RE: What’s special about Dollar Shave Club? 3 Concepts explained

Background

Nine years ago, Gillette and other dominating brands in US shaving industry wouldn’t have imagined that, a random conversation at a party would spark an industry-disruptive brand that is now valued over $1billion and taking up 8.5% of the market share[1].

Our society has shaped norms throughout history that expect men to remove facial and body hair as an indication of civilization, this custom secures steady demands for razors use. Companies like P&G are in the frontline of product innovation, making functional razors with over 4000% markup, yielding lion’s share of the market[2]. However, after they discovered the profitability of making razors into “two-stage” product, they started to intentionally encouraging consumers to replace blades more often than needed and design their products to be more exclusive to blades of their own.

What’s special about Dollar Shave Club?

1. A brand experience that exceeds category expectation, starting from customer empathy: When the industry is getting comfortable with “tricking” people to buy more blades and over complicated razors, they seem to be no longer on the side of consumers but distancing from them. DSC founders started with their own struggles of shopping for blades and carefully designed a brand experience that deliberately think for consumers. Following their “Shave Money. Shave Time” tag line, DSC priced their products 2 times cheaper than Gillette (even though their manufacturing cost is slightly higher) and adopted D2C approach to design a shopping experience that asks for only a few clicks on the website.

2. Conquer the emotional territory of consumers: Instead of trying to sell consumers on functional aspects like stubble reduction, Dollar Shave Club managed to build emotional ties with consumers by creating sense of belonging, entertainment, and simplicity. From product packaging with catchy phrases, beautifully designed website to creative YouTube videos, DSC has not only turned being their club members into a smart deal but also a cool thing to do.

Break the Double jeopardy rule: High customer retention rate through subscription-based model: DSC introduced a subscription e-commerce model which send monthly packages directly home with new razors, blades, and other body care items. Although DSC is still not a major player in terms of totals sales, DSC wasn’t trapped by the double jeopardy rule and has achieved an extremely high retention rate. Data shows 50% of DSC members will remain as subscribers even after 12 months[3]. As the store-less trend is catalyzed by the pandemic and more people transits to an online shopping experience, it’s likely that DSC will have a significant grow in their customer base and remain an attractive brand for people to repurchase.

[1] Alexandra Olson, Chicago Tribune, Retrieved from: https://www.chicagotribune.com/business/ct-biz-harrys-razor-schick-purchase-20190509-story.html

[2] Anderson,Kollenz-Quetard,Tavassoli, “Dollar Shave Club: Disrupting the shaving industry”, London Busniess School

[3] Nikhil Basu Trivedi ,”The secrets behind follar shave club’s billion dollar success in one graph” Retrieved from: https://www.zuora.com/2017/05/31/secret-behind-dollar-shave-clubs-billion-dollar-success-one-graph/

October 22, 2020

Background

Peloton, a fitness tech company founded in 2012 offers indoor high-end connected exercise machines and services and pioneered the U.S connected fitness products segment. Six years later, various companies have entered the market, among them, Echelon who sell similar products with almost half price of the total Peloton packages, has now grew into a major popular brand in the market.

What it would take for Echelon to match Peloton’s success?

1. Be more than “an alternative” through creating value

Foley founded Peloton with a compelling mission, solving the pain point of people who don’t have enough time for commuting to gym by bringing a similar motivating and professional experience at home for everyone at any time [1]. The company also poised themselves as a brand “sells happiness” [2]. Therefore, Peloton persuaded their audience that they are not a bikes or treadmill seller but a brand to make your life better. Echelon, on the other hand, does have engaging marketing content and high-quality products, but when people think of Echelon, they tend to associate the company as an alternative to Peloton when they don’t have enough budget[3], rather than something special. Echelon may learn from Dollar Shaves Club or Warby Parker who also offer cheaper products but explained why. With a 40% margin, excessive charging and $324 million spending on marketing, Peloton seems more like an elite-only brand and is not friendly to average middle class customers (this stereotype was enhanced via the ads in 2019). Echelon could communicate about how they offer affordable products that enables more people to pursue fitness and wellness.

