First up, what was/is Brandless?
Brandless raised 240 million dollars on the idea of being the universal place to sell non branded products online and in stores.
Logic
Name brand products costs more.
Pharma products average 80-85% higher over generics.
Food is 15-30% higher.
Hygiene products average about 30%.
And some categories of food can be way higher, like ice cream, which averages 60% higher on store brand/generic.
And if prices are higher, why do people buy name brand?
- Lack of risk. People buy what they trust.
- Advertising. People buy what was sold to them.
- Quality. Brands like Haagen Dazs will normally beat a generic drug store ice cream.
- Vanity. Very few want to look ghetto and have fruit flavored circle cereal, when fruit loops cost $1 more a box.
Brandless realized though that a lot of what people were buying online was name brand and generic products could be just as good, but cost way less.
That said, even after they raised 240 million total in just a couple years, they shut down pretty quickly, ending in February of 2020.
Couldn’t even live long enough to blame COVID.
So here were the problems.
Not understanding how big generics already are.
Costco has 25% of all sales come from Kirkland products, which are store branded, “brandless” products.
Pharma products are also a big example, with 88% of prescription drugs being dispensed as generics, versus only 8% being being branded. That’s also on a massive decline since 2005, where it was 30% branded and now down about 70% in 15/16 years.
Even consumer perception with polls have 42% of consumers say they are more likely to buy generic/store brand over name brand.
This made me look at the founders personally and a problem I saw checking their backgrounds.
Founders
Tina Sharkley
Former president of Baby Center, former president of Sesame Street’s digital division and was high ranked at AOL in the 90s.
Ido Leffler
Founded multiple successful companies like Yoobi and strong corporate background.
This is a really common founder problem, where I feel like they were to some extent out of touch.
My guess is the idea for Brandless was reading some consumer reports on cost gaps in brand v generic products and living lifestyles, where they personally never bought generic.
I don’t think they realized when creating the company how many store/generic products exist and they added little value.
Costs
The word “brandless” means it’ll cost less money to 99% of people.
E-commerce is a low margin industry where even Amazon only has a margin of 7-8%.
Retail also isn’t very good, where Walmart made 13.7 billion in profit in 2020, on 523 billion dollars.
The margins on e-commerce & retail are already bad and Brandless launched as company where they said they were going to be worse.
They didn’t offer any unique ideas to save money on advertising, distribution, manufacturing or anything.
They just made a commitment to make less money.
They aren’t the cheapest option
More and more manufacturers are setting up sites, skipping the middle men and selling directly.
Brandless short of raising billions to sell all their products in house, they’d never have the cheapest products around.
Final thoughts
Brandless did actually return.
The company was taken over under new management, relaunched and raised 118 million.
I don’t actually ever see the company working, but I think this idea is a product of living of data sheets and consumer reports over actually living.
Anyone can just google and find that almost every large retailer has a store brand which makes up 20-50% of sales or check Amazon/Walmart and find tons of generics for sale.
I genuinely think the problem here was a room of people who make over $200,000 a year thought it’d be cool if they could buy cereal that wasn’t branded and never looked down the aisle to realize that was already for sale everywhere.