Brandless

Overview

Brandless is a recently launched consumer packaged good eCommerce startup.  Think of it as Trader Joe's meets The Dollar Store meets Dollar Shave Club.  They have impressively launched with several hundred privately packaged and curated core basic consumer products (think toothpaste, household cleaning supplies, salad dressing, etc.).  They also have a flat price guarantee across all their products of $3.  Similar to other newly successful consumer brands such as Tom's Shoes or Warby Parker, Brandless has a philanthropic component to its business with the company donating a meal for every order.  

The company plans to keep its costs down by only distributing online and never selling more than several hundred SKUs at any given time with a very limited selection of each product type.

At launch they offer their B.More membership program likely inspired by Amazon's Prime program for $36 to get faster and free shipping options.  Creatively, as a membership perk they double the meal donations per order sent to homeless shelters and upon joining donate 10 meals.

Brandless is based in San Francisco and Minneapolis and was launched in July 2017.  The founders, Tina Sharkey and Ido Leffler, are serial entrepreneurs with decades of consumer brand experience.

Why I like Them

Brandless is the convergence of several interesting trends in consumer packaged goods (CPG) - the rise of private label brands, direct to consumer, value in the form of low price for quality, businesses that give back, and simplicity (in packaging, choices, and the product itself).  Ironically, of course the company seeks to integrate all of these simultaneously by creating their own anti-brand as it were with a logo of a white blank space (trade marked of course!).  The company is specifically designed to incorporate everything the millennial demographic looks for in consumer products today and it is obviously this customer they are laser focused on.  The founders read every marketing study done on millennial consumers and custom built a company that checked the box on each finding.

Looking at the larger picture it will be fascinating to see how Brandless does against the Amazon and Walmart.coms of the world. My hunch is that they will find limited success, perhaps with certain product categories their brand becomes known for, but quickly learn eCommerce and consumer packaged goods are a hyper competitive industry in this day and age.  I predict their customer acquisition costs will be shockingly high on a unit economic basis and their lack of pricing power (one of their brand promises at launch is everything is $3) will greatly hamper them.  Doing some basic price comparison of their products revealed they aren't cheaper than equivalent competing brand products on many of their offerings. 

Also, one of the big things consumers now look for online is free shipping (the single biggest draw of Amazon's Prime membership) and at launch free shipping only occurs for orders above $72, requiring at least 24 purchased items.  Otherwise shipping is an expensive $9, discouraging those who want to order a handful of  items.  This seems like a large flaw for a company who's only distribution channel is online and is creating a consumer facing brand from scratch.

Overall, I strongly applaud their innovative business model of attempting to combine every CPG trend into one company but suspect they are trying to many things at once.  I predict they will ultimately be forced to abandon the every item is $3 policy, as well as adjust their shipping rates and policies at a bare minimum.  

It will be a fascinating study in the next generation of CPG but I remain skeptical.

Disclosure:  All information is from publicly available sources, I have not had any contact with a member of the company or its investors.

What I Find Interesting in Mary Meeker's 2017 Internet Trend Reports

Annually (and sometimes twice in a year) Mary Meeker of KPCB releases a data packed look at the state of technology, the Internet, various industries, and the Macro picture.  This year it weighs in at a hefty 355 slides which you can see here.  There are already several excellent summaries of the deck with the quick summary  and a longer version.

Some points that drew my attention:

• We are finally at the tipping point where global Internet ad spend surpasses TV ad spend.  I'm surprised that it took us so long to get there.
• The war between online advertisers and ad blocking is just beginning with most developed countries ad blockers being used by less than 20% of the population and less than 5% of mobile users.  Many more battles will be fought here in the coming years.
• Voice is finally starting to noticeably catch on as a user interface both in mobile and at home consumer electronics (i.e. Amazon echo and competitors).  It is likely that the GUI will be to Generation Z what the command line was to the Millennials - a relic of a past age. 
• The fast rise of eSports which is a trend I've had my eye on for several years now.  In the not to distance future it is not to hard to see the eSports becoming as mainstream as traditional athletics.  Far more to come on this from me.
• The continued ascension of Netflix toward dominance in the media industry over the traditional old guard.  I would not be surprised if there is an acquisition attempt or several of Netflix in the next few years and would wager there has already been a few that were rebuffed quietly.
• An exponentially Increasing threat of cybercrime - black hat hackers are the modern day equivalent of the high sea pirates of the 17th century.
• The first few slides of her USA Inc. section really help spell out the current state of the United States government financial situation.