It was the most talked about exit of recent weeks: The trade group Unilever reportedly paid a billion dollars for Dollar Shave Club, a startup based in Los Angeles. A billion for a razor-subscription service, that is still in their red numbers.
In the US Dollar Shave Club serves approximately three million people with razor blades. With the subscription model users get sent razors regularly. Founded in 2011 the startup aiming for a total sales of 240 million dollars this year, as the US magazine Fortune writes.
A similar business model is being implemented by Mornin ‘Glory, a Berlin startup, founded by Fabio Paltenghi and Nicolas Stoetter in 2012. It is aimed, like the US model, especially at men who are frustrated by stubble and expensive razor blades. Both startups’ customers are almost exclusively men.
But while Dollar Shave Club provides cheap blades from only a dollar per month and wants to address particularly price-sensitive customers, Mornin ‘Glory offers mid-price razors to buyers who usually prefer more expensive, quality blades.
The website of Dollar Shave Club looks a little more rustic, while Mornin ‘Glory’s page, which is mainly in blue and light gray tones seems a bit more serious. The Berlin-based startup wants to appeal to smart men with their high-quality and still easy supply.
The target group is the same, the advertising budget is not
Probably the most important difference between the two startups is location: While Dollar Shave Club blades sell in the US, Mornin ‘Glory mainly focuses on the European market. Does the Berlin startup have a chance at a similarly sized exit?
Probably not, an industry insider says to Gründerszene, who wishes to remain anonymous. Based on the figures from the startup (its recently finished equity crowdfunding campaign at Companisto ended with just over 250,000 euros) he concludes: “Mornin ‘Glory does not provide relevant indicators in order to assess if an exact copy of the US model can operate in Europe.”
Among other things, Mornin ‘Glory does provide any details on the net sales, the churn rate and ultimately the marketing budget on Companisto. But it is precisely the latter that’s thought to be crucial for further success: “Mornin ‘Glory needs many millions to build on the success of Dollar Shave Club,” said the industry expert.
Clearly, Dollar Shave Club has attained its customer base only by very high marketing costs. Among other things, the startup made a clip for prime time at the US Super Bowl. In it, a very rusty, hairy razor talks to its owner in the shower. The message of the promotional video: This shaver may be nice, but should be replaced urgently.
What If they move to Europe?
Dollar Shave Club is not yet active in Europe. But the barriers to entry are low. The Berlin startup does not have any technological head start to their US competitors if they should decide to conquer the European market.
“If Mornin’ Glory wants to keep up, it will need more millions in venture capital than Dollar Shave Club and that will be difficult,” said the industry expert. Because in addition to the original advertising budget of Dollar Shave Club, they now have the budget Unilever has to offer – the marketing budget of Procter & Gamble.
The success doesn’t seem to affect the Berlin counterpart anyway: “We are not jealous,” says CEO Ulli Papke. The 37-year-old has been at Mornin ‘Glory since last summer. He succeeded founder Nicolas Stoetter, who withdrew for personal reasons from operations of the company. Papke was previously responsible of Hello Fresh as Managing Director of business in Germany and Austria.
In his opinion, it speaks for the business model that a trading group was willing to spend so much money for such a young company. “The United States is a few steps ahead in many industries, so we are in good spirits,” said Papke.
They haven’t seen the Americans as competitors: “We currently have no ambitions to expand in the United States.” The company will initially focus on the local market, ie. Germany, Austria and Switzerland, according to the director. But he could imagine other European countries as sales markets too.
This article was originally published on Gründerszene.