It Pays to be Direct

About $1.4 Billion, give or take.

As you may have heard, the company that owns Schick razors, Edgewell Personal Care, just purchased DTC Subscription shave service, Harry’s, for a cool $1.4 Billion according to Bloomberg.

That’s a smooooth shave.

What did Harry’s have that Edgewell valued at such a premium? Innovative product technology? The ‘killer app’? Not really. I’ve used Harry’s and it’s nice. In a blind shave test, which I don’t recommend, I’m not sure I could tell the difference between Schick and Harry’s. They both get the job done. So it wasn’t any Feature/Function that prompted the action.

So what was it?

A direct relationship with the consumer. As Forrester reported, for Edgewell, “the end goal is to move everything into DTC.”

Direct to customer.

In the end, Harry’s built a brand. A hell of a brand, actually. They hired real pros– younger ones primarily– bent on doing things differently: the right way. They put a premium on design. The proposition is clear and compelling. There’s a ‘giving back’ component. It’s painless and Service-led. Plus, it’s priced to move.

In contrast, so many traditional CPG companies are still in what I call the Big Paulie mindset. For those of you who have not seen Goodfellas (why not?!), that goes something like this:

Find the razors a little pricey? F you. Pay me.

Got a nick on your neck?  F you. Pay me.

Don’t feel the benefit of the ‘product innovation?’ Interesting. Not really. F you. Pay. Me!

If you can’t beat ‘em, join ‘em. Following the footsteps of Unilever picking up Dollar Shave Club (for a billion), Edgewell decided the move must be made now. A long war was something they ultimately could not afford.

Despite being in the game a nanosecond compared to Schick (founded in 1926), Harry’s almost certainly knew more about shaving behavior. At scale, anyway. That’s big. It informs product and service design, upsell strategy and much more. Harry’s knows who buys their razors, when they refill their blades, where they live… They usually get some A&U information to complete the picture– how often they shave, grooming products they like… It’s a treasure trove of insights. And those insights are best gleaned through having a direct relationship with the customer that’s personal, equitable, and transparent.

Schick probably runs some focus groups, but other than that they know how much product the retailers buy, when they re-order…and likely not a ton more (at scale, anyway). They’re somewhat flying blind and being overly generic can sometimes be a symptom of such conditions.

Not only does Harry’s know what I’ve bought historically, they know I’m currently lapsed. My subscription is on pause. As a result, they send me very compelling Win-Back offers to re-activate. They step up the discount periodically based off of my projected Lifetime Value (LTV). It’s smart. It works. I’m part of the Orange Handle Mafia in defiance over yesterday’s Big Paulie arm twisting. Cheaper and direct-shipped to me when I choose? Yes, please.

Will Harry’s perfectly executed playbook turn every CPG into a DTC? Remains to be seen. As brilliant as Harry’s leadership seems to be, can they flip the script on other Edgewell brands like Hawiian Tropic, Playtex and Wet Ones? Seems harder, but there are 1.4 Billion reasons for optimism.

With retailers under unrelenting pressure from Amazon and Walmart, the squeeze runs down hill to suppliers like Edgewell to come up with more and more favorable terms. That almost always erodes margin, respect, and relationships over time.

By creating a DTC relationship, Edgewell is bravely creating its own terms and rising or falling accordingly.

Whether that’s cutting its own throat or a giving a close shave to its retail partners remains to be seen.

Contact SessionM today

Making your data actionable so you can make your customers more loyal and profitable.

Learn more about SessionM + Amperity

By clicking download, I am acknowledging that SessionM will process my personal data in order to send content and information about our services. For further questions and options, please see the SessionM Privacy Statement.