Razor warehouse generates chuckles and profits

Running a retail business from a distribution center is a great way to cut overhead costs like supporting and staffing a brick and mortar store, but the strategy has an additional benefit—it can be just plain fun.

Hard-working logistics professionals don’t often have a chance to get a chuckle out of warehouse work, but when Dollar Shave Club founders Mark Levine and Michael Dubin launched their company in Venice, Calif., in 2011, they needed a way to recruit new customers to their innovative startup.

The video they produced of Dubin pitching the business as he strolled through their warehouse became an instant classic. It featured the founder triggering mistakes and uttering profanities, quickly netting the young company thousands of new customers and overwhelming its then-immature fulfillment network.

Dollar Shave Club soon recovered, and this week it had another good laugh at its competitors’ expense. Under pressure from online retailers such as Dollar Shave Club and its fellow direct online retailer Harry's Inc., Procter & Gamble Co.’s Gillette division is cutting its prices in order to stay competitive, the Wall Street Journal reported today.

The global grooming giant is feeling the razor-burn as its young rivals leverage the powerful efficiency of warehouse operations to cut the legs out from under the shaggy supply chain of a traditional storefront strategy, with its wholesalers, middlemen, and transportation costs. By exchanging the overhead costs of supporting a brick and mortar storefront for a simple monthly subscription fee, online purveyors can take advantage of economies of scale to buy inventory directly from suppliers.

That smooth operating model is not restricted to shaving products—just ask hardware store owners about a related strategy for ditching the brick and mortar store, deployed by The Home Depot Inc. and Lowes Companies Inc. when they invite shoppers right into their distribution facilities. Or ask home goods sellers about Costco Wholesale Corp.’s similar approach in selling everything from paper towels to television sets directly off of shipping pallets.

There is no word yet if those retailers are also producing humorous warehouse videos to promote their services.