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Unilever buying Dollar Shave Club for $1 billion - I thought this was just nuts


LongHaul
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eh, I really disagree with you.

 

5x expected 2016 revenue is steep but not insane. The return on that probably won't be great, but the return will depend on the unit economics and what they're eventual market share will be (I wouldn't be surprised if they end up dominating the market -- I think a good way of looking at this is that it is a bet that DSC can increase there market share by 3-4x, which would be ~1/2 the US market. They are also only US, Canada and Australia, so they're maybe more opportunities internationally). I don't know what the unit economics are but I'd guess they're fine and will likely improve with greater volume. Also, Unilever isn't exposed to this market, so they aren't cannibalizing, and presumably, the expertise running a subscription business will be valuable to them prospectively. 

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Mr Money Mustache saiz: Why shave? You don't shave, you save!

 

 

About 12 years ago, Gillette had a great idea to sell the razor with 2 blades with free movie ticket. The cost was less than the cost of the movie ticket by itself. I bought as many as I could. Emptied the shelf. Still have some (I don't shave often). Gillette caught on at some point.

 

True story.

 

Movie rights available on request. Contact my agent.

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Mr Money Mustache saiz: Why shave? You don't shave, you save!

 

 

About 12 years ago, Gillette had a great idea to sell the razor with 2 blades with free movie ticket. The cost was less than the cost of the movie ticket by itself. I bought as many as I could. Emptied the shelf. Still have some (I don't shave often). Gillette caught on at some point.

 

True story.

 

Movie rights available on request. Contact my agent.

 

Lol!

 

Dollar Shave Club was a great business model as compared to buying the higher-end Gilette razors like I used to. I still like their shave butter, but only was with them for a very short period of time until I was sold on The Art of Shaving. It was a much larger upfront cost for the brush, oil, lotion, and blades/safety razor; but it really was the best shave I ever had, I have only needed to replace one pre-shave oil in 18 months (still have cream and lotion from original purchase), and safety razor blades are dirt cheap (<$10 for 100 blades). Lastly, it actually allowed me to enjoy the process of shaving.

 

I did the math, and doing this was significantly cheaper, over time, than even dollar shave club given how long supplies last and how cheap replacement razor blades are.

 

I expect them to do well with people who don't care about the ritual/comfort in shaving OR don't want to spend the upfront money, but anyone who gets easily irritated skin after shaving or is actually interested in saving the most money over time, the Art of Shaving is probably the better go to. BOTH are better than traditional options though so I imagine they have plenty of runway ahead.

 

 

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Interesting take from a great tech/business writer I follow:

 

https://stratechery.com/2016/dollar-shave-club-and-the-disruption-of-everything/

 

The article makes me think about our industry (investing). It is much harder these days to find lasting businesses. There are a few other examples of these disruptors.

 

Casper in mattresses

Blue Nile in diamond rings

Warby Parker in glasses

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Interesting take from a great tech/business writer I follow:

 

https://stratechery.com/2016/dollar-shave-club-and-the-disruption-of-everything/

 

The article makes me think about our industry (investing). It is much harder these days to find lasting businesses. There are a few other examples of these disruptors.

 

Casper in mattresses

Blue Nile in diamond rings

Warby Parker in glasses

 

 

I just watched this documentary on Tower Records (see link below). Fascinating and very well done in my opinion. As a Canadian I had no idea of the history or 'societal' impact these young guys had on the music industry. 

 

The last bit offers a lot of lessons to companies facing disruptive technologies, considering that Tower Records didn't completely fail and in-fact, in one 'area', seems to have thrived. - I'm trying not to be a "spoiler".  The comments about the bankers coming in to reorganize - are precious. That portion is "MUST WATCH" for investors.

 

 

All Things Must Pass: The Rise and Fall of Tower Records (2015)

http://www.imdb.com/title/tt3272570/

 

 

http://www.towerrecordsmovie.com

 

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Interesting take from a great tech/business writer I follow:

 

https://stratechery.com/2016/dollar-shave-club-and-the-disruption-of-everything/

 

The article makes me think about our industry (investing). It is much harder these days to find lasting businesses. There are a few other examples of these disruptors.

