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A Close Shave With American Manufacturing

Wed, 07/02/2014 - 11:30am
Joel Hans, Managing Editor, Manufacturing.net

Phil Masiello, the co-founder and president 800razors.com, has more than once found himself in a dire situation: while traveling, he realized the night before a key meeting that he had forgotten his razor at home. Knowing that he needed to shave in the morning, he had only one option, which was to spend $36 on a pack of eight Gillette razors. And he was never particularly happy about that.

He started to ask: “Why hasn’t anyone disrupted this (market) yet?”

Masiello has a history of producing goods that get “close” to his customers — before 800razors.com, he sold organic and natural skin care products, first on the round of shopping channels, and then directly within retail stores. With experience in what qualities convince consumers to spend more on a particular personal care product, he began to analyze the marketplace, and began to realize that the two big players — Gillette and Schick — had 90 percent of the market for a relatively simple reason: they made a superior product. There was nothing nefarious or heavy-handed about it. Their products simply offered a better shave than the cheap ones. And they charged a premium for that quality.

That understanding began to form the basis for 800razors.com. Masiello says, “Every man and woman wants a great shave — they’re just tired of paying for it. It doesn’t matter how inexpensive your product is. What matters is the quality of the shave. You can have a $1 razor, and people will try it — if it doesn’t give a good shave, they won’t be coming back.”

Masiello knew he had a few obvious options available to him, the first of which was finding a production partner in China or another low-cost country that would be able to churn out those $1 razors without much hassle. He knew he could go to Dorco or Kai — two Asian razor manufacturers — but he also knew there was a reason they weren’t dominating the market like Gillette, in particular. Once again, it comes back to quality.

As he continued his search, Masiello found quality in American manufacturing. When it comes to manufacturing razors, Masiello says, the production processes needed to be “technologically advanced” — it’s the only way to compete on both quality and cost. All the innovation is “happening right here in the United States. All of the technology in shaving is happening here.”

Masiello sought out a U.S. company that could make him the razors he needed with the level of quality his future customers would demand. Although he hasn’t yet named which manufacturer he’s working with, in order to fend off possible competitors from trying to strike a similar deal, Masiello is willing to say that the company has been making razors since 1875, and helped pioneer some of the great technologies in shaving across those years.

Even though most razor cartridges are expensive — recall Masiello balking over the $36 price tag for eight cartridges — and even though consumers are willing to spend a pretty penny getting a good shave, having the right margins is also critical to running a successful business. Masiello has found American manufacturing a major asset there as well. He could go to China or Korea and import razors from there, but in order to bring the price down to a reasonable level, he would have to import an unreasonable volume. At this point, the business is still volatile — putting up cash and then waiting for three months is simply too big a risk.

He’s quiet on the exact details of how this cost structure plays out, but even at $17.99 for eight cartridges — a cool $18 cheaper than his biggest competitors — 800razors.com is making enough of a margin to keep things going. Masiello says, “The cost isn’t all that different, after you’ve added in all those other pieces.”

Phil Masiello on the CNBC show Power Pitch.The ease of manufacturing close to the point of sale has also been a major asset — with a three-month wait on the water, there’s no reasonable way to react. If he were to sell out of product, he would either have to endure being sold out weeks on end, or “pay through the nose” for air freight. Even better, he can get to the facility far quicker, if need be. It’s easier to communicate and to turn projects around.

“I ran short on product last week because of a run we had, and I got additional product in three days,” he says.

Masiello has seen cost and supply chain benefits from choosing a U.S. manufacturer, but back when he began the business, people were saying to him, “Made in America doesn’t pay. Made in America doesn’t mean anything.” And while razors might not be a big-ticket item like a car, Masiello says that consumers still put a great deal of thought into personal care products, and “Made in America” still seems to represent quality and technology over something imported.

To Masiello, the value in American manufacturing is seen readily in a market like dog treats. There’s a slow but significant trickle of stories about how those products are fake or tainted with bacteria. Pet stores now have “Made in America” signs all over the place — and it’s working.

And while the company still hasn’t expanded beyond U.S. borders — both Canada and Mexico are on the docket, with significant hurdles still to climb — Masiello says the “Made in America” brand carries a great deal of weight in both markets. Certainly more than “Imported from China.”

As his business expands using a Made in America model, Masiello sounds a little resentful of the overriding skepticism that dominates much of the political and economic landscape right now, particularly when it comes to the U.S.’s efficacy as a manufacturing power. He says, “People tell us all the time that they cannot believe that we are truly a Made in America product, and they can’t believe that we’re doing it economically.”

But he’s bullish on the next 10 years, if not more, if not more, saying, “We’re just going to get better and stronger. The technology of shaving is going to continue to improve, and because we’re so close to is, because it’s happening here in the U.S., we’re going to take advantage of all those technologies.”

Masiello adds: “Personally, I’m very patriotic. I believe in the strength of America. I believe that entrepreneurs have a responsibility to bring this economy back to where it was. I believe that wholeheartedly. The government is not going to do it on its own. We can sit there be victims, saying, ‘Oh, the government’s not doing anything,’ but no, we have the responsibility to do it. I want to do my part.”

He’s the first to admit that 800razors.com isn’t going to singlehandedly change the economy or create all the jobs that are needed to get the economy humming again. But Masiello does think it could be the start of more people asking a simple, but fundamental question: “It’s not great that we import so much from overseas. Why don’t we do it here? Why go overseas when you can do it in America?”

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