2. Build up the instructor team to stick the community

Apart from Facebook groups, live-streaming achievement ranking, the most essential elements of creating a strong community for connected exercise machines users are the instructors. Peloton marketed their instructors as “quasi-celebrities in the indoor cycling world”[4]. Instructors are crucial because they trigger emotional ties of users with the brand. When the coach calling you name and cheering you up or attending a famous coach’s class you knew, people feel connected, which is an increasing mental need especially during the COVID-19 pandemic, according to a recently published Mckinney’s report[5]. Echelon was recorded to have only have of total instructors as Peloton, leaving them a huge missing puzzle to keep up.

3. Watch out for data privacy

With microphone and camera installed on the machine, sensitive data regarding health, location, etc, how does Peloton protects user privacy and security has been questioned. The data privacy is an ongoing trend that more and more people started to pay attention. Echelon may needs to be cautious about their approach and make their customers feel safe when using the service.

[1] Meghan Murray, “Best self or best company? Peloton searches for a voice” , University of Virginia

[2] Scott Mayfield, “Valuing Peloton”, Harvard Business Review

[3] Rick Broida, “I tried Echelon's $1,000 alternative to the Peloton bike. Here's what happened”, CNET

[4] Lauren Goode, “My two month ride with Peloton, the cultish, internet-conntected fitness bike”, theverge.com

[5] MCKINNEY,”Where do we go from here”

Warby Parker Case Study

Lan Tang

8 September 2020

While many believe that social impact and business are difficult to go hand by hand, Warby Parker has demonstrated a disruptive solution to connect this two together. In this case study, we are going to look at what specifically did Warby Parker initiate and how do social responsibility positively influence the company’s business success and vice versa.

Warby Parker’s moves fall under the following three aspects: environment, society, and governance. Their first contact lens product Scout launched in 2019 use 80% less packaging material than traditional brands.[1] The company also achieve carbon neutrality since 2011 when they started to calculate environmental footprint throughout the product life cycle and purchase equivalent carbon offsets. For the societal commitment, they have initiated buy 1 donate 1 model to ensure people in poverty to have access to affordable glasses. The company also collaborate with NGOs and launched cause-specific eyewear. Lastly, Warby Parker align the company governance with their core value by improving the personal and professional growth of their employees, even those stakeholders across the sea working in the frame manufacturing factories[2]. To sum up, from product design, production to operations, the company has tightly oriented the entire business lifecycle with the social mission.

After knowing what Warby Parker’s has done to inject social purposes to their business, let’s look into how these two elements interact with one another. The way business success impact purpose fulfillment is straightforward: without financial sustainability, institutions would have limited resource to practice any kind of social innovation. As for Warby Parker, their high quality and attractive products is the foundation of the investment capability on nonprofit partners.

Moving forward, how does social practices directly drive business growth? Through the case of Warby Parker, we find the answer key. That is the brand. When most eyewear companies are trying to persuade consumers on how great their products are, Warby Parker started with answering the “why” question and act from inside-out [3] : Warby Parker is not just a fashion eyewear brand, it is a company that carries the mission of increasing prescription access around the world. The way they achieve this goal is to make aesthetically-pleasing and low-priced glasses, create amazing customer experience and do good to the society. It is the strong social innovation beliefs embedded in their brand DNA that made Warby Parker differentiate from any other eyewear companies in the industry. The unique brand value automatically stimulates emotional connections with consumers and their people (employee). Two most important assets for their business success.

Companies embarked their journey with a higher purpose will create more compelling brand values, which in return generate greater customer’s empathy and employee engagement, and eventually become the drive force for business success. This is the takeaway from Warby Parker.

[1] Ann-Marie, “Warby Parker roses out scout, it’s first contact lens brand”, ADWEEK, November 19, 2019

[2] Christopher, Laura, “Warby Parker: Vision of a ‘Good’ Fashion Brand”, Harvard Business Review, July 7, 2014

[3] TED, “How great leaders inspire actions”