I seem to have lost my collection of shaving instruments in the recent move. I’m not sure where they went. Perhaps wherever all the biros, sunglasses and good TV shows have all disappeared off to.
When it came to replacing my razors I was amazed at the prices. There’s something known as the “razor and blades” strategy and I think there’s a lot of evidence that it needs a new name.
The basic idea is that the razor is sold cheap, i.e. at a loss, but the single loss is more than made up for by the series of blade purchases over the life of the razor. Of course, blades are designed to work with only one type of razor, so if you switched, you’d need to buy a new razor.
The concept is well known in business, and a number of other industries have apparently copied the strategy pioneered by the razor. For example, there was Polaroid cameras and their film cartridges, games consoles and their games cartridges (now discs) and Printers with their ink cartridges.
However, what amazed me about the recent prices was that the price of the razor was massive compared to the price of the blades. That’s not how it’s meant to work in the razor and blades model.
According to figures gleaned this very evening from Coles Online, razors and blades don’t appear to be following the razor and blades strategy…
- Schick Quattro Freestyle Kit – $16.34
- Schick Quattro Razor Kit Titanium – $14.16
- Gillette Fusion Razor Kit – $13.72
- Gillette Fusion Phenom Razor – $13.72
- Gillette Mach 3 Razor Kit – $13.07
- Schick Quattro Razor Kit – $13.07
- Gillette Sensor Excel Razor Kit – $7.95
- Schick Xtreme 3 Razor Kit – $7.62
- Gillette Fusion Razor Catridges 6 pack – $32.37 ($5.40 ea)
- Schick Quattro Razor Catridges Titanium 4 pack – $17.10 ($4.28 ea)
- Gillette Mach 3 Razor Cartridges 8 pack – $26.65 ($3.33 ea)
- Schick Quattro Razor Catridges 8 pack – $25.06 ($3.13 ea)
- Schick Xtreme 3 Razor Cartridges 4 pack – $11.43 ($2.86 ea)
- Gilette Sensor Excel Razor Blade Cartridges 10 pack – $27.46 ($2.75 ea)
- Schick Ultra Plus Razor Cartridges 5 pack – $8.70 ($1.74 ea)
- Schick Quattro Razor Disposable with Aloe & Vitamin E 3 pack – $9.80 ($3.27 ea)
- Gillette Mach 3 Disposable Sensitive 5 pack – $16.01 ($3.20 ea)
- Gillette Sensor 3 Disposable Razor 8 pack – $11.99 ($1.50 ea)
- Schick Xtreme 3 Razor Disposable Sensitive with Aloe 8 pack – $11.98 ($1.50 ea)
- Gillette Blue II Plus Sensitive Pivot Head Disposable Razors 16 pack – $14.16 ($0.89 ea)
- Schick Extra II Razor Disposable Sensitive with Vitamin E 18 pack – $11.98 ($0.67 ea)
Note that the cost of a disposable (razor + blade) is less than the corresponding razor or blade. Even if you accept that the quality of the disposable will be lower than the ordinary razor, it’s hard to believe that the quality of, say, the Gillette Mach 3 Razor Kit ($13.07 with two blades) is four times the quality of the Gillette Mach 3 Disposable ($3.20 with one blade).
Although I know nothing about it, I would guess that Gillette and Schick are making out like bandits selling the razors. As a comparison, Catch of the Day recently sold a pedestal fan for $13.95, and selling something out of plastic with fewer materials, no moving parts, and no electronics for a similar price cannot be making a loss.
So, if the razor and blades strategy is no longer following the razor and blades strategy, what should we be calling it?
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8 thoughts on “A rort by any other name”
Andrew, you could have solved all your shaving dilemmas with one word: Movember. Be prepared to be swamped with outcries of the cost of feminine hygiene products. Harden up :)
The whole thing’s an insidious mess – Gillette have even started advertising against their own product (in a few of our local supermarkets there’s big glitzy things trumpeting how much better the Fusion is than the Mach3).
Personally I’ve become a bit of a brandwhore for King of Shaves – to squeeze in among your comparisions, the razor stalk + 3 blades is about $10, and a pack of 8 replacement blades is $21 (http://www.shave.com.au/Razors-Blades-C8.aspx).
Great product, but doesn’t support the argument fully. That’s not much help, is it…
You might be right in Gillette being a good cash cow; P&G don’t give out the details, but the P&G is enjoying profit margins of around 17% – higher than most other companies.
On the other hand, certain telco players aren’t doing that bad in terms of profit margin either. Now, is it a sign of being ripped off? Or is it a sign of innovative products? (One has to keep in mind that Gillette was/is pretty much the only razor-blade company investing any serious money into R&D).
Of course, 17% is still a far cry from the most profitable companies in the world. Philip Morris’s profit margin is over 26%; that, if anything, is a ripoff.
I use the term “rort” under poetic licence. :) The main surprise for me was that the razors should have been cheap if they were following the razor and blades strategy that is named after them.
I wonder what it is that has caused them to abandon it. Presumably the market for razors/blades is different to how it was in the early days.
I guess the main competition for razors + disposable safety blades was from cut-throat razors which would have been cheap to make and could be sold at low prices. These days the main competition may be from electric shavers that are sold at high prices. Also, the market may now be so mature that razors are sold only to those who don’t have them yet but need to shave, so that segment has high demand for them.
So, the loss leader strategy of the past is probably no longer the optimal strategy for these guys. Time for them to hand over the name of the strategy to another product.
Oh, and Jason, I use the King of Shaves shaving gel. It’s good stuff. Haven’t ever tried their equipment though. Since I’ve got to replace my lost shavers, I should take a look..
Then there’s the interesting phenomenon where pink dye for razors seems to be much more expensive than yellow, blue, black (any other non – girly colour)
An update.. I tried the King of Shaves razor but it didn’t really do it for me. Unless I used a lot of pressure, it didn’t seem to provide a shave as close as ordinary twin-blade razors.