August 24, 2016
Unilever Acquires Subscription Shaving Pioneer for $1 Billion
July 21, 2016
If the explosive popularity of the subscription model wasn’t clear, yesterday’s announcement by Unilever that it acquired Dollar Shave Club for a reported $1 billion should have erased all doubts. Most media accounts are positioning the acquisition as a move by the London-based consumer packaged goods giant to bolster its presence in personal-care products rather than food and enhance its competitive position with rival Procter & Gamble. For the card-not-present payments community, however, it underscores the emphasis retailers are putting on subscriptions as a way to reach their customers and provide predictable revenue streams.
“Dollar Shave Club was among the first to truly disrupt the way people consume everyday personal products by introducing them in a subscription framework,” Melanie Stout, vice president of client success for Fishkill, N.Y.-based subscription-billing expert Paul Larsen Consulting, told CardNotPresent.com. “This acquisition by one of the world’s largest CPG companies further validates the success of a recurring billing model, and demonstrates that thinking outside the box in terms of what can be marketed on a recurring basis can prove to be very lucrative.”
Subscriptions were a primary model for media companies and gym memberships for years, but California-based Dollar Shave Club, founded in 2012 and propelled to prominence by an online marketing campaign that resonated with younger buyers , was one of the first of a new vanguard that combined e-commerce and subscriptions to sell all manner of digital and physical goods. According to a Unilever statement, Dollar Shave Club had $152 million in revenue in 2015 on its way to more than $200 million this year. The companies did not disclose the value of the acquisition, but published reports cited sources who said the cash deal was worth more than $1 billion.
“This acquisition is analogous to Under Armour’s 2013 acquisition of MapMyFitness, with traditionally transactional, single-sale businesses expanding into the subscription space. Engaging with consumers on a recurring basis deepens brand loyalty—clearly a high value proposition for Unilever,” said Stout. “We can expect others to follow suit, either building out or acquiring recurring businesses. The key to continued success as these historically transactional businesses expand into the subscription space will be to understand and maintain expertise in the nuances of recurring billing and to mitigate involuntary churn.”
The challenges and opportunities presented by the subscription model are the basis of a CardNotPresent.com Webinar with subscription-billing technology provider Vindicia on July 26. ‘5 Ways to Keep Subscription Billing from Becoming a Recurring Nightmare’ will explore attracting subscribers, deploying agile recurring-billing systems and using metrics to maximize the lifetime value of subscription customers. Sign up for the free Webinar today .