Brandless halts operations. What went wrong?

Discussion
Photo: Brandless
Feb 11, 2020
George Anderson

Brandless was launched in 2017 with a simple idea — provide everyday items with better quality ingredients in generic packaging at a single $3 price point. Brandless claimed that national brand prices were 40 percent higher on average than the comparable generic items it sold.

While hopes were high for the direct-to-consumer concept and venture funding was plentiful at the start, the reality was the business was not self-sufficient. Brandless has announced it is halting operations.

A posting on brandless.com said, “the fiercely competitive direct-to-consumer market has proven unsustainable for our current business model.”

The brand was losing money because of high shipping costs and product quality control issues, according to the online magazine, protocol, siting an earlier report on The Information site. Brandless increased prices as high as $9 on some items in an effort to make the math work for its business.

Last March, Brandless laid off about 13 percent of its workers in an effort to balance costs and revenues. Co-founder Tina Sharkey also stepped down as CEO after the company’s biggest investor, SoftBank Vision Fund, pushed for someone with retail experience to lead the business.

Ms. Sharkey was replaced in May by John Rittenhouse, the former COO of Walmart.com, who wanted to expand into higher-priced items and try to sell Brandless products into retail stores. Mr. Rittenhouse left the company in December.

Brandless experimented with pop-up shops in 2018 with a four-fold goal: community, taste/trial, range and education. A pop-up in New York City that year featured 300-plus items, representing the entire Brandless portfolio. The shop included a tasting wall of non-GMO, organic and vegan snacks. It also had a fair trade coffee station, a beauty lounge and a taste flight menu station. 

Speaking with RetailWire at the time, Ms. Sharkey said, “Here at Brandless we put people first, which means value and values stick together. Better stuff, fewer dollars, no nonsense. Join us. But the two most important words are ‘Join us.’”

The most recent posting on the company’s site concluded with this: “We’re hopeful the future holds a new version of Brandless and that we see you again.” 

DISCUSSION QUESTIONS: Do you think a Brandless-like concept could work? What would it take for that to happen?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"It’s just another example of why stores matter. It’s a proxy for marketing. People see your brand."
"While Brandless had a great concept, they failed to correctly balance consumers’ need for low prices with consumer demand for healthy, sustainable product."
"...in order to be successful Brandless needed to stand out and that means being a brand, which they always claimed they weren’t."

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22 Comments on "Brandless halts operations. What went wrong?"


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Paula Rosenblum
BrainTrust

A reporter asked me yesterday what I thought about this. I had actually never heard of the company, which in the end was part of their problem–a lot of marketing work that needed to be done. After reading its website I said to the reporter, “I don’t understand why this company needs to exist.”

I think Rittenhouse had half the right idea. Selling in retailers’ stores would have increased brand awareness and helped it differentiate. Raising prices – well, that’s just an old retailer ploy that never really works. Once you pick your market, you stay in your lane.

It’s just another example of why stores matter. It’s a proxy for marketing. People see your brand.

Suresh Chaganti
BrainTrust
Suresh Chaganti
Co-Founder and Executive Partner, VectorScient
7 months 12 days ago

Brandless itself is a brand, whether they acknowledge or not. That means, customers have some expectations.

Like many, the concept itself is not bad. But is it priced appropriately? Probably not. Have they chased growth by heavily sacrificing profitability? Probably yes.

It is a failure of business strategy. And the economics did not work out.

Georganne Bender
BrainTrust

Some of the Brandless items would be a value at $3, others not so much. But the line “product quality control issues” speaks volumes about the company.

It took years for consumers to trust generic grocery store brands, why would this be any different? The concept sounded cool, but at the end of the day cheap isn’t always the most important element in what we choose to feed our families.

Michael La Kier
BrainTrust

In 2020 companies need to be nimble. Brandless locking themselves into a brand proposition that locked them into a pricing model was not a smart move. The dollar store model works because when you go in you make lots of impulse purchases. This doesn’t happen as much online. Introducing store brands from a store you trust breeds trust. Introducing a new brand to create store brands that look boring and simple does not engender loyalty.

