Remember when you had to go out to the store and buy things you needed, like a mattress or car or TV and the only options you had were the ones the store had in stock. Yes you had the option of looking at their mail-order catalog but the idea of having to wait for something instead of having it right then-and-there was considered too big of an inconvenience. Yes, we Americans’ are lazy when it comes to buying. Amazon has changed all that – people don’t mind waiting a few days if it means saving enough money on what we wanted.
Companies that have been in the business for a long time are starting to see that their market share is slowly crumbling by small online companies that can offer half their rates. Why do you think stores like JCPennys and Sears are slowly going out of business. I used to be in those stores all the time as a kid and now I haven’t been in one in years.
One of the industries to be affected by disruptors is the shaving industry. Online stores like Dollar shave club and Bevel and Harry’s offer subscription services at rates lower than what someone would pay in-store. These services cater to men who are concerned more with their looks but want the ease of having to replace their blades all the time.
Here is how the system works. You can sign up for how frequent you need a new razor and they will ship you a package that include shaving gel, oil, and more depending on the level of subscription you get. For one dollar you can have a new razor sent to your house (don’t forget S&H of course) and for more fancy blades the cost goes up to $9 dollars a month. If you think about that compared to the average cost of 4 blades for Gillette’s fancy blades at $17 dollars for four blades you could easily spend $400 dollars a year if you have to buy two packs a month. If you don’t need so many than you are still spending $200 a year on shaving products. No wonder this a $6.1 billion dollar industry on men’s grooming products. For just $9 dollars a month you spend $108 bucks and when shipping is included, on average, $150.
The challenge behind a lot of this is that companies like Procter and Gamble and Unilever can not sell directly to customers since they have contract arrangements in place with retailers. Their business model is set up to work only with their retailers in order to gain market share. This is why small online companies that come in and sell directly to customers are able to cut their costs down and sell cheap. I will say that Procter and Gamble is trying an online service to compete with smaller companies but it is a gamble on their part.
Need a new mattress or frames for your glasses? There are now online companies that offer the same service and quality that you would pay for in stores but for half the price. Casper offers great prices where you can custom build your design and then have it shipped to your house. For many people they can easily save $500 bucks. Mattresses no longer cost $100 dollars anymore in case you haven’t been looking.
Another leading disruptor is frames for eyewear. Why pay those huge prices in the eye doctor’s store when you can just have an online company do them for half the cost. Warby Parker is one such company that is shaking things up for companies that have been using the same business model for years.
The next time you think about starting a company, think about what existing models are already out there and see how you can cut your costs. Remember if you decide you want to be on the shelves of Walmart and Target, they will want their cut of the pie as well so if you want to do everything yourself then you will need to find a creative way to get people’s attention. In order for Dollar Shave Club to do that they created a very entertaining video to watch that attracted over a million views to date and continues to be their way of marketing today.