “Procter & Gamble, over many decades, has been the gold standard in brand building and speaking to consumers. It would probably be foolish to ever count them out,” Lieberman says. A P&G breakup might even give Gillette new resources, specialized personnel, and entrepreneurial spirit to focus on its product category, Dibadj says, adding, “I think it [would be] positive for Boston and the brand.”
Before I walk out Gillette’s angled doors, a spokesperson gives me a top-of-the-line Fusion ProShield (suggested retail price for the handle, $11.99), featuring lubrication strips on both sides of the blades to reduce irritation. I bring it home and place it next to recently acquired Harry’s Truman and Dollar Shave Club Executive razors. I rarely shave — I wear stubble or a beard year-round, running hair clippers over my face once a week like a heathen, shaving only when I need to appear orderly, as when interviewing a Gillette executive — but I’m experimenting with each. The gray hairs are creeping in, and I want to see for myself whether “the best a man can get” is enough to justify the price.