4 startups that go head to head with Amazon and Whole Foods
Despite the convenience, millennials really don't want to buy everything on Amazon, writes Alexa Binns of Borden Binns.
Editor's note: The following is a guest post from Alexa Binns, a retail consultant at firm Borden Binns. Thrive Market is among the brands in Borden Binns' portfolio.
Customers looking for affordable "better-for-you" essentials (dish soap, toothpaste, coffee) suddenly have a slew of options. Amazon has dropped prices at Whole Foods as much as 43%. Meanwhile a handful of popular young e-commerce businesses are going after the millennial shopper, promising "Whole Foods at wholesale prices."
Here are four startups suddenly head to head with Amazon and what sets them apart to potentially succeed.
Founded in 2013, Boxed ships bulk with zero subscription fee. Think Costco without the annual membership or real estate. Traditional brands (Cascade, Crest, Dunkin’ Donuts) are their top sellers, however, Boxed offers popular natural brands (Seventh Generation, Tom’s of Maine, Newman’s Own) at a steep discount too. Their private label, Prince & Spring, is priced great but isn’t particularly green. Where they have taken a stand is pricing women’s products like razors and deodorants the same as men’s, despite an industry standard "pink premium."
While Amazon is focused on driving purchases regularly (i.e. Subscribe & Save) and often (i.e. 1-Click ordering, the Dash Button, and Alexa), Boxed can distinguish itself by encouraging customers to stock up on their essentials and order as needed. Given the success of Costco, customers automatically understand the value of buying in bulk and may prefer to spend less time clicking.
Launched in 2014, Thrive Market ships better-for-you products at 25–50% off in exchange for an annual membership fee. Think about it like an e-commerce version of Costco that sells natural brands in normal sizes. They carry a range of established and mom-and-pop brands as well as their own private label. When a customer joins, their purchase sponsors a second free membership for a low-income family.
While Amazon has the widest offering, Thrive Market can compete by offering the most quality assortment. Thrive Market serves as a filter, surveying the growing ecosystem of natural brands and selecting the best in class. Rather then spending time comparing labels and reading reviews, the conscious shopper can rely on Thrive Market to do her homework for her or him.
July of this year, Brandless came online with their assortment of natural essentials. Like the Casper of commodities, Brandless offers lower prices by selling direct to consumer. Across household supplies, personal care, and grocery, their own-brand products are priced consistently at $3 per unit. Their optional membership includes a few perks like cheaper shipping and additional give-back. Every time a customer makes a purchase with Brandless, the company donates a meal through Feeding America; for members, it’s two meals.
Compared to Amazon in general and Whole Foods 365 in particular, Brandless is way more hip. Amazon is not the powerhouse you’d pick to build a cool B2C millennial brand like Casper. 365 by Whole Foods has gotten a little brand facelift, but that familiar 365 Everyday Value logo looks something like the carpet of a children’s hospital. Meanwhile Brandless is clean, personable and touts an enlightened business model. Customers will be attracted to the company that feels relevant and modern. Brandless represents everything new; Whole Foods is ironically having to catch up.
4. Public Goods
Coming off of a successful Kickstarter, Public Goods is offering their natural goods at cost with a membership fee. Kinda’ like Brandless, if they did away with their small margin and big colors. Originally branded Morgan’s, Public Goods private label claims to be on average 60% cheaper than Amazon (they may need to rerun that number). The majority of their products are manufactured in the U.S. Their website is now live with 10 SKUs in personal care.
This is the only company offering products at cost rather than wholesale pricing. To help convey this differentiator to the customer and really connect the dots between them and the manufacturer, Public Goods may want to adjust their listed prices and put their manufacturing partners front and center. Their pricing list now shows prices ending in .25, .50, .75, but true production costs don’t step in quarter increments. Additionally, millennial shoppers are attracted to the idea of trading directly with the manufacturers of their goods. Customers may choose Public Goods if they’re truly convinced their paying what it costs a manufacturer to make the thing and feel like they’re supporting good businesses and good jobs.
The bottom line
With historically high prices, Whole Foods (sometimes referred to as Whole Paycheck) was rather ripe for competition. But with their recent acquisition and these new e-commerce businesses gaining speed, there are suddenly a lot of places to buy affordable natural essentials online.
Where will customers end up buying their eco dish soap online?
Amazon now accounts for over 43% of all online sales. Despite the convenience, I’m bullish that millennials really don’t want to buy everything on Amazon. I believe these younger companies can offer something that Amazon can’t. For startups that sound pretty similar, though, it ultimately comes down to whether they can communicate to consumers what makes them better.