Harry’s is a direct-to-consumer shaving company focused on bringing exceptional design, value, and simplicity to the men’s shaving industry. It is a fantastic example of how a firm can create outsize value by aligning its business and operating models. Investor confidence mirrors its explosive growth: Harry’s has raised $287 million in just four years, most recently raising a $76 million Series C valuing the company at more than $750 million.
Harry’s sells a limited line of razors, skincare consumables (gels, creams, and moisturizers), and accessories through its website, harrys.com. Its business model is built on three pillars: direct-to-consumer distribution, vertically-integrated manufacturing, and subscription service.
Harry’s looks familiar to those aware of the recent trend behind direct-to-consumer internet-enabled brands like Warby Parker and Bonobo’s (in fact, Jeff Raider co-founded Harry’s after being a co-founder of Warby Parker). The model is also reminiscent of less-recent direct-to-consumer companies like Dell or Apple, who used methods like catalogue mail-order to escape demanding and margin-dilutive retail channels. Going direct allows Warby to take value that traditional brands like Gillette give up to retailers and return it to consumers in the form of lower prices.
Harry’s razors are therefore 2-3x cheaper than similar retail-distributed competitors’ products (~$1.50-$2.00 vs. $3.00-$4.50) at the same level of quality.
However, unlike Warby, Bonobo’s and some of its own direct competitors like Dollar Shave Club, Harry’s owns its manufacturing facilities. Rather than outsource the design and production of its shaving products to private-label manufacturers overseas, Harry’s has poured over $100 million of investor money into acquiring Feintechnik, a 93-year-old German razor factory.
Owning Feintechnik allows Harry’s to capture manufacturer margin in addition to the retail margin it realizes from going direct-to-consumer.
Finally, Harry’s realizes a recurring revenue stream from its shaving products by offering a subscription service which automatically sends razor cartridge refills and consumables to customers on a quarterly basis based on shave frequency. Offering subscriptions allows Harry’s to realize better revenue predictability and higher customer lifetime value in addition to giving it a regular and powerful marketing channel for introducing new products and services.
Harry’s operating model hinges on being memorable, design-forward, and aesthetically consistent. While many competitors offer razors at similar prices and levels of service and convenience, Harry’s is winning because it rightfully believes that shaving technology is commoditized and real differentiation exists in the form of attractive visual design. Harry’s design-focused philosophy tightly leverages its core assets: the Feintechnik factory, the company’s talent, and the Harry’s brand.
The vertical integration enabled by owning Feintechnik allows Harry’s total control over the design and manufacture of everything from its blades and packaging to its bold and attractive razor handles while helping it avoid the delays, inconsistencies, and quality concerns associated with outsourced manufacturing. The company also has a singular focus on aligning its people—product designers, brand managers, web developers—around a unique visual aesthetic. Finally, Harry’s brand allows the firm to compete even against established competition in the men’s care space, leveraging its brand to expand into skincare and owned retail with its first New York barbershop store.
Not Every Tom, Dick, or Harry’s Razor Company
Harry’s focus on consistent, exceptional design as a differentiator is well-supported by its business model. Its direct-to-consumer model allows it to control branding and promotion without dilution or complication from retail partners; its owned manufacturing facility allows it to strictly control for design and quality; and its subscription model creates consistency of experience and messaging while driving loyalty.
The “competitive moat” around Harry’s business is deep: razors and razor blades are the categorical exemplar of how stickiness can be driven around a consumable product. By creating a differentiated product that targets a discerning customer segment, manufacturing the product itself, and delivering that product directly, Harry’s takes unique advantage of its design-centric operating model to create a high-affinity customer base.
It also has room to run. Within shaving, Harry’s can penetrate the adjacent wet-shaving accessory segment (the brushes, stands, safety razors, and straight razors offered by players like The Art of Shaving); within men’s care, it has room to grow its line of consumables to include products beyond skincare and grow its line of accessories to include other men’s grooming products; and within distribution, it has a long runway of owned retail white space.
To Gillette and Schick, shave yourself the effort: Harry’s is evidence that firms with complementary business and operating models can change industries.