Gillette Jumps Into The Subscription Economy

By Aarthi Rayapura August 19, 2014

DSC

Sam

By Samuel Cravens

In 2012 Michael Dubin, the founder and CEO of Dollar Shave Club, posted a now-famous YouTube video. His company received over 12,000 orders in 48 hours before their servers melted down.

 

Soon afterwards, Proctor & Gamble  (the parent corporation of Gillette) said that it wasn’t worried about the Santa Monica startup. After all, they controlled over 60% of the estimated $12 billion dollar razors and blades market.

 

Today Dollar Shave Club has over 800,000 subscribers, and is slated to run over $60 million in annual revenue. It ships over 5% of all razor cartridges sold in the US. Nielsen also notes that retail razor cartridge sales have fallen 10.6% in units and 5.3% in dollars over the past year.

 

Cue the arrival of Gillette’s new subscription plan, which claims to offer razor subscriptions for a dollar a week (the math is dependent upon how often you replace your razor). Buyers are directed to P&G’s eStore to obtain discount subscription offers at popular vendors like Amazon, Soap.Com, Sam’s Club and Target.

 

It’s a clever approach that offers subscription-box convenience while also leveraging P&G’s substantial retail channels. So now a three year-old upstart is now competing directly with an established multinational manufacturer. That was quick!

 

Even if  this is a reactive move, like Apple’s purchase of Beats for its music subscription service, it’s still a smart pivot. Why? Because Proctor & Gamble isn’t just responding to a new competitor, but a sea change in consumer shopping habits.

 

Consumers today have new expectations. They want products and services that are innovative, reliable, mobile, and customizable. The winners of this new world, like Spotify, offered what iTunes couldn’t — an engaging subscription experience.

 

Gillette, the inventor of the “razor blade business model,” is now competing directly against a recurring revenue-based disruptor. These are interesting times.

Welcome to the Subscription Economy, Gillette!

 

Upcoming Webinar: The Subscriber Decision Journey