Harry’s: Not Your Dad’s Razor

Disrupting the razor blade industry

harrys logo

Tacky marketing. Sky-high prices. Inconvenient merchandising behind cashiers or locked up in aisles. These aspects characterize the typical razor blade purchasing process in drug stores. Harry’s co-founders, Jeff Raider and Andy Katz-Mayfield, have set out to improve the unsatisfying razor buying experience for men. Jeff, a co-founder of Warby Parker, hoped to disrupt the ~$3Bn razor blade market similar to how Warby Parker shook up the eyewear industry years earlier. Together, Jeff and Andy created Harry’s with the mission to conveniently provide customers with well-designed, high quality shaving products at reasonable prices.

Harry’s designs, produces and sells its own line of high-end shaving products. This vertical integration gives Harry’s complete control over its product, allowing them to successfully address the above frustrations associated with buying razors while keeping prices low.

 

Design

Harry’s did away with the cheesy design and annoying packaging typically associated with razors. They carefully crafted their stylish shaving product line by combining contemporary ergonomics with minimalist design. Harry’s razor blades are made from high grade steel that is shaped into a precise and sharp angled blade that provides the best possible shave.

Harry’s offers two main razor designs: the Truman, their classic razor that comes in four colors, and the Winston, a more premium razor designed for a more precise shave. Harry’s also produces branded cleansers, moisturizing creams, lotions, shave gels, and shaving accessories (razor stands, travel bags). Products can be purchased a la carte or in sets. Harry’s narrow range of products also enables the company to keep prices low.

razors

Manufacturing

The founders searched the globe for the right razor manufacturing partner. Their quest led them to Feintechnik, a 93-yr old German razor blade manufacturer. Feintechnik was a strong partner for Harry’s given its vast experience producing razor blades, its flexibility in manufacturing both luxury and basic razor blades (allowing Harry’s to create the perfect blade that matched their desired price point), and Feintechnik’s existing relationships with European distributors. After partnering with Feintechnik for a few months, Harry’s purchased the German factory for $122.5mm in January 2014 with proceeds raised from a recent funding round. Harry’s factory in Germany currently employs 450 engineers, designers, and other workers that produces millions of blades a year.

By owning the Feintechnik factory, Harry’s has end-to-end ownership over its production and supply chain systems. This vertical integration gives Harry’s a long-lasting competitive edge, as it differentiates the company from similar players that sell subscription sets of razors and blades at discounted prices online. In addition, owning the manufacturing process enables Harry’s to efficiently iterate on its product design and construction. Further, this product control enables Harry’s to more successfully battle current razor blade market leaders, Gillette and Shtick, who together control more about 85% of the world’s razors.

factory

 Factory Tour: https://www.youtube.com/watch?v=gMUg2o95ZrA

Distribution and Pricing

Harry’s products are largely sold directly to customers through its owned and operated e-commerce site and mobile app. Customers can also purchase Harry’s products at the company’s brand-named barbershop/showroom in NYC. This mostly online strategy gives Harry’s the flexibility to sell its products at affordable prices by removing the friction costs associated with distributors and retailers. Harry’s sells blades for ~$2/blade, which is 50% cheaper than what leading competitors charge for their blades.

Harry’s adopted a subscription-based strategy to service customers in a hassle-free way. Customers subscribe to a shave plan (Harry’s provides a free trial box set) and specify their shaving frequency. After the trial box, Harry’s automatically sends a box of shaving supplies based on how often a customer shaves. Customers can cancel their shave plan at any time.

Subscription plans start at just $6/month. Harry’s offers shaving sets at different price points to serve a wide base of customers. A basic set includes a razor, 3 blades, blade case, and foaming shave gel and costs $15 – a steal compared to razors that competitor Gillette sells for ~$10-$15 (which typically only includes the razor and two blade refills).

