From feeling ripped off to inspired to Germany and then buying a manufacturing plant to stop the competitor. Wow, Harry’s was ready to fight.
Dave Young:
Welcome to the Empire Builders Podcast, teaching business owners the not so secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those.
[Irock Plumbing Ad]
Dave Young:
But welcome to the Empire Builders Podcast. Dave Young, along with Stephen Semple, and we share stories about people that have built themselves an empire.
Stephen Semple:
That’s correct.
Dave Young:
And today Steve told me we’re going to talk about Harry, Harry’s razors.
Stephen Semple:
Yes, Harry’s.
Dave Young:
Harry From Harry’s. You know Harry.
Stephen Semple:
Harry from Harry’s Razors. That’s it. Yes.
Dave Young:
Yeah.
Stephen Semple:
Yeah. So-
Dave Young:
Do tell. I mean, I think I’ve peripherally heard it, but I don’t think I’ve used the product.
Stephen Semple:
Yeah, I’ve not used the product either. And I also remember when they first came out and they were advertising primarily online, but now you see them in Walmart and in Target and whatnot, they become really quite a big deal and really a disruptive force in the shaving business. But in terms of a disruptive force, one of the main actors in this, we’ve heard of before, because it was founded in 2012 by Andy Katz and Jeff Raider, and Dave, you may remember the name, Jeff Raider. He was one of the founders of Warby Parker back in episode 80.
Dave Young:
All right.
Stephen Semple:
So Jeff, he’s got a couple of big successes under his belt because Warby Parker as we know was huge. It was huge.
So they launched in July of 2012 and 2016 they had 2 million customers. 2017, their product was launched in Walmart and Target, 2019 Schick was going to buy them for $1.4 billion, and that purchase was blocked by the FTC. So they became in seven years, a pretty big deal from startup to being a business worth, even though the sale didn’t go through, still valued at $1.4 billion. And when they started, and frankly the market still is, but when they started heavily dominated by Gillette. Gillette was a 70% market share. Today it’s been whittled down by companies like Harry and the Dollar Shave Club where Gillette is 50%, but still 50% of a market is big.
Dave Young:
It comes and goes in and out of style, but men are always going to be shaving their beards off.
Stephen Semple:
Yeah.
Dave Young:
They’re always going to be shaving whiskers off.
Stephen Semple:
Right. Even guys like us, we’re shaving part of our face, just not our entire face. Right?
Dave Young:
Yeah. It’s not ever going to just be a fad business, I guess is what I’m saying.
Stephen Semple:
Yeah. So Harry’s really pioneered the direct to consumer model. They were sort of one of the first into that because at the time Gillette was sold in retail, and Harry started online and did online advertising. That’s how they started. And a lot of what they did is not as effective today, but really worked well a decade ago.
So Andy and Jeff met at Bain and Company, and it was a consulting firm. They became friends and they both left to join private equity firms and then they were off to business school. Jeff, of course, starts Warby Parker with some buddies while he is in Wharton. And if anybody has not listened to that story go back to episode 80. It’s almost unbelievable. They started this business online, and I wish I kept some of the old ads and they did this retargeting. So, which again, was much more effective a decade ago than it is today.
Dave Young:
For listeners that might not know what retargeting is, it’s that phenomenon where you show some interest online in a product or a business and you change your mind and you do something else, but the ads for that product or business follow you around for weeks. You’re being retargeted. They’re like, “Oh, you were interested in this?” And so those ads will continue to persist. One of the most annoying things to me about retargeting is you actually buy the product. You don’t need it anymore, and the ads still persists. They follow you around.
Stephen Semple:
Yeah, absolutely. You still get the ads.
Dave Young:
That’s my little side rant on retargeting, so now we rejoin our main story [inaudible 00:05:28].
Stephen Semple:
So it’s October 2011, and Andy gets an idea for Harry. He’s driving home from work, stops at a drugstore, goes in to get some razor blades. The product is locked away because razor blades are a high price, small product which often gets stolen, and he is wandering around the store looking for help to get it unlocked. And while he is waiting, he’s looking at the packaging and the branding and he sees poor packaging, nothing stands out.
