Gillette’s Razor Blade business model reinforces the blue ocean strategy concept of buyer utility. Specifically, when analyzed on the blue ocean strategy buyer utility map, Gillette’s disposable blades were convenient to purchase, use, and dispose of. Like many blue ocean offerings, disposable blades also broke the cost/value trade-off, offering higher value at lower cost than the then prevalent straightedge razors.
Create a razor and razor blade business model is a common refrain. While it certainly didn’t rock the world like most other innovations on this list, the Gillette “razor/razor-blade” business model has had a profound impact on the business world.
Safety razors consist of blades encased in something else, making it more difficult to seriously injure oneself. They are first found in two booklets by Frenchman Jean-Jacques Perret, L’Art D’Apprende à se Raser Sol-Méme (The Art of Shaving Oneself) in 1769 and L’Art du Coutelier (The Art of the Cutler) in 1771. Razors continued to evolve over the years with various types of guards for straight razors.
Brothers Frederick and Otto Kampfe Safety razor were the first to patent and commercialize safety razors, in 1880. The American Safety Razor Company acquired the Kampfe “Star Razor” business and in 1919. An advertisement from 1919 boasts “over five million users consider the Star a blessing.” The razor cost $2.00. Like all razors from this period, blades had to be sharpened: it did not contemplate disposable razor blades.
King Camp Gillette, then a traveling salesman, spoke to an inventor who had created a better bottlecap, which contained a cork. He encouraged Gillette to invent something disposable.
Gillette’s original innovation, described in his 1904 patent, was a disposable razor blade that cost less and was far easier to use than Star Razors or other safety razors. Gillette did not claim to innovate the safety razor; he patented the easy-to-use disposable razor blade.
A main object of my innovation is to provide a safety-razor in which the necessity’ of honing or stropping the blade is done away with, thus saving the annoyance and expense involved therein, and to this end… Thus, the material from which my blades are made need only be just thick enough to take a suitable edge, so that the blades require but a small amount of material and can be ground very quickly and easily and hence I am able to produce and sell my blades so cheaply that the user may buy them in quantities and throw them away when dull without making the expense thus, incurred as great as that of keeping the prior blades sharp, and, moreover, will always brave the cutting edge of his razor-blade in the same perfect condition as that of a new blade. Gillette Patent, Nov. 15, 1094 (emphasis added)
Gillette’s initially charged $5.00 for his razor bundled with 20 blades, advertised to last for two years of daily shaves. An Oct. 1903 Gillette advertisement offered blade re-sharpening (a then-ubiquitous service offering for razor makers) for 2.5 cents per blade or blade replacement for 5 cents each ($1 for 20 new blades).
Razor blade disposability was such an alien concept that even Gillette – with their patents on an inexpensive disposable blade – offered blade re-sharpening.
Realizing they were leaving profits on the table, the company almost immediately discontinued the blade re-sharpening service. By Nov. 1903, just a month after the re-sharpening service was advertised, the ability to re-sharpen was gone from advertisements and Gillette nearly doubled the replacement price to $1 for a dozen blades. “No Stropping No Honing” read advertisements.
The business grew steadily despite copycats that sold razors and blades at much lower prices. By 1913, Sears offered safety razor blades for 49 cents per dozen that fit into the handles of what, by then was a myriad of safety razor handles.
Gillette initially refused to allow resellers to discount razors or blades until 1913, routinely suing those who did. Eventually, they relented, probably due to anti-trust litigation and legislation. During WWI the company sold razors at cost to the US army; soldiers purchased 32 million blades. After the war, American men returned home accustomed to Gillette razors.
Profit From Blades, Not Razors
With the war over and the initial patent expiring, in 1921, Gillette changed to the low-cost razor and more profitable blade business. They lowered the price of the razor to $1.00 – the same as no-name safety razors were selling for by that point – and profited from the blades, charging $1 for ten blades. Soon the company was literally giving away low-end razors; they came gratis with canned meat or chewing gum. While dropping the price of his original safety razor, Gillette simultaneously introduced a new improved razor and blade at the original $5 price point.
It was at this point, with a free, low-cost, and high-cost razor – and blades that brought in recurring rent streams – that company profits soared, and the razor/razor blade business model was born.
Gillette has, ever since, continually offered “upgraded” razors though has arguably reached a point where innovations marginal value.
King Camp Gillette Goes Broke
Gillette, the person, sold most of his stock in 1910 to early investor and manager John Joyce for $900,000. However, King remained the literal face of the company, appearing in ads and packaging. He continued offering suggestions but had no input on day-to-day management.
Gillette used the earnings for bad real-estate and stock investments, that were all but worthless after the Great Depression. Joyce and his Board of Directors lost their positions in 1930 after a forced merger with Gillette competitor, Auto Strop. They had patented a razor blade specifically fitted to a razor. Gillette copied the idea and Auto Strop sued Gillette for patent infringement. They settled with the merger but Auto Strop CEO Henry Gaisman almost immediately took control of the much larger Gillette.