Does it pay to be simple and cheap?
An American e-commerce company that manufactures and sells food, beauty, personal care products, and household supplies just won $240 million to fight Amazon on its price and quality.
This startup is called Brandless. You may have seen some of its advertisements on Facebook and Instagram. The company was founded in 2012 and is headquartered in San Francisco.
Brandless sells around 300 items on its website. All the items are generic household items that tend to be used every day. They’re the type of items that you know you need but hate buying. Or maybe not hate buying but instead make you contemplate if you should splurge $5 on a bottle of multi-surface cleaner or go for the generic brand.
Source: Brandless.
The minimalist marketing makes it appealing. But what’s even more appealing is that almost all the items on the Brandless website are $3 each. How is the company able to sell high-quality products without the overhead?
Well, it cuts out the middleman and ships its products directly to the customer. And this means that you won’t have to pay for any markups between the supplier and the retailer…
There’s a New Brand in Town
Brandless prides itself on providing high-quality products to its customers. Its founders Tina Sharkey and Ido Leffler noticed that something was changing in how consumers behave toward brands. They noticed that big-name brands were starting to struggle.
Sharkey commented on the changing customer in an interview: “The false narrative of modern consumption, that brands have created and products have created, was actually dying a fast and painful death.”
She added that customers were starting to shop based on value. If they preferred organic or non-GMO products, then those were the products they’d seek out.
So, both founders wanted to make a business that represented value and would create a community, as well. This made their company more than just a business but also a brand that consumers could trust and value…
Brandless Valuation Just Got a Boost
The company launched on July 11, 2017. Fairly new to the e-commerce industry, the company has an intention that could attract a lot of customers. Brandless wants to make the items that it sells on its website accessible and affordable for more people.
Everyone deserves to have the option of items that’ll be better for the environment or better for their health. There isn’t a reason for a certain item to be marked up at a higher price target just because it’s a trending item. The company believes in high-quality products at simple and fair prices.
Brandless wowed SoftBank Group CEO Masayoshi Son. On July 31st, Brandless announced that SoftBank’s $100 billion Vision Fund had invested $240 million into the company. This deal takes Brandless’ valuation to a little over $500 million.
The company is shaping up to become a big player in the online shopping realm. But it might not be a direct competitor of Amazon. Sharkey says, “Amazon is the everything store.” Whereas, Brandless is “a highly curated collection.” The companies are different, but they’re both competitors in a growing e-commerce market.
And it’s a market that’s gradually shifting toward innovation rather than brand awareness. Before the rise of e-commerce, people were shopping and buying products because they were familiar with the brands. They believed in brand loyalty. But now, that trust has been lost. Now, it doesn’t matter if your grandmother always bought a certain brand. It’s instead about the value and quality of products.
Consumers want to get what they’re paying for. And they want good products. It’ll be an interesting next few years as the e-commerce market gets more competitive and consumers get even more selective.
Until next time,
Jennifer Clark
Pro Trader Today