And when he finally gets the blades, he pays $25 bucks for four blades, and in that moment, he feels ripped off. He knew it was expensive, but it was that light bulb moment because it was expensive. There’s one supplier. It’s basically a monopoly just like Warby Parker. He saw the parallel.
So he sent a note to Jeff, who’s the guy who was involved with Warby Parker, and he said, “We should do this category,” because he and Jeff had kept in touch, and it so much felt like the early days of Warby. This also resonated with Jeff, and Jeff said, “Yeah, let’s do this.”
But there was something extra to it because Wallace was direct to consumer, very powerful, something he understood. You also had repeat purchase and a completely novel idea in the shaving space. So he was like, “I love this.” They knew there was big money in this because Gillette had sold around that time to P&G for $50 billion. So they knew there was money there, they knew it was profitable, and everyone agreed it was a poor experience.
Here’s what they didn’t expect. They had a couple of challenges as they started to explore this. Most of the manufacturers are owned by Gillette or tied up by Gillette from the standpoint of, “No, we have no capacity. We’re making crap for Gillette.” And-
Dave Young:
So they’re the people that make blades.
Stephen Semple:
Yes, and not just anyone could do it. Razor blades are actually very hard to make. It’s very precise, very difficult to make these very thin, flexible blades that don’t cut the face, but actually just take a little bit of skin off the surface. They spent a year researching into the market, just trying to find a place to make this stuff. Initially they did not understand how hard that was going to be. It’s very sophisticated technology, really, really hard to make. Even the steel is very, very specialized. It only comes from a couple of places.
And they also learned there’s a big difference in performance between low quality and high quality, just night and day. And it’s highly automated. You’re putting this perfect edge on these little blades over and over again. And so the industry grew up in places where there’s great engineering. Most of the blades are made in places like North America and Germany, and it’s also very vertically integrated. So even if they could find a manufacturer, then it’s like, how do you make it? How do you make it unique? This was the big challenge.
They’re looking for a manufacturing partner. And one day Jeff is reading a shaving blog done by a safety blade user. So the safety blades are those little blades sharp on both sides that you put into a handle. Right?
Dave Young:
Mm-hmm.
Stephen Semple:
And he read about a factory in Germany called Fine Technique that they said made some of the best double edge blades in the world.
Dave Young:
Okay.
Stephen Semple:
Now it turns out they also made a lot of other blade products. So they reached out to them cold. So they reached out to Fine Technique cold and asked the factory to send them some samples to try and they tried the product and it was really good. And the steel for these blades came from Sweden. It was very specialized steel heat, cool it, make it malleable, all that other stuff.
In January of 2012, they go to Germany to visit the factory, and they wanted to do this customized product, make their own handles, colors, et cetera. And the factory is in this little teeny tiny town in former East Germany called Eisfeld. And it took them quite a while to get some credibility in the factory because they came across as a bunch of crazy marketing American sales guys to these very East German engineers.
So what they did to make it legit, they committed to buying a million blades from these guys. But here’s the fun part, they didn’t have money. They hadn’t raised anything yet. So he said, “We’ll buy a million blades from you.” All right, great. Now we got to raise some money quickly. So Jeff quits his job. They put some money in, but they still need about $500,000. So they went back to Warby Parker investors, right?
Dave Young:
Okay, yeah.
Stephen Semple:
People that he had made a lot of money in the past, so we went back to Warby Parker investors. But not all of them liked the Harry idea, but they found enough and in fall 2012, they find Harry’s, they both quit their jobs and Harry was the name of one of their grandfathers, and they wanted to be this father figure type of thing. And they felt if they could pair this strong name with some fun colors and nice design, that would really strike a chord and it would be different from what was out there.
Most of the ads at the time were these handsome guys shaving with a woman hanging around, so they wanted to do something different. So they raised $4 million in the first round. Launched in March 2013. They had to design a handle, make the cartridge, website had to be built, and the host also had to make all of this stuff. And they started by making a shave set, which was a couple of handles, blades and shaving cream for $15 bucks.
Dave Young:
Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this.
[Empire Builders Ad]
Dave Young:
Book your starter session on this podcast website. Just visit theempirebuilderspodcast.com and click on get started. Let’s pick up our story where we left off and trust me, you haven’t missed a thing.
