The razors and blades model is a business model1 in which one item is sold at a low price in order to increase sales of a complementary good. Common variations today is printers-and-ink, consoles-and-games, and razors-and-cartridges.
There is a common myth that the business model originated with King Gillette. This myth is false – Gillette priced his early razors at 5 US dollars. This was equivalent to about approximately 145 US dollar in 2020… five times more expensive than the offerings from companies like Gem, EverReady and Christy. All three sold their razors for one dollar, while companies like CURBO even gave their razors away for free.
I am not – by far – the first one to notice this. Randal C. Picker of the University of Chicago Law School wrote a paper on the myth in 2010.2 The paper is an interesting take on disruptive technologies, and how patents influence business practices. Gillette didn’t start moving towards the razor and blade model until after the patent on the Gillette Old expired. One could argue Gillette wasn’t fully committed to the model until they introduced cartridges.
As described in the paper, EverReady and other low priced razors came much closer to the razor and blade model. Gillette seems to have implemented a monopolistic business model3 – costly razors and a single source of blades. This was not completely successful, since they did not have a monopoly on safety razors in general.To quote the paper:
Gillette’s business model—both its actual business model and its supposed razors-and-blades model—faced real competition and strong limits. The Ever-Ready and Gem Junior razor handles were implicitly priced at a very low price. Straight-blade shavers could try the new multi-blade approach with a minimal upfront investment and Gillette shavers could switch easily if Gillette blade prices were too high.
Picker, Randal C., The Razors-and-Blades Myth(s) (September 13, 2010). U of Chicago Law & Economics, Olin Working Paper No. 532, Available at SSRN: https://ssrn.com/abstract=1676444 or http://dx.doi.org/10.2139/ssrn.1676444
Keywords is minimal upfront investment. Today someone making the shift from cartridges to traditional wetshaving is more likely to buy a 30 dollar safety razor over a 150 dollar one. It must be assumed that the same held true 100-120 years ago. If the initial investment is lower, the barrier to entry is lower. This probably explains why so many inexpensive razors – Diamond Edge, Christy and even CURBO – stayed in production and use for such a long time
I strongly suggest reading the paper – or if time is of the essence, at least the article the author penned for the Harvard Business Review.
Footnotes:
1) An in depth article can be found on Wikipedia.
2) You can read the abstract here, and also download the full thirty six page paper.
3) Once again, there is an article on Wikipedia.