The Rise and Fall Of Brandless
In July 2017, Brandless came on to the scene as a memorable brand for their product line with prices ranging from $3-$9. So imagine our excitement finding out that this company also promoted responsible sourcing and was cruelty-free, founded by two incredibly individuals Ido Leffler and Tina Sharkey.
Leffler, is a co-founder in other familiar brands like YesTo and Cheeky, while also a heavy investor in the subscription box world. Those look like Birchbox and Dollar Shave Club.
The female counterpart to this team is Tina Sharkey. She was born to create Brandless into a success. Her parents holding important roles in the fashion industry. Father working in garment sourcing and her mother, president of Perry Ellis America. In most of Sharkey's work experience, Sharkey worked in community establishment which made her the perfect candidate to communicate with the people around her, and build a company with items people actually want to see in their pantry.
In 2014, Tina met Ido. And by 2017, they were in business.
I placed my first order with Brandless during their peak time in 2018 and was blown away. I still even have some of their stickers on my laptop. But what happened to their business model? What happened to their quality? What went wrong?
The direct-to-consumer model is not new. It's a budding area in eCommerce; cutting out a middle man to reduce the price of a product. What they were lacking? A sizeable profit margin. As a company who was creating their products in-house, imagine a bottle of high quality, organic olive oil costs $1 to manufacture, including the price of packaging, you're now at about 1.50. Then the olive oil sold for only $3 (a steal), but Brandless has only made $1.50 from this purchase. The company is super happy that you're supporting their business model and wants to offer you the best products in the future! But in a real world, even if they sold 1,000 bottles in one week, that cash wouldn't even be able to pay ONE employee's monthly paycheck.
So why did the original Brandless founder leave?
Pressure. Imagine a company investing over 240million (lets write this out so that the number is a little more intimidating: $240,000,000) in you and your idea, and you have to wake up at 1:30am every morning and bust your ass to make your company profits are valued to that point, and then some, within a few years. Some may say its unrealistic, but that is the world of capital investing. Put that number in comparison to how much you are paid a year. Would you be able to do it? In a company that was losing money to produce high quality products more than they were making money, the only way was out to ensure she didn't receive much of the blow back when it was time to file for bankruptcy in a few years.
Why did they move the prices up?
Here is where John Rittenhouse comes into play. A lot people blamed Rittenhouse's position in Brandless for moving the prices upwards and past the $3 price point the company started at. People are also saying that because he held a higher position at Walmart, his only intentions here were MORE profit. Have any of you been to a Walmart? Have you seen how much cheaper things are at Walmart compared to other stores in the area? Have you seen Walmart's off-brand supply that brings them in more money than selling these larger brands like Bounty and Tide? Rittenhouse's only agenda with Brandless was to make the brand profitable and get them out of debt. If it was up to him, he would've kept the products at Brandless $3 and threw in a free giveaway cruise to tour the world if the company was actually making money.
There is a really huge stereotype that I believe needs to be dissolved in the consumer market, that all companies are bad and have ill-intentions for it's people and customers. As someone who has owned and invested in many companies in the past, I can not disagree with something more. All I've ever wanted to do was first, make sure that my employees were receiving a comfortable living wage. Then, making sure that my customers were getting a phenomenal quality product. The price point that the item has to be sold at in order to understand this is the price to make sure that those two things happen, was my opportunity to communicate to everyone WHY.
What went wrong?
The execution. Brandless did not communicate with their customers that a change was to come. Brandless didn't test the market with its already existing client base to see if their new partner brands were trustworthy to sell along Brandless products. They didn't ask to see if raising the price of the average product from $3 to $50 was a good idea to follow. Skipping all of these steps, led them down a terrible path the company never saw coming.
Going into retail. Have any of you seen Shark Tank? In my 8 years of watching the show, I have never seen a shark get on board with a company similar to Brandless whose idea of "growth" meant moving into the physical stores. The preparation alone for that move was becoming costly for Brandless.
Why'd they get rid of the food?
Space. Not enough warehouse space to house all of the addicting snacks, to make room for the CBD trend that was supposed to take them out of the negative. The snack and food industry is also incredibly harsh, the cost to manufacture goods are at its highest, and selling snacks and pantry goods weren't in alignment with the new company leaders idea of how to make Brandless profitable.
So that's it. Brandless is no longer accepting any new orders, and will finish processing the ones made before their closing. I've been toying with the idea of maybe creating a company similar to Brandless. How does $6 for everything in the store sound? Leave me a message in my contact me section about how you felt during this Brandless journey and what you'd like to see happen in a future store opening that's much similar.
Here are some retailers that are much like Brandless you can shop at in the meantime:
3. Public Goods