Dollar Shave Club made major headlines this month thanks to a catchy video and a solid promise: high-quality razors delivered to your door for just a few bucks a month. But is the deal from this scrappy start-up as clear-cut as it seems?
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The video soon went viral, flooding the Santa Monica, Calif.-based firm with thousands of orders, according to a report in The Wall Street Journal. It also garnered CEO Michael Dubin plaudits for being a market disrupter. But I decided to do a little digging into Dollar Shave's unconventional approach to selling razors in an era when Americans are plenty fed up with high prices and poor service. It began with Dorco. That's the South Korean company known by razor aficionados for its well-made blades.
At Dorco's website, you can purchase razors that look remarkably similar to those offered by Dollar Shave -- but with a catch. In order to get the best deal, you need to make a bulk purchase about the size of a Kleenex box. Consider: The highest-end Dollar Shave Club razor is "The Executive," with six stainless-steel blades, lube strips and a pivoting head, runs $90 over 10 months (razor plus 3 catridges per month). Dorco sells a six-blade model with the same features, the SXA1000. Buying directly from Dorco, a 10-month supply -- the razor plus 30 cartridges -- costs just $28.66. (Since there is a $25 minimum for free shipping, you'll need to store all those cartridges in your house for several months.)
Dollar Shave Club Wins Fans, Takes On Big Brands5:48Dollar Shave Club, a recently launched online-razor seller, bet big and has a made a big impression with a comical video starring its CEO Michael Dubin. Mr. Dubin and WSJ's Emily Glazer join us on Lunch Break to discuss the strategy and how well it has translated to the bottom line.
In fact, Dorco appears to be the supplier for most of Dollar Shave's blades. Ken Hill, president of Dorco USA, said his firm sells Dollar Shave Club the four- and six-blade razors that are used in its packages, but not the Dollar Shave's two-blade option.
In an interview, Dollar Shave CEO Dubin told me he "could not confirm or deny" that many of his company's razors come from Dorco. Asked why customers should join the Club when they can buy razors directly from a company like Dorco -- for as much as 75% less -- Dubin said his service offers greater "convenience." "Are there similar razors out there? Sure. But our goal is to create value." I pointed out that I can get the Dorco razors delivered conveniently to my front door, too. "Not once a month," he said.
Aside from price, some Dollar Shave Club customers are questioning the service's reliability and billing practices. On the company's Facebook page, between the raves and the woots, are persistent complaints from clients upset that Dollar Shave took their orders, but now says blades won't be delivered until May 15.
In messages posted on its Facebook page, Dollar Shave Club apologized for the delays, saying that the company's customer service reps were "a little back-logged" with thousands of orders due to the "overwhelming demand." Yet, the company has charged these customers in full, according to Dubin, for holding their place in line. (According to Visa rules, transactions should be voided if the merchant can't ship the product within seven days. AMEX's policy is eight days, while Mastercard requires merchants to bill only when goods are shipped. Dubin said he wasn't aware of those policies.
Dollar Shave's struggles highlight an increasingly common problem for companies navigating the new world of social media. Most firms pray for a viral campaign success, but many aren't prepared for what happens next. Wise marketers know to put in circuit breakers. In 2011, Domino's limited winners of its Facebook game to one winner of a free $10 gift certificate every 60 seconds. This let the pizza chain exploit social media, while controlling exactly how much product they gave out. "Apple runs out of products. People have to wait for their iPads," says Dollar Shave's Dubin. "Every business is going to have challenges. We're not the first company to have customers unhappy with the product or unhappy with the service. And we're going to do our best to get better."
As a new business, Dollar Shave Club clearly has a few things to learn. For instance, earlier this week when I tried to order more than nine razor packs containing four cartridges each from Dorco USA, its site said they didn't have enough in stock. But unlike Dollar Shave Club, Dorco won't let me pay for razors until it has them on hand to ship. Dollar Shave Club would do well to take a note from Dorco in that regard. Hill said the six-blades have been very popular and the supply issues were unrelated to Dollar Shave Club's volume. Later in the week I was able to place more cartridges in my online cart at Dorco USA.
However, it looks like Dorco USA is also learning from Dollar Shave Club. It just launched greatshavingripoff.com, which takes stylistic cues from Dollar Shave Club: It has a cute lo-fi YouTube video, retro typography, and a narrative positioning itself as the David to the Goliaths of Gillette and Schick. The site drives sales back to the Dorco site, but there's no annual subscription plan required.
Ben Popken is the former managing editor of Consumerist.com.
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