Harry’s: Shaving Men in an Age of Razor Robbery

How an upstart shaving company is upending the way men shave while uplifting design.

Overview

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.

Business Model

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.

Direct-to-Consumer

Harry's Pricing
Harry’s Relative Pricing

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.

Vertical Integration

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.

Subscription Service

How Harry's subscription service works
How Harry’s subscription service works

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.

Operating Model

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.

Harry's Products
Harry’s “Truman” Shaving Kit

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.

Sources:

  1. https://www.harrys.com/
  2. CrunchBase
  3. http://www.forbes.com/sites/stevenbertoni/2015/07/07/razor-wars-harrys-raises-75-million-to-fight-gillette-and-dollar-shave-club/
  4. http://www.fastcompany.com/3025315/fast-feed/shaving-startup-harrys-buys-razor-factory-for-100-million
  5. https://www.feintechnik.com/
  6. http://www.bloomberg.com/news/videos/b/687d1458-a3d5-4141-bc6f-675099fc334c

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7 thoughts on “Harry’s: Shaving Men in an Age of Razor Robbery

  1. Thanks for the post Jon – enjoyed the read and agree with your analysis of the alignment between Harry’s operating and business model.

    To my mind razors are in many ways unique in how well suited they are to the online-only direct to consumer model given their relatively high value, small size and limited life. I would love to see Harry’s continue to go long manufacturing and focus on owning the global blade industry before they branch into too many product adjacencies which might be less suited to their model.

    1. Thanks for the comment! I think you nailed it: was doing some direct-to-consumer thinking with Elian yesterday and I think we came up with similar metrics–high value for size (shipping margin), subscribability (or limited life as you say).

      The other 2×2 to consider is immediacy vs. need for touch/feel: you don’t need to see touch or feel a razor–trial is done at home. If you think about sectors most highly penetrated by e-commerce they are largely low immediacy / low need for touch/feel (traditional media a good example: don’t need that book you’ve been meaning to read today, nor is it important that you see it before you buy –> Amazon)

  2. Great post Jon! I actually had the chance to meet with and interact with Harry’s team a lot in my previous job and they were always a fascinating group to meet with. The company is founded, as you said, by people with experience and success in the start-up space. The culture they have created amongst their users is truly second to none. I also found the move they made to open Harry’s Corner Shop in New York City to be really interesting. The physical location provides them a great chance to reach their consumers, while hosting unique events in a high-traffic location near their target market.

    1. Thanks Schach. I actually question a little the premise of Harry’s physical store as opposed to, say, a Warby showroom (despite the fact that I said their physical stores have great future promise, an assertion premised on the success of Art of Shaving).

      I think glasses are uniquely important to try before buying–hence Warby’s try-at-home program and physical showrooms. Razors aren’t exactly the same, but I still think it’s an exciting way to get the product in front of the consumer to show them how beautiful it is from a design perspective. In that sense their stores are closer to the top of the marketing conversion funnel than the bottom–more awareness focused than purchase-focused.

  3. Great read, Jon. Thanks for the post.

    The vertical integration here on the manufacturing side and direct-to-consumer on the distribution side makes complete sense and increases efficiency for all those involved (Gillete / Schick not including). I do wonder, though, how Harry’s was able to prove out its value earlier on when they did not have $100M of capital sitting around to invest in a creme de-la creme German manufacturing plant. Scale and dollars makes things easier, but how they were able to confer value AND quality earlier on?

    1. Thanks, Fu. I’m with you. Harry’s was no different from any other white-label private label sourced razor company before they owned their own factory, except for the one thing: their design and the Harry’s brand.

      They were able to capture some early magic through simple, clean packaging, bold and memorable branding, and a product that is objectively more attractive (or at least differentiated) from the alien space probe forms Gillette and Schick have been pushing for years (and that Dollar Shave Club is blindly following).

  4. I suspect Harry’s is having some difficulty. Their launch was a triumph of thoughtfully targeted ads and understated styling. Their pricing is attractive but unfortunately as many have found out the product flawed and perhaps inferior. The blades are impossible to clean and have about 1/3 the useful life of a comparable Gillette product. Being vertically organized the management should be able to fix the issue but they appear to be in denial. Be interesting to follow.

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