Sometimes you are just too “F***ing Great” for your own good.
Early last week an irreverent and entertaining YouTube video for Dollar Shave Club (affiliate link), a Santa Monica, California start-up that ships razors directly to customers who subscribe to the company’s monthly delivery service, virally spread across the Internet faster than blood streaks down your chin when you cut yourself shaving.
The promise made by Dollar Shave Club Co-Founder & CEO Michael Dubin in the video (below): their blades are not good, they are “F***ing Great!”
Social media, new media, and mainstream media were all abuzz with articles about the video and the company’s charismatic CEO. It went viral and the company went from unknown to unstoppable almost overnight.
The video — which cost $4,500 to produce — was uploaded Monday, March 5, 2012 and, just 11 days later by Friday, March 16 (as of the time when this blog post was published) had 3,456,727 views — an average of 314,247 per day! Did views equate to conversion? Yes. According to a Huffington Post article posted on March 8, Dollar Shave Club had already generated 5,000 sign-ups. Imagine how many more signed up in the eight days since then; the video was so popular it caused Dollar Shave Club’s website to crash!
The company’s subscription based razor blade service offers three options:
- The Humble Twin: Two blades and five cartridge refills — for a monthly cost of $1, plus $2 shipping.
- 4X: A four-blade razor with four cartridges refills — which costs $6 per month with shipping included.
- The Executive:Six-blades and three cartridge refills — for a monthly cost of $9 with shipping included.
They also offer affiliate arrangement and provides a unique URL with which members can refer others. The deal is simple: for every new account your link refers, you get one month of free service. Founded in April 2011 by Dubin and his partner Mark Levine, Dollar Shave Club officially launched with the upload of the YouTube video.
Despite it’s kitschy video, Dollar Shave Club is well funded, having announced almost $1 million in funding from Kleiner Perkins Caufield & Byers and Forerunner Ventures. Other funding sources include Andreessen Horowitz, Shasta Ventures and Felicis Ventures. It also received $100,000 in angel funding from Science, Inc. (which was founded by former Myspace CEO Mike Jones).
How does the business offer such competitive prices? Two words (rather, two countries): China and Korea. The razors the company sells are private-labeled products shipped directly to each subscriber from manufacturers in both countries — “cutting” out the middleman. But therein might lie the problem. On Friday, March 16 at 3:38 p.m (Pacific) the company sent a letter to new subscribers who opted for the 4x razor with the following message:
In the e-mail Dubin earnestly explains the situation as follows:
Last week the Internet came to visit, and as a result, we’re unable to fulfill your 4X order right now.
Yes, we think this sucks too. But we’re giving you options.
Here they are:
- If you’d like to hold your place in line, do nothing, and you will receive your first shipment on May 15th.
- If you’d like your $6 refund, no problem. Please Click this link. Log in, and click the refund button. We’ll handle the rest.
Please accept our sincere apologies for not being able to meet initial demand. We’ll make sure it doesn’t happen again.
Co-Founder & CEO
Dollar Shave Club
It is unclear if the delayed delivery affects all three razor options or if it is limited to the 4X razor. The supply delay could be more easily remedied if it is the latter and not the former — perhaps people could just switch their subscription? But, then again, the e-mail does not provide that option — so it is as yet unknown how significant this problem might actually be.
Update as of March 18, 2012: A colleague informed me he subscribed to the “Humble Twin” and also received an e-mail informing him of a delivery delay, but in his case it was only for one month, not two. He elected to wait and see.
Regardless, a two month delay — even a one month delay — is not a good way to begin a business relationship with new customers. Delaying consumer gratification is one of the worst sins a retailer (or in this case a wholesaler) can commit — once you lose that leverage most customers lose interest and go elsewhere.
As Tim Daloisio (whose screen shot of the e-mail he received is posted above) offered in a tweet: “Easier to win a customer the first time than to win them back — better luck next time @dollarshaveclub #fail.“
Perhaps this was all too good to be true? Sales data was not made available so it is hard to know how many people were affected. But, if you assume that, since they signed up 5,000 people in the first three days (1,667 new accounts per day), in eleven days there could be as many as 18,337 new subscribers.
If you further assume customers subscribed to each of the three options in equal numbers (also not likely, but for the sake of easy arithmetic, let’s keep things simple), there might be 6,112 sadly stubbled 4X subscribers. For shave! I mean, for shame!
At $6 per subscription there could be at total of $36,672 in revenue that was generated but for which no products were delivered. Not a king’s ransom by any means, but certainly not an insignificant amount.
But, more importantly, the company’s inability to meet the demand beg’s the question: had they already ordered inventory or were they waiting to see what the demand actually was?
Perhaps this was the case. From a business standpoint, why sink thousands of dollars into products if you are unsure they will be sold? And, in fairness, projecting and meeting demand is one of the more challenging tasks with which a business must contend.
But the fact remains that, despite their impressive funding and savvy marketing, the delay calls into question Dollar Shave Club’s operational abilities.
To their credit, they have provided an option to cancel and get a refund or to stay put and wait until the razors can ship on May 15th. However, it could have been an added measure of good faith had Dollar Shave Club offered one month of free service for each month of delay. Additionally, the company fairly clearly outlines their terms of cancellation in their Terms of Service (which we can also assume nobody has read).
However, as noted in an article titled How to Quickly Read a Terms of Service [Law], “Dollar Shave Club does a good job of explaining how to stop the membership, but requires a vague “reasonable amount of time” to cancel. You might be on the hook for another month.” Food for thought.
Lastly, and perhaps most importantly, Dollar Shave Club needs to make sure it does not violate the “30-Day Rule” established by the Federal Trade Commission (FTC). The relevant portion of this law is explained below:
The Rule requires that when you advertise merchandise, you must have a reasonable basis for stating or implying that you can ship within a certain time. If you make no shipment statement, you must have a reasonable basis for believing that you can ship within 30 days. That is why direct marketers sometimes call this the “30-day Rule.”
If, after taking the customer’s order, you learn that you cannot ship within the time you stated or within 30 days, you must seek the customer’s consent to the delayed shipment. If you cannot obtain the customer’s consent to the delay — either because it is not a situation in which you are permitted to treat the customer’s silence as consent and the customer has not expressly consented to the delay, or because the customer has expressly refused to consent — you must, without being asked, promptly refund all the money the customer paid you for the unshipped merchandise.
So, despite having initially been lathered with success, let’s hope that Dollar Shave Club doesn’t cut it too close and improves its operations. Maybe they can even shave a few weeks of that two month delay?
Update: I finally received my order of 4X blades on Saturday, May 26, 2012!