A vast loft space with polished herringbone floors, wall-mounted bike racks and desks of trendy twenty-somethings (mostly), Harry’s headquarters in Manhattan could easily pass for the Hollywood set of a fictional, well-funded hypergrowth upstart.
But venture inside the razor company, which is taking aim at Gillette’s dominance of the $3 billion US men’s grooming market, and you find a scene that’s more suburban strip mall than SoHo startup. Down the hall from the snack-stocked kitchen in early August stood a mock Target shopping aisle complete with cardboard end-cap displays, rows of razors on metal hooks and neat shelves of shaving cream. And there were Harry’s founders, Andy Katz-Mayfield and Jeff Raider, obsessing over every detail of their upcoming partnership with the big-box retailer. “You can’t just throw product on the shelf and hope it sells,” says Raider, who before Harry’s co-founded eyewear disruptor Warby Parker. “The challenge around physical retail is telling the Harry’s story. We’re used to doing that online, where we have unlimited real estate.”
In an era when businesses are touting asset-light, ecommerce models, Harry’s has gone against the grain. In 2014, Katz-Mayfield and Raider paid $100 million for a 96-year-old German factory to make high-quality blades. And now, as traditional brands scramble to strengthen their online sway (this summer Wal-Mart paid $3 billion for e-retailer Jet.com, Macy’s announced it would close 100 stores and focus on ecommerce, and Unilever acquired Harry’s razor-subscription rival, Dollar Shave Club, for $1 billion), the pair is pushing hard into brick-and-mortar stores.
On August 21, Harry’s began selling shave sets on 4 feet of aisle space in every one of Target’s 1,800 stores—that’s 1.4 miles of razors and foam. It’s a rare nationwide rollout for the retailer, which has the second-largest shave business in the US (Wal-Mart is first.) To prep for the launch, the startup spent months working with retail consultants, designing shelf displays and packaging, upgrading its razors and handles, and increasing production capacity, head count and marketing spend. Harry’s won’t comment on the cost of the launch, but it did raise $75 million in June 2015 to upgrade its German factory and accelerate R&D. “The competition is strong,” Katz-Mayfield says, “so if you’re going to do this, you have to go big and make a real splash.”
Katz-Mayfield and Raider grew up in different Boston suburbs and met as interns at Bain & Co. Later both worked at private equity firm Charlesbank before going off to business school. Katz-Mayfield attended Stanford; Raider went to Wharton, where he and friends Neil Blumenthal, David Gilboa and Andy Hunt started Warby Parker (it’s now worth more than $1 billion). After business school, Raider returned to Charlesbank, and Katz-Mayfield moved to Los Angeles, where he worked for a dental startup—and hit upon the idea for Harry’s after a bad trip to the pharmacy. “They had all these different razors locked behind plastic gates,” he says, “and in the end, I paid $25 for a few blades and a can of shave cream.”
Seeing an opportunity, he called Raider. The pair decided it was a market made for a Warby Parker-type disruption. During nights and weekends they went deep on grooming and learnt that making razors is complicated. Steel molecules have to be rapidly heated and cooled (from 2,000 degrees to –100) to produce metal hard enough to grind to a perfect edge. “Quality and performance count when you are taking a knife to someone’s face,” Katz-Mayfield says.
With Raider’s Warby connections and cachet, they raised $4 million from Thrive Capital and contracted their first products with a German company, Feintechnik. While Procter & Gamble’s Gillette franchise advertises with supersonic jets and razors racing through outer space and Dollar Shave Club used frat-boy humour, Harry’s marketing had a vintage feel with product models named Winston and Truman. It launched in March 2013 to much hype, offering razors that rivalled Gillette’s Fusion at about half the price. Sales surged. Two months in, the founders realised they had a supply problem.
“We knew our growth would be significant, the capacity concerns were real, and we already wanted to make the product better,” Katz-Mayfield says. “The only way we could solve all those problems is to be vertically integrated.” In January 2014, they closed a $122.5 million funding round, convincing their investors that they should buy Feintechnik and its 500-employee blade factory in Germany. “They probably thought we were a little crazy,” says Katz-Mayfield.
This year, Harry’s expects $200 million in sales. All told it has raised about $300 million in equity and debt—including the $75 million round that was led last summer by Wellington Management and gave Harry’s a $770 million valuation.
The Target partnership began to take shape two years ago when Raider spoke at the retailer’s design week. His talk caught the attention of John Butcher, Target’s senior vice president of beauty and personal care. “This industry is ripe for disruption,” Butcher says. “We have the second-biggest shaving business in the country, and Harry’s is bringing cool to shaving.”
The big question is whether that cool will translate to the Target aisles. “Of all the big-box stores, Target was most aligned with the Harry’s brand,” says Miro Copic, principal partner at BottomLine Marketing.
“For Harry’s, the deal grows their addressable market, builds brand awareness, and lets people touch and feel their product,” says Ken Cassar, principal analyst at Slice Intelligence. “And Target gets first dibs on an exclusive brand.”
The partnership, which sells Harry’s products on Target.com, too, got off to a strong start, with $5 promotional starter kits selling out in stores and online. The deal could produce 2017 sales of over $20 million for Harry’s, according to a source close to the company. And then there are the possible add-ons like face scrubs, cleansers and the other 50 percent of the market: Women’s razors.
(This story appears in the 28 October, 2016 issue of Forbes India. To visit our Archives, click here.)