Brandless' all private-label model to challenge retailers
A new online all-private label consumer goods retailer opened a web shop on Tuesday, with items from soap to kitchen essentials selling for $3 apiece.
Brandless was incubated by Sherpa Capital, founded by serial entrepreneurs Tina Sharkey and Ido Leffler, with product development led by Rachael Vegas, who worked Target for 15 years, according to TechCrunch. The company is headquartered in San Francisco and Minneapolis.
The venture got seed funding from Cowboy Ventures and Slow Ventures, Redpoint led the company’s Series A round, and NEA and GV closed a $35 million Series B round just ahead of the company’s launch, TechCrunch reports.
Brandless is taking a few pages from legacy retail: its $3-across-the-board price tags on every item recalls dollar stores’ origins, its slimmed down assortment follows the no-frills German model ala Aldi, Lidl and Trader Joe’s, and its spare labeling resembles the old days of generic labels, before grocery stores brought more design to their private label lines.
All that, plus it’s an online-only retailer. A promotional code to celebrate the company’s launch garners a special $3 shipping rate, but delivery options on the regular consist of just one: a one-item order garners FedEx ground, taking two to four days, at $9. It's not clear if shipping prices would rise with bulkier packages.
Notably, the company doesn’t employ any “secret sauce” algorithm like Jet, which offers a host of ways for shoppers to save money, like delaying their shipping, combining their orders or giving up the ability to make a return. In fact, much like its label design, the emphasis appears to be on simplicity. Brandless in a company blog post says its low prices are thanks mostly to “hacking” what it calls a “brand tax,” “the hidden costs you pay for a national brand often associated with production and retailer margin.”
“We’ve been trained to believe these markups increase the quality of the product, but they rarely do,” according to the company. “And those markups seriously add up. In fact, you pay an average of 40% more to have a big-name brand on the label.”
This leverages the hatred many consumers have for a “tax” of any kind and, like direct-to-consumer brands such as Harry’s grooming supplies, is the latest challenge for retailers and consumer brands already battling intense price competition and the robust fulfillment and private label efforts from Amazon. The effort could be an answer to what Matt Sargent, senior vice president of retail for Frank N. Magid Associates, says is an emerging backlash against huge assortments that are overwhelming to some shoppers.
"Costco has actually done this for a really long time and done it successfully," Sargent told Retail Dive. "I think they’re on to a trend. How they execute it I’m not really sure, but I’m really intrigued by their approach of curating an assortment. As we’ve seen from Trader Joe’s and Costco it can be successful, but the question is, is there a space for it online? Could this be a way to deliver cost efficiencies that even an Amazon can’t match with its brand?"
Brandless could be more appealing to Walmart shoppers, who, compared to Target or Amazon customers, tend to buy on price and convenience rather than brand or experience, but who so far have largely resisted online shopping, he said. The murky shipping details on the Brandless site, though, could be a turn-off, Sargent warned. "Unless they are up front about their shipping, that will be a hiccup for them," he said. "That could really frustrate somebody who’s frustrated with the [online buying] process in the first place. If they don’t make it super simple, they’re walking a very thin line."
- company blog post Brandless : Open for Business
- TechCrunch With $50 million in funding, Brandless sells everyday essentials for $3 each
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