Tam Pham Bang Le

ITS 380

Shin-Ping Tucker

September 20, 2019

Chapter 2: E-Commerce Business Models and Concepts

Case Study Ė Dollar Shave Club

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

Dollar Shave Club uses e-commerce business model that would allow customers to order razors and blades sent directly to their home for as little as $1 a month before shipping. Later on, Dollar Shave Club prioritizes unscripted customer service: real live people as opposed to automated systems and interfaces. The Club Pros are just one example. Even rank and file customer service representatives are trained to respond to customer queries in a playful way consistent with the company's brand. For many companies, customer service is a struggle, but for Dollar Shave Club, it's a strength.

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

††††† Dollar Shave Club allows customers to order razors and blades sent directly to their home for as little as one dollar a month before shipping, saving time a n d money while also undercutting Gillette to gain market share. The company's razors are made inexpensively in South Korea, and distribution was originally done entirely in-house. Cutting out retail outlets creates savings that the company can pass on to its customers. The company also wants to create a lifestyle brand as opposed to a simple delivery service, illustrating its contrast with the bigger brands. In the video, the founder highlights the selling points of his service, including the surprisingly high costs of razors at supermarkets and their many needless features.

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

††††† At first, Dollar Shave Club used subscription revenue model. The company offers its members razors and blades then charges a subscription fee for the membership. Experience with the subscription revenue model indicates that to successfully overcome the disinclination of users to pay for content, the content offered must be perceived as a high-value-added, premium offering that is not readily available elsewhere nor easily replicated. Thatís why subscription revenue model work for Dollar Shave Club.

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

††††† Dollar Shave Club is turning into a brand that inspires loyalty and engagement in its customers. The company maintains an assortment of perks for its members, including an online menís lifestyle magazine. the company rose to prominence using online-only videos to spread awareness of its brand to highly targeted demographics. Dollar Shave Club only needs to advertise to men, which they can do much more easily online than on television.

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

††††† Gillette also responded to criticisms that its products are overpriced by slashing prices across the board and launched a marketing campaign designed to bring back departed customers. They also sued Dollar Shave Club for patent infringement, but because Dollar Shave Club's razors are simplistic by design, they are likely to enjoy better protection from patent infringement than if they chose to make razors with distinctive features the way Gillette does.

 

Projects

1.      Y Combinator (YC) is Silicon Val ley's best known incubator. Y Combinator invites applications for its batches periodically. From the host of applications that are received, it selects some good businesses which are scalable and unique. Over a period of a few months it provides support to all the incubatees in the form of knowledge sessions, space, advice and mentorship from the leaders in the Industry. It also invests some money into the startup (earlier $14,000, now $1,20,000). In return it picks up a small stake in the company (equity). These companies are then either acquired or go on for an IPO, when Y Combinator sells this stake (makes an exit) for cash in the market. This is how they generate revenue. Twice a year, YC offers the founders of a select group of startups a three-month boot camp, complete with seed funding and mentorship from an extensive network of highly regarded tech entrepreneurs. The selection process is rigorous: there were 7,000 applicants for YC's Winter 2018 class and only 141 were accepted. Every boot camp ends with a day known as Demo Day or D Day, where each startup is given the opportunity to pitch its fledgling businesses to a group of wealthy venture capitalists hoping to unearth the next Facebook or Google. When companies are admitted to YC, they are given $120,000 in cash in exchange for a 7% stake in the company. Founders have regular meetings with YC partners and free access to technology, technical advice, emotional support, and lessons in salesmanship. As of March 2018, YC has helped launch over 1,585 startups, which together have a market capitalization of more than $80 billion. Fifteen YC alumni companies are worth over $1 billion, and more than 70 are worth over $100 million. However, there is more or less all the science behind it.

2.      The visions of many entrepreneurs and venture capitalists for e-commerce have not materialized exactly as predicted either. First-mover advantage appears to have succeeded only for a very small group of companies, albeit some of them extremely well-known, such as Google, Face book, Amazon, and others. Getting big fast sometimes works, but often not. Historically, first movers have been long-term losers, with the early-to-market innovators usually being displaced by established "fast-follower" firms with the right complement of financial, marketing, legal, and production assets needed to develop mature markets, and this has proved true for e-commerce as well. Many e-commerce first movers, such as eToys, FogDog (sporting goods), Webvan (groceries), and Eve.com (beauty products), failed.