Gillette has dominated the razor business for decades. They have religiously followed a narrow strategy of adding new features and convincing consumers via advertising that they are worth the increased price. In the last three years Gillette has had some competition. It came in the form of low cost shave clubs and surprisingly, Gillette just continued to introduce new, pricier products; for example, a razor with a swiveling ball hinge that allows the blade to pivot. Its latest move was to file a patent application for a razor cartridge that heats up.
Pricing of these very sophisticated engineering tools from Gillette has gotten out-of-hand. For example, a four-pack of its Fusion cartridges carries a price tag of around $19.50.
Spotting a rising customer concern with high prices and over-engineered products, in 2013 a brand named Harry’s started selling low priced razors and blades online. The cost advantages were significant. For example, while refills from Gillette from its various razors range from $2 to $6 per cartridge, these new online offerings were averagely $.20 a cartridge. The introduction of Harry’s was soon followed by Dollar Shave Club and then by Schick. These three brands together had sales of $700 million in 2016 and that compares to Gillette’s 1.4 billion. Net, the three of them are half the size of Gillette at this point.
Finally waking up, Gillette recently announced that it would be lowering its prices by anywhere from 12 to 20%. The founder of Harry’s summarized all of this with the following quote “people trust that our pricing is fair. There is significant pent up frustration among guys that Gillette has been methodically over-charging them for decades.”
Very recently Gillette launched its own online razor offerings. It’s likely too late since for the past three years it has allowed Harry’s, Dollar Shave Club, and Schick to establish solid online franchises that are growing significantly. They have taught guys that shaving should not be as complicated or as expensive as Gillette has made it out to be.
Gillette made a huge mistake three years ago. It violated a core business principle. Namely, never let a competitor have a desirable feature that you also aren’t immediately putting in front of the consumer to stifle any of the competitors’ growth.
Surprisingly, companies often make the mistake of allowing competitors to get way out in front before they react. Blockbuster watched the development of Netflix for years, reacted very late, and went bankrupt. Blackberry watched the Apple iPhone provide a board set of apps while it stuck with its classic email machine and became irrelevant.
How many times does the business world need to be taught this basic lesson?