Stephen Semple:
So on launch, they have 12 full-time employees. They turn on the website. They also did the same thing that they did launching Warby Parker, where they had a PR firm and they used the same PR firm to create lots of buzz ahead of time, and they got great press. So they’re running around New York before the launch doing this pre-launch strategy and they got tons of traffic right away. They got on all sorts of different men’s blogs and on Uncrate they sent samples and everyone loved it. Within a month, they’re sold out.
Dave Young:
And probably people are rooting for them because they want to get out from under the oppressive thumb of monopolistic Gillette.
Stephen Semple:
Yeah. And when they were sold out, they also did something that was fun. And again, I always like when you sell out and you do something rather than just saying we’re sold out. Right?
Dave Young:
Mm-hmm.
Stephen Semple:
So they ran a PR campaign, and what they did was none of the staff were going to shave until the customers could. And this became a great-
Dave Young:
That’s so good.
Stephen Semple:
… social media piece of all these unkempt, like, “We’re not going to shave until our customers can shave.”
Dave Young:
Yeah, I like that.
Stephen Semple:
And so when they launched, they were getting this feedback from customers. Customers loved it. And so they went back to their supplier and they said, “Look, this is going to be huge. Can you give us a dedicated line?” The other thing is they suddenly realized, you know what? They got worried that Gillette might cut the legs out from under them so they decided to buy the factory. They spent two months negotiating to buy the factory.
And what they managed to do when they got the agreement of the factory was they raised another $65 million in equity and $35 million in debt, and they bought the factory. But here’s what freaked them out. Overnight they now have 500 employees, and they really felt the weight of this.
Dave Young:
In a country that they yeah, that they don’t really know.
Stephen Semple:
And the cultural differences. These people-
Dave Young:
Oh, sure.
Stephen Semple:
These people are manufacturers versus technology, fast versus planned. There was massive amounts of tension. And I even remember them advertising the story of buying the factory in their ads. I wish I’d kept it because it was written like it was from Harry, it was written like it was from this grandfatherly person. It was really a beautiful piece of copy talking about buying this factory in Germany.
When you think about it was a crazy David versus Goliath narrative. Gillette was 70% of the market, and people got behind it and loved it. The guys really started to learn how to market and get things made. So it’s 2014. Remember they launched March 2013. The plan was to do $10 million 2014. They did that in June. They’re on their way to 20.
Dave Young:
Oh wow.
Stephen Semple:
They’re already running out of capacity at the factory, and they really wanted to establish themselves. So they raised capital, raised some more capital to build out the factory in the plant. 2016, they launched in Target. This really got attention because Gillette had to drop their price and they felt like, “Wow, here’s a win. Gillette dropped the price.”
Now here’s the other thing Gillette did. Gillette did a campaign that said, people who try Harry’s leave. So Jeff and Andy sent a letter to Gillette disputing that saying, “No, no, no, you’re wrong.” And then they published the letter as a piece of advertising.
Dave Young:
When you’re battling a Goliath like that and you make them react, and then you can use the interaction, the only side in that battle that can lose is Gillette.
Stephen Semple:
No kidding.
Dave Young:
Right? Gillette should never have blinked an eye.
Stephen Semple:
Nope. They really should not have, but part of what scared Gillette is that when they launched in Target, and Harry’s worked really closely with Target, they wanted to create a different aisle experience, Overnight they took 50% share and target of razor blades. Now, there was a bit of a halo effect because I remember walking into seeing it in Walmart. You’re already familiar with it. You’d seen it online. They had been doing all sorts of things. So even if you weren’t a customer of it because it was this online thing, when you walked into Target and you saw it, look, there’s the halo effect of this suddenly felt more real because Target gave its approval to this company.
But yeah, they grabbed this share immediately overnight. Gillette responds. They do this letter, they publish the letter, and it’s kind of made me think of a client of ours, Griffin, run by Tom Casey. And we’re going to insert here, and we’re just going to stop for a second here. Let you hear one of Tom’s ads.
