Case Study

1.       What is Dollar Shave Club's business model and how does it differ from its competitors?

Dollar Shave Club follow a B2C business model. It differs from its competitors on the following aspects:

-          Dollar Shave Club’s value proposition is fair price and highly customer-centric service. The company reduces the unfairness in razor price from monopoly by setting a cheap subscription, $1 for a month supply of razors and blades. The price is cheaper than the once largest shaving brand, Gillette in the US.

-          Market opportunity: Dollar Shave Club possesses more than 50% market on razor blades. They plan to achieve a market space in Europe. With the acquisition of Unilever, Dollar Shave Club does not face much financial difficulty in raising capital. The company instead focuses on vertical growth in online marketing and branding.

-          Revenue model: The company follows subscription revenue model. They allow customers to have razors and blades home deliver at a subscription fee of $1 a month. Dollar Shave Club cuts down manufacturing cost by manufacturing products inexpensively in South Korea and cuts out retail outlet cost by having an in-house distribution.

-          Competitive environment: Shaving product is not a competitive segment. Dollar Shave Club’s traditional competitor is Gillette, besides, Harry’s and other subscription-based business are their direct competitor. The company’s market position is the second largest shaving business in the US.

-          Competitive advantage: Dollar Shave Club gains first-mover advantage in shaving product subscription. They leverage the high customer loyalty and retention rate.

-          Market strategy: The company is opposed to automated customer service systems, they have real live people that helps customers out and can even make jokes. This differentiates with other online models and create a positive CX, thus, building a high customer loyalty. Dollar Shave Club builds a high commitment to the brand and its members, their customer base is loyal enough to become an individual ambassador for the company.

-          Organizational development: Dollar Shave Club has 300+ employees. They has been focusing on IT infrastructure, including CRM platform, marketing automation platform that sends out customer e-mails, and other customized applications for order fulfillment, telephone-based customer support, machine learning and data science.

-          The company’s management team is divided into functions and operations, including 2 co-founders, CEO, VP of Operations, VP of Product, Director of Engineering, Platform Services and Director of Mobile&Retail Product. Dollar Shave Club built out its executive team with a Chief Digital Officer, Chief Technology Officer, several other technology-focused executives, and a slew of new engineers

2.       What are the key elements of Dollar Shave Club's value proposition for consumers?

Their products are inexpensive, which easily gets a high market penetration rate. The company also

earns a high customer loyalty and retention rate.

3.       What revenue model does Dollar Shave Club use and why does it work for them?

The company follows subscription revenue model. It works because their service is inexpensive. They allow customers to have razors and blades home deliver at a subscription fee of $1 a month. Dollar Shave Club cuts down manufacturing cost by manufacturing products inexpensively in South Korea and cuts out retail outlet cost by having an in-house distribution.

4.       How would you characterize Dollar Shave Club's online business strategy?

It is a very customer-centric business strategy, which follows a common trend of today’s business, focusing on customer relationship.

5.       How have Dollar Shave Club's competitors responded?

Since Gillette lost their market share to 54%, they started to protect its position by launching Gillette On Demand service, which allows customers to order new razors and blades by text message, as well as receive every fourth order for free after three regular orders. Gillette claimed to offer price points that are competitive with Dollar Shave Club. Gillette also responded to criticisms; and add new features at no extra cost. They also sued Dollar Shave Club on copyright infringement.

 

 

Project:

1. Select an e-commerce company. Visit its website or mobile app and describe its business model based on the information you find there. Identify its customer value proposition, its revenue model, the market space it operates in, who its main competitors are, any comparative advantages you believe the company possesses, and what its market strategy appears to be. Also try to locate information about the company's management team and organizational structure. (Check for a page labeled ((the Company," "About Us," or something similar.)

Company: The Real Real

Customer value proposition: The Real Real is an online marketplace that allow people to sell pre-owned designer brand clothing, like Gucci, Rolex, Bvgari,… with 100% authenticity  and drives fashion industry into sustainability.

Revenue model: The company follows sales and subscription revenue model. As for sales model, they buy second hand clothing from consigners, do all the intermediate jobs such as promotion, sale, pricing, authenticity check and sell for profits. As for subscription model, their First Look subscription is priced at $10 monthly and it gives customers to early access to new products, sales, promotions; their Platinum subscription is an upgrade of the First Look one with a free shipping, it costs $30 monthly.

Market space: The company focuses on consigners of luxurious clothing, customers with an interest in luxurious fashion and supporting sustainability.

Competitors: Their competitors are ThredUp, a B2C e-commerce that sells selected secondhand clothing, and other C2C e-commerce such as Poshmark, Vinted, Ebay… Besides, on-site business like Buffalo Exchange, Earth Exchange, Crossroad trading, Wasteland.. are also big competitors.

Comparative advantages: The Real Real gains a asymmetry advantage. They gather and build a good relationship with their suppliers, AKA their consigners. Thus, they have a plentiful of luxurious clothing that are very well-selected and high quality. They also highly value authenticity, they have a team to ensure the luxury brand clothing they buy in are not fake. This allows customers to have unlimited choices and a complete trust in their products, which boosts sales and makes consigners stay loyal to the company.

Market strategy: They build a generous and supportive model to help consigning suppliers. Consigners who work with the company can earn up to 85% of each item’s sale price. From that, the company is able to have a big variety of items, penetrating a big amount of customers. The company also offers lots of discounts for new customers or friend reference in order to tap into new customers. They also promote themselves on reputable press such as Vogue, NPR…

Management team: The company executive team includes a CEO/Founder/Chairperson, Chief Operating Officer, CFO, Chief Technology Officer, Chief People Officer, Chief Revenue Officer, SVP Strategy&Growth Marketing, VP/Corporate Controller, General Counsel, Chief Product Officer.

Organizational structure: The company focuses a lot on operations and technology function.

2. Examine the experience of shopping online versus shopping in a traditional environment. Imagine that you have decided to purchase a digital camera ( or any other item of your choosing). First, shop for the camera in a traditional manner. Describe how you would do so (for example, how you would gather the necessary information you would need to choose a particular item, what stores you would visit, how long it would take, prices, etc.). Next, shop for the item on the Web or via a mobile app. Compare and contrast your experiences. What were the advantages and disadvantages of each? Which did you prefer and why?

For a traditional shopping, I would ask a shop associate to find out information on the item I want to buy. Usually, Best Buy is where I would visit for a camera. It will take me about an hour to get the item if it is in stock, otherwise, a week if I have to order it. The price is OK and Best Buy has price match policy, if I can find a cheaper camera elsewhere, BestBuy will offer that price for me.

For online shopping, I can get the product information through product description. I will browse through Google to find the best value offer. Best Buy does a good job in providing product information, other website, sometimes other businesses are not good at describing their products. I can also have personal help with chatbot/real people. Online shopping helps me save gas while being qualified for free shipping on a camera product. Online shopping is theoretically faster in the picking process, meanwhile having many options online is a big advantage, however, ironically, too many options takes customers longer to pick the most value camera. “Grass are greener” mindset makes us spend more time to compare products, adjust criteria. Other disadvantage of online shopping is the camera will not come to us right away, depending on the business, shipping takes about 3-5 days.

I prefer online shopping in this case because I do not need the camera right away and the internet allows me to do more research on the product I am looking at.