Posted 3/7/16 at http://sharpologist.com/2016/03/analyzing-wet-shaving-market.html
Happy Monday All!!! Back to work after the car accident this past week. Always remember to wear your seat belt !
Check out my latest article. Click on the link above.
In past 30 days or so the wet shaving industry has seen some frightening changes. Several vendors have announced they will be closing their doors, changing ownership or just ceasing operations until further notice. This has concerned many consumers regarding the industry and has many more trying to understand why this is happening to seemingly successful businesses.
To better understand what exactly is going on here I decided to do some research. What I found really made me think. How did this happen? I said to myself as I searched and searched the internet looking for something to just jump up at me and tell me what’s wrong. Little did I know the answer is in my shaving cabinet?
In the past 5 years we’ve seen a sudden boom in the emergence of wetshaving artisans. The forums and other forms of social media brought together those who have been wetshaving for years and those who were inquiring about different ways to do a morning task that they felt needed a change. Many used traditional products that were available for years and posted their thoughts online. Members would post their “mail calls” when their product arrived and would reveal much they love/hate their product. Some would post about enhancing their purchases and came new ideas. These members saw an opportunity for a new business and decided to make a career out of it. “I mean seriously to make a career out of something you love? Who doesn’t want that?” Boom an artisan is born.
***Please note these are not actual figures. The numbers associated with this article are designed to show an example of market saturation and are no way associated with the actual wetshaving market.
As time passes more social media groups emerge and the forum membership increases. Wetshaving is getting popular. More and more artisans join in and create new products, offer new services and share innovative ideas. The majority of these artisans continue their day jobs and work long nights at home to produce, package, and mail out their product to their anxious consumers, who love the fact they are buying directly from the source. The “part-time artisan” then spends the last hours of the day answering emails, posting on forums/social media outlets and developing new products. A typical day in the life of an artisan.
Now let’s look at the questions that have come up in the past few weeks and see if we can come to a conclusion.
Is the market getting saturated? A true business market is not considered saturated until the market has been maximized in the current state of the market place. This requires companies to come up with new innovated ideas to provide goods or services that will set them apart from the rest of their competition.
This is a difficult question to answer for the wetshaving world, but I think we can see where the industry is going. Before we come to a conclusion lets go over the cause.
Remember that part-time artisan we spoke of? Let’s say he/she produces great products and sells an average of 50 units per month. For arguments sake, his/her average selling price is $10 USD and his/her profit after all expenses is $4 per unit. This artisan made $200 in profit and $500 in gross sales for the month, and worked around 120 hours (4 hours a day x 30 days this includes production, packing, shipping and media relations). I think you can see where I’m going with this.
The number of full time artisans that solely rely on their business as their primary income is much less than those of the part-time status. These ladies and gentlemen become more innovative and more involved on forums, social media and advertise heavily. They keep prices lower because the need to. Remember this is their “bread and butter”.
Let’s go back to the math aspect of what’s going on here. I promise it will all make sense soon. Let’s take a look at our current market. For arguments sake, let’s say we have 10 full time artisans and 50 part-timers. If our average part-timer generates 50 products a month and grosses $500 in sales, that’s $25,000 in monthly sales. Not bad for a part-time gig.
A few years go by and the wetshaving world is still booming. Our number of full time artisans stays the same but part-timers increase to 100. Now the market and demand have grown but not at the same rate. Let’s say market sales have risen 25% to $31,250 a month for part-timers with the larger market. That drops the average monthly gross sales to $312.50 per part-time artisan. The average part-timer is running down 37.5 %, even though the market is up. There’s too much competition and we now have market saturation.
We haven’t mentioned the financial impact the full timers have felt yet. I’m sure if you actively watch the forums and other forms of social media you can tell that the full time artisans are becoming more aggressive. Like we previously mentioned this is their “Bread and Butter” and how they earn their living. They become more aggressive and take a bigger piece of the pie. For arguments sake let’s say they run several promotions and take back 10% of the gross sales ($3125) from the smaller part-timers. Dividing that amongst the board leaves our part-time artisan who is working a full-time day job and spending most of his/her free time with their “part-time business” down an average of 47.5% and making roughly $100 a month in profit.
This example may be extreme but it makes sense. It puts an understanding to why some artisans are dropping out, and decided to move on. That brings us to our next question.
Is reselling, PIF (giving away product) or trading affecting the market?
This question really woke me a few days ago. I decided to break it down so I could really see what was happening here:
We have our part-time artisan who is producing 50 products a month right? Let’s say that 10% (5 units) of the products he/she sells is given away, resold or sampled out from previous customers. 5 units a month equals 5 potential customers that received the part-timers goods without the part-timer receiving any funds. He/she ultimately lost 5 potential sales. Break down those products into 20 samples and he/she have the potential to lose 20 units or 40% of their average month sales. There is a possibility that they may gain a sale or two but the risk is not worth it. This may seem like an extreme example and it probably is, but think about how many samples you’ve come across in your wetshaving endeavors.
In the beginning of this article I mentioned that the answer was in my cabinet. It is. I have many samples and full sized products that I received from the secondary market… 75% of these items I used and did not repurchase. I have given away samples and full sized products too. I never realized that I personally played a part in the recent changes to the wetshaving market, but I have. Have You?