The direct to consumer model enables Harry’s to leverage consumer purchasing data to provide a seamless shopping experience for its users. Harry’s uses consumer data to reach out to a customer when they’ve predicted he needs to replenish his blades. Further, access to consumer purchasing facilitates a more personalized experience for its customers.

process

Harry’s Giving Model

Harry’s also prioritizes social responsibility. The company donates 1% of its net revenue to City Year and other charitable organizations that help young adults achieve in education and beyond.

 

Sources:

https://www.harrys.com

http://www.forbes.com/sites/stevenbertoni/2015/07/07/razor-wars-harrys-raises-75-million-to-fight-gillette-and-dollar-shave-club/

http://techcrunch.com/2014/01/22/10-month-old-harrys-lands-122-5m-buys-93-year-old-factory-to-go-toe-to-toe-with-gillette-and-schick/

http://www.businessinsider.com/how-harrys-bought-a-german-factory-2015-6

http://www.wsj.com/articles/SB12147335600370333763904581058081668712042

http://firstround.com/review/This-Startup-Cracked-a-24-Billion-Market-with-Branding-Heres-Their-Formula/

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Student comments on Harry’s: Not Your Dad’s Razor

  1. Great post! It seems like the vertical integration really helps them offer an appealing value proposition to customers. My only concern is that they’re not able to reach a particularly wide market, and I’m curious to know how a consumer over 35 or 40 perceives the hassle of signing up online vs. continuing their established purchasing pattern. It would be interesting to see how Harry’s market share / customer base has evolved since it launched!

  2. Thanks for writing, Michelle. I had never heard of Harry’s, and I learned a lot about the company from your post.

    The vertical integration piece stood out to me, and I agree with Maclean that it helps Harry’s create more value for its customers. It enables them to offer a high-quality product at lower prices, and it gives them credibility that is valuable to a new entrant into the market. I expect that it will take years for Harry’s to grow (given its organic growth model), but vertical integration, online sales channel, and ownership of customer behavior data positions it well for the long-term trajectory.

  3. Michelle, I have heard about Harry’s but did not know this much so thank you for the education. It’s an interesting fact that Harry’s sells the blades for 50% of the competitors. I would be curious to see the margins for each company and how these price point differences feed into the bottom line. Furthermore, I agree that the vertical integration in this case seems to be working for them but as they grow and hopefully take a larger piece of the market share, how will they sustain the low prices? Do they have the money or resources to buy other manufactures? I am curious to see when they grow if they can scale their business in a logical way.

  4. Great post Michelle! Any idea what the COGS are for a simple razor blade? How in the world can Gillette and others maintain what I presume to be high margins? Also, any idea on the electric shaver vs. manual market? Do we see consumers shifting to electric?

  5. Hello Michelle, great post!

    I would be interested whether you know anything about the competitive reaction of the incumbent players towards the new players in the razor industry. Given the large market power and almost endless resources of Gillette, I wonder whether Harry’s can survive if Gillette lowers their price point for example.

    best
    Peter

  6. Great post Michelle! I agree Harry is a very interesting company and you brought up some key points on the distinct qualities that differentiate its business model vs incumbent brands. One part of their operating model I am still a bit confused by is their decision to purchase a factory in Europe. I worry that as a US start-up, they will spend too much time dealing with supply chain and manufacturing issues in Germany that will divert attention away from marketing efforts in the US to rapidly build scale to capitalize on its first-mover advantage. On a similar note, when their existing factory is fully utilized, it is unclear to me how easily it will be for them to bring new capacity online. I say all of this with the assumption that consumers care about good quality razors, but that the primary value proposition of the Company is its convenient delivery to end users and its lower priced items.

    Do you think Harry could have entered into partnerships with the existing European manufacturers to de-risk the business by avoiding capital intensive projects? Or would the negatives outweigh the benefits?

  7. Hi Michelle! Great post – I love Harry’s. I noticed that your post predominantly focused on their first offering: the razor. Yet Harry’s has diversified away from its subscription razor business and started to offer a full grooming product line, which now commands a large portion of its profits as it has much higher margins. How do you feel that this shift away from its original offering fits into their business and operating models? Do you think that it will have a different core product in the future?

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