The Dollar Shave Club isn’t available in the UK just yet. But it will be soon, surely, after Unilever’s blockbuster deal, worth a rumoured $1bn (or 30 billion shaves, as the subscription-based razors and personal grooming service might put it).
Unilever’s move is intriguing to say the least. First in pitching it against Procter & Gamble, its arch rival in so many other categories, in the lucrative razor-blade market.
Second, in taking Unilever into e-commerce on a scale it’s never previously entertained, potentially transforming it at a stroke into a significant global e-commerce player.
Unilever has, until now, made only small-scale strategic investments in e-commerce, most notably taking a stake in Gousto, as well as opening a web shop selling Maille mustards. That contrasts most obviously with the strategy of Procter & Gamble. After taking a stake in Ocado several years ago, it’s been much more aggressive in the direct to consumer space, most notably launching the pgshop.com site in the US and Germany. It’s also forged a close relationship with Amazon and has been at the forefront of the rollout of its Amazon Dash button. And it’s launched… the Gillette Shave Club.
But it’s probably Nestle more than P&G that’s provided Unilever with the inspiration for this acquisition. Anyone who’s seen how successful Nespresso has been will know how powerful a concept so-called ‘disintermediation’ (or cutting out the middleman) can be if you have the right offer and the right execution. And seeing how disruptive Dollar Shave Club has already been in the US, with the hilarious video by founder Michael Dubin going viral, supported by a slick back end operation, to generate $200m in sales, the Persil, Marmite and Magnum giant is hoping to take the operation global, while boosting its footprint in the fast-growing male grooming category.
It will be fascinating to see if Unilever continues to market the service in the same daring, cut-the-crap manner that made it so successful. Will Unilever try to bolt on sales of other personal care products, like Dove and Lynx, for example? Like so many other corporates, Unilever’s record integrating entrepreneurial businesses is mixed (cf Ben & Jerry’s for example).
Some commentators have declared Unilever is on the road to becoming ‘an e-commerce company’. Such predictions should be taken with a pinch of salt. No question disintermediation could dramatically empower Unilever in the supply chain, but not necessarily in a simplistic ‘cutting out the middleman’ way.
Although selling razor blades direct could see Unilever grab a lot of market share, in most cases a supplier active in direct-to-consumer selling will still rely on traditional retail relationships for the bulk of its sales, particularly a large, diversified player like Unilever, that works with retailers across a range of categories.
But armed with valuable first-hand data and consumer insight from its D2C ventures, there’s no question Unilever can approach these relationships – as well as product and brand development – with far greater confidence.
What’s more, a growing number of consumers use online to research their purchases. That means a well-developed e-commerce presence is part of how consumers experience a brand – and can pay off for suppliers even if shoppers ultimately choose to still buy in store.
Unilever won’t be the last fmcg giant to realise that in 2016 innovation doesn’t just mean new product concepts and marketing ideas – new routes to market, too, have to be part of the innovation pipeline.
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