The market for shaving wet razors and their blades is worth approximately 400 million per year in the UK. It was traditionally dominated by two producers, Gillette, and Procter & Gamble, with more than two-thirds of sales between them. When they merged in 2007, the result was very substantial market power. Wilkinson Sword was the next largest manufacturer, with around 18 per cent of sales. 

The market displays many of the characteristics we would expect of an oligopoly with high levels of advertising and strong branding. There is also evidence of on-going innovation; where once the twin-blade razor was a novelty, now five blades are the norm.

Yet, despite the barriers to entry presented by this dominance, a new player entered in 2008. The King of Shaves razor was launched on to the market, with a view to building on the success of the brand's shaving gels and foams. The company, KMI, worked for five years to develop a lower-cost, lighter-weight alternative to the products offered by Gillette and Wilkinson Sword.

It wasn't only its design that challenged the existing companies; its approach to marketing also differed somewhat. KMI has made much greater use of online advertising, email and social media than the incumbent firms. It launched an iPhone app in 2011 and has a website with hundreds of thousands of hits every month. It offers a number of innovations, such as a monthly subscription service, halving the price of blades. It has also worked very closely with large retailers on special offers from launch onwards, sacrificing early profits to build market share.

KMI's stated intention was to take 25 per cent of market share within five years of launch. This was described as highly ambitious by commentators at the time and proved to be the case. In that period it had to spend over 1m in legal fights over patents, and suffered an unsuccessful launch in the USA.

By the end of 2013, KMI had just 3 per cent, with sales of around 10 million. It did, however, have 9 per cent of the shaving products market, reflecting its origins in gels and foams. Given that, it is perhaps surprising that in January 2014 it announced that its new

foam-free Hyperblade was to be launched.

Gillette, in turn, had an 84 per cent share of the UK market for razors again, by the end of 2013. It has been estimated that Gillette makes a profit of 3000 per cent on each razor blade sold. The reason is that the cost of producing a razor blade is extremely low - a matter of a few cents at most. Once customers have bought a razor they are 'tied in' to a particular brand. The company therefore has something close to monopoly power.

It has proved difficult to break Gillette's market power, but KMI is not giving up yet.

Question: How has KMI sought to overcome these barriers, and what strategies has KMI focused on?

Question: High levels of innovation have been seen in the market for wet razors. Does this alway benefit the consumer?