In The Headlines
Dollar Shave Club Finds Success by Offering a Simpler Shave
Dollar Shave Club, a startup launched two years ago on the strength of a single, viral video, has started to grow up. More than a million customers spend about $7 million each month to get razor blades and other grooming products in the mail. Becoming a serious business has not changed the sophomoric and hilarious tenor of the ads, but Dollar Shave Club has shifted its marketing focus from YouTube to traditional television commercials.
Four 30-second ads have begun airing on “shows guys watch,” says Dollar Shave Club Chief Executive Officer Michael Dubin. If all goes as planned, the media blitz will introduce the razor-shipping service to a class of consumers that may not be directly plugged into the Internet’s stream of photos, cat videos, and irreverent product pitches.
“It’s certainly an expansion of our efforts,” Dubin says. “These spots needed to do two things: reach new markets but also be consistent with our brand tone, so that any existing members know that it’s part of the same company.”
Brand tone, in this case, would be a shopper getting “tased” by a store clerk. The new Dollar Shave spots go to great lengths to highlight the frustrations of buying razors in-person: locked retail display cases, confusing rebates, and high prices.
Dollar Shave’s initial pitch, published on YouTube in March 2012, focused solely on the prices and the intricacy of blades from established brands. “Stop paying for shave-tech you don’t need,” Dubin intones in the first video. The new spots play up Dollar Shave’s convenience as a subscription-based model selling a range of products. The line now includes shaving “butter,” an aftershave lotion, and packs of wet-wipes, which warranted a second Web video dubbed “No. 2.”
In the past two years, as Dollar Shave and its competitors ramped up, the number of razors sold at convenience stores has sunk by 2% and the number of blades sold in those shops plummeted by 19%, according to Nielsen data. Beard-wearing hipsters have also contributed to the overall decline of razor sales. Rival razor subscription services, including one from Procter & Gamble’s Gillette brand, have also played a part in the retail razor slump.
Dollar Shave’s shoestring social marketing campaign managed to round up a large number of fans. Some 1.2 million people are currently active subscribers, and 40% of them are signed up for more than one product. At its current pace, Dollar Shave will ship 44 million cartridges in the coming 12 months. Dubin declines to discuss profits, but it is safe to say the company is buying old-fashioned ads, in part, because it can.
The Hidden Strength in U.S. Car Sales
The U.S. auto market is doing better than economists are giving it credit for because of a new, untracked phenomenon: the certified preowned vehicle. Even though average gasoline prices have plunged below $3 and consumer confidence is running high, auto sales figures have missed economists’ expectations as of late.
Economists are being thrown off because certified preowned sales are stealing market share from new cars. The sales figures are not part of the nation’s gross domestic product calculation, and you cannot find them anywhere in the vast Federal Reserve databases.
While new car sales increased by 6.1% to a 16.5 million annual rate in October, certified preowned sales raced ahead by 10%, on track for a record 2.3 million units sold in 2014, according to a report from Wall Street firm Convergex.
Certified preowned sales “may not make it into the GDP calculations but, as near-substitutes for new cars, their growth is a promising sign of continued strength in overall light vehicle demand,” Convergex’s Nicholas Colas said in the report, citing data from Automotive News.
Auto sales will top 19 million in 2014 with certified preowned figures added in to the total figure. That is better than the 17 million to 18 million annual sales in the three years leading up to the credit crisis in 2008, according to Bureau of Economic Analysis figures.
Auto companies established certified preowned vehicle programs in the late 1990s to solve a problem, according to Colas. A third of new car and truck sales were actually leases and so auto companies technically owned these vehicles and would have to take them back if the consumer chose not to buy them at the end of 24 or 48 months. So they gave these unpurchased cars a new warranty, some reconditioning and sold them in the used car market at a higher price.
