What's going on?

The US startup Dollar Shave Club is at the sharp end of Unilever�s battle against rival Procter & Gamble (P&G), after the consumer products giant paid a reported $1 billion to buy the 5-year old startup that relies on a subscription model to sell men�s grooming products.

What does this mean?

Oscar Wilde once said, �Imitation is the sincerest form of flattery.� Well, Oscar, it�s also one of the biggest threats to nascent business models. While Dollar Shave Club has grown from nothing into a company expected to generate $200 million in revenue this year, its business model is under threat from new entrants – especially Gillette�s new online shave club (Gillette is owned by P&G). Dollar Shave Club is attractive to Unilever as a way to gain an immediate and significant foothold in the growing market for men�s grooming products (men are, apparently, doing a better job of taking care of themselves�).

Why should I care?

For stocks: Big companies like to buy growth.


Unilever could have built its own presence in the men�s razor market � but that would have taken years of effort and entailed significant execution risk. Instead, it spent $1 billion to buy a company that�s already done it. Dollar Shave Club is still exhibiting strong growth which, when combined with the growing market for men�s grooming products, should allow Unilever to benefit from future growth.



The bigger picture: Scale helps small businesses.


Dollar Shave Club was coming under increasing pressure from both smaller new entrants, like Harry�s Razor Co, and �The best a man can get� (a.k.a. Gillette). With Unilever�s backing, Dollar Shave Club can battle with Gillette on a more even footing and expand its business internationally. It looks like the classic example of a small disruptor being bought by an industry giant who will then try to scale it up.