 

Casper in mattresses

Blue Nile in diamond rings

Warby Parker in glasses

 

I'd argue that network type of business are actually lasting business that will go on for a long time. It seems that the network effect has given them a competitive advantage that allows them to have margins way above normal businesses. I don't invest in anything above a PE of 20 but I do think the Googles and Facebooks of this world are much more lasting than low PE investors like me are ready to admit.

 

Regards

BeerBaron

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Interesting take from a great tech/business writer I follow:

 

https://stratechery.com/2016/dollar-shave-club-and-the-disruption-of-everything/

 

The article makes me think about our industry (investing). It is much harder these days to find lasting businesses. There are a few other examples of these disruptors.

 

Casper in mattresses

Blue Nile in diamond rings

Warby Parker in glasses

 

I'd argue that network type of business are actually lasting business that will go on for a long time. It seems that the network effect has given them a competitive advantage that allows them to have margins way above normal businesses. I don't invest in anything above a PE of 20 but I do think the Googles and Facebooks of this world are much more lasting than low PE investors like me are ready to admit.

 

Regards

BeerBaron

 

Do they have pricing power? IMHO relatively little

Are there high switching costs? IMHO relatively little

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Interesting take from a great tech/business writer I follow:

 

https://stratechery.com/2016/dollar-shave-club-and-the-disruption-of-everything/

 

The article makes me think about our industry (investing). It is much harder these days to find lasting businesses. There are a few other examples of these disruptors.

 

Casper in mattresses

Blue Nile in diamond rings

Warby Parker in glasses

 

I'd argue that network type of business are actually lasting business that will go on for a long time. It seems that the network effect has given them a competitive advantage that allows them to have margins way above normal businesses. I don't invest in anything above a PE of 20 but I do think the Googles and Facebooks of this world are much more lasting than low PE investors like me are ready to admit.

 

Regards

BeerBaron

 

Do they have pricing power? IMHO relatively little

Are there high switching costs? IMHO relatively little

 

Have you ever worked in direct response marketing? What you are saying is crazy as the industry exists today, at any reasonable scale. There are other players but Google and FB are huge, and must-haves if you want to maximize your distribution.

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I'd invert and say that high margin for sustained period of time= sustained competitive advantage. If you want to find lasting business with a moat, find the one with high margins.

 

BeerBaron

 

A lot of people make this claim and use it as a shortcut to find investments with "moats", but I believe this is false.

 

Companies can have high margins for sustained period of time without having sustainable competitive advantage or moat. Capitalism and free markets are not perfect and hyper efficient and niches can be high-margin for long time without being moaty.

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My points about pricing power and switch costs were in relation to the dollar shave club, not Google/FB.

 

That makes sense to me. Sorry for the confusion.

I should have been more specific :)

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  • 1 year later...

Here's an even better way to save money on shaving (and it's not about growing a beard):

 

 

haha....don't know why this guy is shirtless.  :o

 

anyone actually try this? The comments look positive.

 

He's shirtless (maybe naked!) because he's badass enough to totally not GAF ;)

 

I've heard from many people who say it works. I'm going to try it the next time my blades start to feel dull...

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  • 1 month later...

Here's an even better way to save money on shaving (and it's not about growing a beard):

 

 

haha....don't know why this guy is shirtless.  :o

 

anyone actually try this? The comments look positive.

 

I am running an experiment, using the same blade for 2 month now and  can confirm thwt it works. I sharpen the Mach3’s every 2 weeks using about 10 strokes on my  jeans. While they are not quite as sharp as new, they are plenty sharp to get the job done.

 

Thanks for posting.

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After about a year, can you report back on whether you've made a hole in your jeans? I smell false economy ;)

 

A hole in jeans is a fashion statement that makes jeans more valueable. So I smell win-win solution.  8)

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After about a year, can you report back on whether you've made a hole in your jeans? I smell false economy ;)

 

A hole in jeans is a fashion statement that makes jeans more valueable. So I smell win-win solution.  8)

 

Exactly! Also , you can pick a different spot to sharpen your blades.

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