“These vehicles are essentially new-car substitutes for many buyers,” said Colas. “The fact that this segment is growing faster than new vehicle sales is a promising signal on the state of the U.S. consumer.” The hidden date on sales of certified preowned vehicles means that car sales are actually greater than most economists believe.
Citations
1. http://buswk.co/1zuxarX – BusinessWeek
2. http://www.cnbc.com/id/102186242 – CNBC
The Good News Is . . .
• U.S. retailers reported strong sales in October, a sign American consumers were spending with more enthusiasm and could help keep the economy growing at a brisk pace. Overall U.S. retail sales rose 0.3% last month, according to the Commerce Department. Retail sales account for about one-third of consumer spending.
• Nordstrom, Inc., a leading fashion specialty retailer, reported earnings of $0.73 per share, an increase of 5.8% over year-ago earnings of $0.69. The firm’s earnings topped the consensus estimate of analysts by $0.02. The company reported revenues of $3.1 billion, an increase of 8.9%. Management attributed the company’s results to sales from new store openings, expanded same store sales, and contributions from its recent acquisition of Trunk Club.
• Berkshire Hathaway, the holding company headed by Warren Buffett, has agreed to buy the battery maker Duracell from Procter & Gamble (P. & G.). Berkshire Hathaway will swap its holdings in P. & G., worth about $4.7 billion, in exchange for Duracell. The battery maker fits squarely into the kind of business that Buffett likes to buy, producing relatively steady cash flows and having a strong market position. The business commanded about 25% of the global battery market last year, according to P. & G.’s most recent annual report.
Sources:
1. http://reut.rs/1164KbF – Reuters
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://bit.ly/1sWq1we – Nordstrom, Inc.
4. http://nyti.ms/1t0t2KV – NY Times Dealbook
Planning Tips
Tips for Pumping Up Your 401(k) as You Near Retirement
Pensions are pretty much a thing of the past. With the switch to company-based 401(k) plans, the burden of saving for retirement falls to you. It is vital for you to be engaged in your company-sponsored 401(k) plan, especially the closer you get to retirement. Below are a few tips you can use to help maximize the value of your 401(k) as you approach retirement.
Follow the 1% rule – One of the best things you can do is increase your contribution by 1% each year. Each year, raise it by 1% until you reach the maximum allowed. It slowly puts more money to work for you each year without hurting your budget.
Save your bonuses – If you get a bonus, use it to maximize your 401(k) withholding for that month and live off the bonus. For example, if you get a $5,000 bonus, normally you would live off your salary, and you might save 10%, or $500. Instead, withhold 100%, put it in the 401(k), and live off the bonus for that month.
If you delay retirement, keep your 401(k) – If you are 70½, you have to withdraw a certain amount from your 401(k). But if you are still working at 70½ and you have a company 401(k), you do not need to take out that minimum distribution until you actually retire. Also, avoid rolling your 401(k) into an IRA. If you do, you will have to take the minimum distribution.
Know your company’s vesting schedule – Many companies have a vesting schedule with the company match in 401(k) plans. The money the company contributes does not really become yours until you have stayed with the company long enough. Overall, one out of every four job changers is not fully vested and forfeits money. Job hopping could thus reduce your retirement income significantly.
Have an emergency fund – Having an emergency fund means that when you need quick cash, you can avoid dipping into your 401(k). The taxes and penalties you may incur by doing this can damage your retirement investment. One of the best ways to start an emergency fund is to work with you current financial institution and start a direct deposit. Make sure it is a separate account. And think of it like the old vacation club or Christmas club accounts banks used to offer. That way it goes from your check to your account and you get used to not having that money.
Sources:
1. http://bit.ly/1xG6vZ6 – Investopedia
2. http://bit.ly/1lS1TKL – Kiplinger
3. http://bit.ly/1s95rIr – US News & World Report
4. http://usat.ly/1txykhB – USA Today
5. http://bit.ly/11hp4a6 – Bankrate.com
6. http://abt.cm/1qa8LYF – About.com
