Mini-Case Study: Dollar Shave Club (10 points)

In an industry dominated by a couple of powerful incumbents, how has Dollar Shave Club raised its revenue to a whopping $200 million in just four years?

You should use Bloombergs article and the numbers enclosed (end of this document). You should select ONLY two views (from the Strategy Tripod). (Be concise and precise, 400 words)

These are the documents that should be used to answer the question: ( Figure 1 and figure 2 are taken as pictures and should also be used)

Bloomberg Article:

Why Unilever really bought Dollar Shave Club for $1B Bloomberg Video - July 20, 2016

Bloomberg Journalist:

What do you make of Unilever, a European Company, buying a shaving company?

Frederic Court (Founder of Felix Capital):

This is a big deal! Not just the amount!

This is a kind of thing that we havent seen much happening in Europe. This requires a huge conviction. It takes Unilever into the US, into a new market. That gives them a tremendous... huge skill, talent and assets.

We are going to see that any company will need to make their digital transformation. Unilever is one. But any large incumbent will just need to do that, buy assets that they cannot build themselves.

Bloomberg Journalist:

David, You made a point about saying earlier that a lot of investors did not want to invest into this company. Tell me about the initial speech and why might have turned initial investors off!

David Pakman (Partner at Venrock):

The commerce space is hard and tends to have low multiples. It does not attract as much capital as other segments in the tech markets.

What was different here is that this is a company with highly predictable revenue, tremendous loyalty and super strategic.

The traffic in physical stores is declining and we have over dependency on sort of legacy brands spending on TV ads where attention is shying away from and heading to mobile phones. So, in DSC we have a company that is expert in social marketing and really reaching consumers on the social channels where they tend to spend their time and a company in the direct to consumer business.

I agreed with your other guest. Many legacy consumer goods companies and many companies in general will have to become direct to consumer companies.

They have companies like Amazon on the rise...so getting this expertise is crucial

As an investor it was an easier decision for us as it fits a lot of our criteria that I just laid out here.

Bloomberg Journalist:

I remember when my husband started ordering razors from DSC. How can this company make money selling razors this cheap?

You refer to this company as a full stack consumer company. What makes this advantageous when trying to take on Amazon? What kind of companies can really take on Amazon?

David Pakman (Partner at Venrock):

Well, first this is a company that does make a number of their own products. They sell a lot of other stuff besides razors. They have got 27 different products... The majority of which they make themselves. They make products and market them directly and dont even use creative service agencies or Madison Avenue advertising agencies. They make their own creatives and then they acquire customers themselves, and they service customers themselves.

So we call it full stack. They operate every piece of the technology and every piece of the components to build the company and develop expertise in each of those layers.

In a lot of traditional companies, customers are actually retailers so they are good at blocking store shelves and dominating there...but that is a skill that is becoming of decreasing importance.

Bloomberg Journalist:

Do you think that DSC is a technology company?

Frederic Court (Founder of Felix Capital):

It is a technology-enabled company. Going forward, I think that every company will have to become technology-enabled.in every segment so all the CPG (Consumer Packaged Goods) Companies themselves will have to go through that transformation.

The biggest difference there is to be able to go directly to the consumers without having to go through retail. Unilever is essentially a wholesale business. They sell through retailers and there are two challenges there. One they lose a lot of margin doing this and the other one, you do not know your customers. By going directly to your consumers you have much better margin, you know them better and you can get back to them, retarget them and have that direct relationship.

Figure l: Figure l