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Consumer

Andy Katz-Mayfield

Cofounder & Co-CEO, Harry's

Vertical integration is hot — almost as hot, one might say, as disruption. Startups from Casper to Bonobos use the phrase, indicating a “do it yourself” approach that often yields huge growth and low overheads. But what is vertical integration? Is it an in-house design team? Using ecommerce to sell directly to consumers? In a sense, yes.

“But to Harry’s, vertical integration meant owning the entire process soup to nuts,” says Andy Katz-Mayfield, co-founder and co-CEO of the men’s grooming brand. “Including manufacturing.”

Mayfield points east — not to the SoHo shopping district across the street, but to Germany. Three hours south of Frankfurt, the rural town of Eisfeld warrants a mere two sentences on Wikipedia. And yet it’s where Katz-Mayfield and his co-founder Jeff Raider dropped $100M of VC-funded cash in 2013.

“Jeff had found Feintechnik on a European shaving blog — which, yes, do exist,” laughs Katz-Mayfield. “And it was just this incredible manufacturer from the 1920’s, an under-the-radar hero of the shaving community. At first, we only intended to hire them to make razor blades… and then 10 months later we bought the factory.”

Harry's: The vertically integrated startup.

SO, HOW DID TWO MILLENNIAL B-School grads end up buying a century-old blade factory? A German one whose industrial workforce draws stark contrast to Harry’s loft office and majority 20-something employees? To tell that story, we must first explain why Raider was Googling European shaving blogs in the first place.

“The shaving industry had pretty much gone undisrupted for 100 years,” explains Katz-Mayfield. “The reason being: One, it’s incredibly difficult to make high quality blades — only a few factories can do it. And two, it’s nearly impossible for young brands to get retail shelf space.”

It’s true: Manipulating steel into 1MM blades both durable and sharp is remarkably difficult, as is getting retail chains to carry them. It’s so difficult, in fact, that two CPG brands — let’s call them Shmillette and Shmick — were long allowed to dominate the $17B men’s grooming category, inflating prices however they liked.

“But then one day, I was living in Los Angeles and spent $25 at a drugstore on four razor blades and some shaving cream. It felt like I’d been taken advantage of… and that’s when I started thinking.”

Who ya gonna call? Jeff Raider. Not only were the pair longtime friends, but Raider also happened to be one of the founders of Warby Parker. (Raider left WP in 2010 but still serves on the board.)

“Their model had so much in common with my vision,” Katz-Mayfield remembers. “But more than that, Jeff and I have known each other for 10 years — we worked together [at Bain] before business school. And since founding a company is effectively getting married, the best thing you can do is to pick someone you trust.”

100 Years Of (Shick) Solitude

[I] spent $25 at a drugstore on four razor blades and some shaving cream. It felt like I’d been taken advantage of.”
With sets starting at $15, our product costs roughly half that of major CPG brands.”

THE PAIR DID DILIGENCE and determined there was enough cushion in Shimllete/Shmick pricing to slash ’em in half and still make a profit. (Something Dollar Shave Club, which slightly predates Harry’s, had already started to prove.) But they still didn’t recognize the need to own manufacturing.

“Then we sold out within 10 days of launch,” he laughs. “And while there was a part of us that thought it was awesome, we also thought, “Oh shit. We’ve got to figure out how to make more product.”

Supply chain is tough to get right — it isn’t sexy and is generally the area entrepreneurs know least about. (Perhaps the reason why so many retail-based startups fail.) 

“We knew that in order to have a stable company, we’d need to have a stable supply chain,” says Katz-Mayfield. “Need to bring vertical integration one step further and take manufacturing into our own hands.” 

Yes, to avoid going the way of the ecommerce dodo — when brands like One Kings Lane are fire sold for a fraction of their valuation — they would need to raise an additional $100M. They would need to set Harry’s apart from other vertically integrated companies like Warby Parker and Dollar Shave Club by bringing production in-house. Ten months and some German skepticism later, they bought Feintechnik outright.

The Disruption Begins

HARRY’S GREW FROM 35 TO 435 employees overnight — 91% of which were now German manufacturers. And in that decision lies the truly disruptive thing about Harry’s: While many companies claim to be vertically integrated, Harry’s actually does the whole damn thing themselves.

“It’s not at all to say our model is better than anyone else’s,” Katz-Mayfield explains. “It’s just what works for us. A high-quality razor blade simply requires more advanced engineering than other products — if we wanted to control product, we had to control manufacturing.”

So, if you buy a blade from Harry’s — one boasting that famous gothic arch blade, which relies on ancient architecture to ensure sharpness and durability — you really are, in essence, buying the brand. They design, manufacture and distribute their own product, selling directly to consumers via an online platform that allows for constant customer communication (and, of course, data).

“The post office delivers the final package. Other than that, it’s all us.”

It's not at all to say our model is better than anyone else's. It's just what works for us.”

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