Startup Harry’s buys German factory to cut into razor market

New York TimesFebruary 1, 2014 

— For more than 93 years, the Feintechnik factory in this small German town an hour north of Nuremberg has produced billions of razors, its machinery transforming steel by the ton into the mathematically precise blades that end up in low-end safety blades and the hardest-to-manufacture five-blade razors.

But as of last month, the sprawling factory belongs to Harry’s, an Internet shaving startup that was not even open for business 10 months ago.

Few companies contemplate striking $100 million deals before their first birthday. But Harry’s is wagering that owning its own factory will help it better compete against Gillette and Schick, the titans that together control nearly 85 percent of the market.

“For a 9-month-old company to buy a 93-year-old one is a lot to bite off,” Andy Katz-Mayfield, 31, one of the startup’s co-founders, said with a laugh in an interview at Feintechnik’s offices here.

Harry’s is but the latest startup to reimagine a prosaic product and give it a panache that helps it stand out from the crowd. But virtually all other e-commerce ventures of recent years – from Warby Parker, the red-hot eyewear brand, to the clothiers Everlane and Bonobos – have relied on using the same factories that bigger and more entrenched players use, and then selling their wares for less.

Harry’s and its backers, including the investment firm Tiger Global, are betting that buying Feintechnik will give Harry’s a huge advantage. By running everything from the manufacturing of the razors to selling them online directly, they believe, the startup will control its entire customer experience, while allowing the company to change its products quickly.

“In one fell swoop, we’ve become the only really vertically integrated shaving brand,” said Jeffrey Raider, the startup’s other co-founder. (Raider, 33, helped found Warby Parker with three classmates at the Wharton School of the University of Pennsylvania, and he still sits on the eyewear maker’s board.)

The deal also has the benefit of instantly making the company profitable since Feintechnik is profitable, though Harry’s is not (the co-founders said that is because they are reinvesting the profits back in the business). The deal also gives Harry’s a tidy side business of making razors for an array of other customers. It will also swell Harry’s employee roster more than tenfold, to more than 400.

To analysts, the men’s shaving business has long been ripe for disruption. The business has posted tepid growth since the financial crisis – sales grew just 2.25 percent last year, to $2.4 billion, according to the research firm Euromonitor – as customers have shown weariness at paying for traditional razors.

Tim Barrett, an analyst at Euromonitor, said Harry’s may have found a profitable niche, pointing out that upscale beauty and grooming products tend to grow much faster than mass-market brands, especially after the recession. And it seizes on a growing interest in shaving differently.

“Given their positioning and increasing product profile offerings, I think it will be doing decently well among people with a bit more money to spend,” Barrett said.

The approach is drawn from the playbook of Warby Parker, which has become a darling of the startup world by offering trendy eyeglass frames for far less than Luxottica, the behemoth of the industry.

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service