David Weinand
BrainTrust

A DTC consumer products brand needs a LOT of marketing to build momentum. I’ve not heard of them before this article. And even with a lot of marketing, unless you’re Amazon or Walmart, I don’t think playing to the low end of the market is a recipe for success as a DTC brand. The most successful DTC brands are playing at the higher end of the market. Also, if they were having product quality issues that’s a double whammy, so no surprise here.

Camille P. Schuster, PhD.
BrainTrust

Brandless is still a brand so people have to know about it so they can order. Consumers will not run across the products in the store to make the price comparison – they have to know about the products and go search for them. That takes some kind of promotion for awareness and something for motivation. On the back end, there is a need for major quality control to live up to the high quality claim. And then there are the distribution issues. That is a lot to deliver for $3 a product. The business model does not seem sustainable.

Lisa Goller
BrainTrust

Brandless reflected relevant consumer trends and benefits, yet the math simply didn’t work.

Among its strengths, Brandless offered:

  • Ease to shop according to dietary needs and values (like vegan or free-from);
  • Variety;
  • Simplicity of a low flat fee;
  • Convenient home delivery;
  • Terrific marketing as loyalty toward national brands continue to decline

Yet Brandless faced obstacles like:

  • Logistics: Building a direct-to-consumer network is expensive;
  • Declines in repeat purchases: It’s hard to earn loyalty fast enough to cover costs;
  • Limited physical store presence: It’s hard to build community and engagement.

For a Brandless-like concept to work, a company would need:

  • Partnerships with logistics providers or distributors to expand reach at a lower cost;
  • More robust omnichannel service to spark product trial and boost brand trust;
  • Consistently high quality control so consumers keep coming back.
  • Ryan Mathews
    BrainTrust

    Brandless always felt a bit like life imitating art, in this case, the movie Repo Man. And in both life and the film, the issues were quality, excitement, the ability to identify with a product, and the fact that in a purely generic world — once you move past a few geriatric “No Branders” — there isn’t much of a consumer market for a product whose value proposition is essentially a price gimmick. Brands may be in trouble, but they aren’t dead yet by a long shot. Put this one in the, “Sounded Like A Good Idea At The Time,” box, seal it, and put in on the first shelf you find in the warehouse of failed concepts.

    Patricia Vekich Waldron
    Staff

    I met Tina and visited one of the Brandless pop-ups. It was an interesting concept that relies on customer loyalty. Unfortunately, Brandless was not able to live up to their brand promise (interesting, high quality products at a value price) due to a faulty business model, ultimately disappointing customers.

    Mohamed Amer
    BrainTrust

    Successfully selling a literal “brandless” brand with near zero awareness based on lower prices is the stuff of superheroes. To succeed you need consumer trust, a realistic plan to capture mind share, and consistently high quality products – all wrapped in a path to profitability. The foundation was never properly set, and last I checked superhero powers are restricted to comic books and our screens.

    David Naumann
    BrainTrust
    David Naumann
    Retail Industry Analyst
    7 months 12 days ago

    Companies that have been successful with private label products have developed a private label brand name that customers could associate with the products. A “brandless” concept might be too obscure for consumers to embrace or follow.

    As others have mentioned, developing a new business requires advertising to increases awareness and most people have never heard of this “brand.”

    Gene Detroyer
    BrainTrust

    They can give all kinds of reasons, but i think “product quality control issue” may be the single biggest one. Generate trial and disappoint the customer with bad product, and the customer is no longer a customer — ever.

    Jeff Sward
    BrainTrust

    Brandless might have oversimplified the idea, and overestimated the speed of embrace. I’m going to say the idea already existed and works phenomenally. It’s called Kirkland. Kirkland stands for impeccable quality and amazing value, no matter what product category it’s used in. A simple store label that evolved into a brand with a very simple brand promise. But how many years did that take?

    Stephen Rector
    BrainTrust

    With customer acquisition costs rising for all DTC brands, companies like Brandless with very low AOVs have an even tougher road to success than brands like Casper and Warby Parker. This is a lesson for all on what not to do within the DTC landscape.