[Griffin Service Example Ad]
Stephen Semple:
The whole target, Gillette, that made me think of that ad, you take the action and you actually turned it into something. So in 2018, they’re now on Walmart, and as I mentioned earlier, they were offered $1.4 billion for the business. That got blocked. Three weeks later, COVID happens. They had to circle the wagon. They saw lots of challenges. The business is still doing great. They’ve launched a woman’s line. So they’ve really, really disrupted the business, and I think also paved the way for others in the shaving industry to do some disruptive things as well.
Dave Young:
And I know from recall, when they’re in a place like Target, because they’re not the giant conglomerate tied to Proctor and Gamble, now, theirs is more of a lifestyle display.
Stephen Semple:
Yes.
Dave Young:
It’s a little section of an aisle or an end cap that shows them and their products, and it becomes a brand that you can just sort of identify as a lifestyle and maybe an anti statement of Big Razor. And whereas Gillette’s strategy always seems to be different. They own a lot of the aisle space, and it’s all just variations of the same. It’s all the same product packaged differently, colored differently, but you look at it and you can’t figure out why it would be any different than the one that’s got eight blades instead of the one that’s got a three pack other than price.
Stephen Semple:
Right. Yes. And what I thought was really interesting is, again, it’s this whole idea of direct to consumer. And we’ve seen this over and over again that the companies that have really built these amazing businesses tend to have this direct to consumer approach, whether it’s online advertising, but it’s this whole idea of direct to consumer. But the thing that also really exploded them was when it went in the Target, they had two things. One was the halo effect of Target, but the other is, and you’ve talked about this a lot in the past is this idea of aided recall. You recognized it when you walked into Target because you had also seen, probably seen their aggressive online advertising.
Dave Young:
Yeah, yeah, absolutely.
Stephen Semple:
So even if you weren’t a customer, you’re like, “Oh, I recognize these guys. Oh, they’re in Target. Oh, that makes me even more comfortable buying it,” which is the reason why I think they exploded so quickly in Target and that scared the crap out of Gillette.
Dave Young:
Mm-hmm. No doubt. I think that’s a key component of this.
Stephen Semple:
And it’s interesting just from the standpoint, again, it started with this experience of I didn’t like the buying experience. I didn’t like the price. There’s an opportunity to do something here. Now, it turned out the opportunity was much more complex than they expected because making razor blades is really hard. But they persevered through on it and figured out how to do it.
Dave Young:
They seem to have pulled it off.
Stephen Semple:
Yes. But they also immersed themselves in that space. How they discovered the manufacturer was reading a blog where somebody just mentions this place and they go, “Oh, wow.” And it’s just like we’ve seen that others were. It’s that immersing in the space and getting to know the supply chain and whatnot, that becomes really, really important.
Dave Young:
It’s a cool story and a cool product and a line of products now. They’ve created quite the brand.
Stephen Semple:
Yeah. They really have.
Dave Young:
And go into our Empire Builders Hall of Fame as two founders that have two empires now, right? It’s a double play.
Stephen Semple:
How often has something like that happened? You look at Jeff Raider and you go, “Wow, Warby Parker,” and then right after Warby Parker, Harry. Like, holy jumping. That’s impressive.
Dave Young:
To make the magic happen twice I mean, that is impressive because often a founder doesn’t always realize the magic that made the first one huge. They believe that they have just a Midas touch, and anything they start is going to be just magic.
Stephen Semple:
I think that’s a great observation because what Jeff saw was the parallels. When you look at Warby Parker dominated by one or two manufacturers, distribution chain, expensive, all this other stuff.
Dave Young:
Mm-hmm.
Stephen Semple:
And it’s interesting, he drew the parallel one’s glasses and the other’s razor blades, but the parallels were there.
Dave Young:
The term we use for it is business problem topology mapping.
Stephen Semple:
Yep, yep.
Dave Young:
Right? You’re looking for the same problem in a different industry that you can solve in the same way.
Stephen Semple:
Yep. And that’s essentially what he did because if you go back and review Warby Parker, you find, yep a lot of parallels. A lot of parallels so it was good for him.
Dave Young:
Yeah, amazing story. Thank you for bringing that to the podcast, Stephen.
Stephen Semple:
All right, thanks, David.
Dave Young:
Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat juicy five star rating and review. And if you have any questions about this or any other podcast episode, email to [email protected].
