MGR eCommerce Edge Weekly | February 11, 2020
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DTC Darling, Brandless, is Shutting Down: This is Why Strategy Matters
In 2018, Brandless raised $240 Million in an attempt to create a minimalistic and affordable brand that sells everything from snacks to home goods to toiletries. Most items were priced at $3 or $6.
When I first listened to an interview with founder in 2018 on the strategy and vision for the company I thought, “this company is doomed from the start, no way they can succeed at this even if they have $240 Million in the bank.” It turns out I was right, but I’ll admit I definitely didn’t think they’d run out of money just 20 months after launching.
I’ve said it before and I’ll say it again, there’s a right way and wrong way to compete with Amazon. Brandless competed in not just the wrong way, but the impossible way.
To understand how to compete with the behemoth that is Amazon, we must ask “what does Amazon succeed at most, and where do they fall short?”
Amazon is the king of price and convenience, so trying to compete with them on those “features” is a death sentence. If you want to beat Amazon you need to create exclusivity for your brand, products, and customer experience.
Brandless had none of these things, they instead chose to:
- Launch with hundreds of SKUs instead of trying to focus on a solid base of 5-10 and making those products great.
- Their products were not unique at all, the only differentiation they had was the packaging.
- They had extremely low price points of $3 and $6 which would require a sales volume in the billions (if not tens of billions) in revenue to make profitable through eCommerce.
- They had nowhere near the convenience of Amazon Prime for their fulfillment.
- And finally, they created the opposite of an exclusive brand, they were literally brand-less and generic.
I don’t write this with the intention of “dunking on” the Brandless team, I’m sure they had many very bright minds and they will find new, great opportunities soon.
I write this because there are too many companies who are not spending enough time really thinking through their strategy, and it will will lead them to the same fate as Brandless if they don’t change course now.
If a company can blow through $240 Million due to poor strategy in just 20 months, think about how long your bootstrapped company will last if you do the same.
Other Notable Links:
1. The latest on how the Coronavirus will impact US businesses – REUTERS
2. Amazon’s latest investor report shows a shift in strategies and plans – GEEKWIRE
3. How two DTC underwear brands intend to put Victoria’s Secret out of business – GLOSSY
4. Are growth at all cost start ups coming to an end? – MGR
5. Everything you need to know about YouTube ads – MGR