    Doug Garnett
    BrainTrust

    A brand concept like “Brandless” could work — if they embrace the truth that “Brandless” is a brand. They didn’t, they believed their own PR and that took them to this end.

    What about their DTC claims? No. DTC is a brilliant approach for serving a narrow market with unique products. It’s not a way to scale — scaling only happens with retail. It takes only a brief review of the past 40 years of DTC history to see this.

    But here’s where Brandless went really wrong: It’s pure myth that brands are “ripping off consumers” because there’s advertising cost built in. Jumping to that assumption is, in fact, purely irrational. What we know about markets is that the leading companies fight hard, all the time, to maintain their place. They aggressively attack costs and have built their businesses well.

    The hubris required to presume that Dollar Shave or Brandless discovered something that these successful big companies haven’t? Ridiculous. Retailers need to watch out for that kind of shallow thinking.

    Neil Saunders
    BrainTrust

    The biggest issue here is that the economics of the business did not stack up. Generally, grocery is a low-margin business that necessitates very high volumes to turn a profit. Brandless’ volumes were simply not good enough to generate a reasonable return, hence the attempts to push up prices – to levels consumers would not tolerate. On top of this, the online model eroded margins still further meaning the company made big losses on every single order.

    The move into retail stores was interesting and could have helped resolve some of the issues, especially as it helped to increase exposure to more consumers. However, in order to be successful Brandless needed to stand out and that means being a brand, which they always claimed they weren’t. The failure to square this circle was at the heart of the company’s issues.

    John Karolefski
    BrainTrust

    Whenever I heard “Brandless” I thought “generic,” and generic deserves its poor reputation. The $3 price point sounded too good to be true. It was.

    Jasmine Glasheen
    BrainTrust

    Here’s the deal. I was a Brandless fan up until I ordered a batch of cleaning supplies from the company. I figured the “cruelty-free” sustainability bent would mean that the cleaning supplies ingredients were relatively harmless.

    I thought wrong. All of the cleaning supplies came in an empty spray bottle with a tiny plastic satchel of pure chemicals that you had to cut open and mix with water to create the spray. I got some on my hand and my skin started peeling in that area.

    While Brandless had a great concept, they failed to correctly balance consumers’ need for low prices with consumer demand for healthy, sustainable product. It’s not easy for DTC brands to achieve profitability. Especially in the wake of similar, eco-friendly brands with a similar business model—brands like Public Goods.

    But as more brands offer eco-friendly packaging through companies like Loop’s zero-waste packaging, the DTC space will become even more competitive. Quality will once again become the great differentiator.

    Craig Sundstrom
    Guest

    I don’t know that this could work even WITH a store presence: the whole point of generics is that you have trust in the seller. Why would any business expect to have (earned) that right out of the gate? The “single price point” only complicated what was already a dubious idea. This wasn’t a retail concept, it was a well funded — if not well enough — psychology experiment.

    Peter Charness
    BrainTrust

    Retailing looks simple, doesn’t it, until you get into the depths of it. Establishing a brand and dealing with costs and margins isn’t as easy as it sounds.

    Trinity Wiles
    Guest

    Brandless’s brand was not having a brand. Ironic, right? To me, the issue wasn’t in brand identity. It was a poor pricing model and a lack of consumer education, which indicates a marketing problem. I honestly don’t hate the idea of Brandless, but the pricing model along with quality control issues made it unsustainable.

    Christopher P. Ramey
    BrainTrust

    Brands matter.

    Retail research may tell you that price is paramount. And customers may incessantly talk price, but they buy brands.

    wpDiscuz
    Braintrust
    "It’s just another example of why stores matter. It’s a proxy for marketing. People see your brand."
    "While Brandless had a great concept, they failed to correctly balance consumers’ need for low prices with consumer demand for healthy, sustainable product."
    "...in order to be successful Brandless needed to stand out and that means being a brand, which they always claimed they weren’t."

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