The $ Shave Club: Disruption in Action

Sometimes disruption happens right under your nose.  Take a look at the men’s razor blade category:

  • Needs to be continuously replenished.
  • Massive market.  Let’s call it 50% of the world’s population.  Maybe a bit less if you don’t mind facial hair.
  • Huge barriers to entry.  How can you get into this category?
    • You’re not just going to “up and build” a factory, it takes massive capital and expertise
    • Your also not going to unseat one of the established brands (Gillette) and their massive branding investment.  
    • If you could conquer these 3 barriers, you need to get the consumer to vote, which means you need access to distribution.  In CPG, that’s the health & beauty buyer at the retail chains.

So how do you gain a slice of an industry dominated by the 800lb Gorilla? 

  • Find a source of supply.  Nearly every category has Private Label & Contract Manufacturing supply.

  • Forget the middleman in the distribution chain, go directly to the consumer.

  • Build your own brand, unconventionally.  Use social media, be edgy, create stories.

  • Keep expenses LOW.  To the bone….

In other words, do everything DIFFERENTLY than the industry leaders do.

httpv://www.youtube.com/watch?v=ZUG9qYTJMsI

How do you know when the big guys are sleeping at the switch?  They begrudgingly acknowledge the up-start.  Then they immediately cling to their existing business model, defend it and ignore the very threat in the first place.

  • “We have products at those price points too!”
    • Maybe, but can I find them when 80% of the shelf space is covered with your more expensive stuff?
    • But you won’t deliver it to my doorstep will you?  Of course not, that would annoy the retail buyers wouldn’t it?

You see these types of up-starts more and more.  SODA stream comes to mind.

Sodastream

If Coke or Pepsi do not have a team figuring out how to buy and integrate this company into their model they would need their heads examined.  When I say “team”, I’m talking about a team of less than 10 people.  In an urban office, FAR away from headquarters, made up of strategic thinkers with minimal internal experience within Coke or Pepsi.

Sometimes experience is what prevents the 800lb gorillas from seeing a disruptive model.

Blinders off.  

Disruption lenses on.

http://online.wsj.com/news/articles/SB10001424052702303624004577338103789934144

Comments

  1. Such great points Sean, the young and the hungry! LOVED your post, couldn’t agree more with the sentiment that the big corps have developed a real sense of entitlement, taking the very customers that got them to the dance, for granted. Well done! I think I’m going to give $ shave club a whirl, razors are such a rip-off!

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