Moneybox

Why Unilever Thinks Dollar Shave Club Is Worth $1 Billion

Watch out Gillette, Unilever just made a big move.

Jodi Hilton/Getty Images

On Tuesday, consumer-goods giant Unilever announced it had purchased Dollar Shave Club. The reported price for the 4-year-old razor subscription service is $1 billion—about five times the projected 2016 revenue of the company. That price tag may sound steep, but Unilever—the company behind such everyday retail brands as Dove and Axe—is buying a lot more than razors. It’s buying its way into the growing subscription model, which sidesteps brick-and-mortar retail—and it’s buying Dollar Shave Club’s 3.2 million subscribers.

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Razor subscription services, in particular, have been popping up over the past few years; Dollar Shave Club’s main competitor is Harry’s, which was founded in 2013. That’s left Procter & Gamble, the makers of Gillette, playing catch-up. According to Euromonitor, P&G’s share of the shaving market fell from 71 percent in 2010 to 59 percent last year. That might explain why the company is finally entering the game—albeit a little late—with its own mail order outfit, Gillette Shave Club. P&G already competes with Unilever in the U.S. shampoo and deodorant market; now the two companies have opened a new front for competition.

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But as much as Unilever and P&G are competing to sell you every single one of your toiletries, they’re also eyeing another competitor: Amazon Prime. P&G is even launching other services to compete with Amazon’s ubiquitous subscription offers. This month, P&G launched the Tide Wash Club in Atlanta, a service promising to send consumers Pods refills for a flat monthly fee. The company’s other experiment, Tide Spin, operates in Chicago and is a laundry pickup and delivery service for “the busy consumer.” The company has yet to reveal any compelling information about the success of either program, but it’s clear that the success of Amazon’s subscription-based services is making major corporations rethink how they do business.

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