Reimagining Modern Consumption: Brandless

Reimagining Modern Consumption: Brandless

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Arti Dhar

MBAG 8571A: Marketing Management

Fall 2017 Final Paper

Table of Content

1. Introduction  ……………………………………………………………………………  3

1. 4 “P’s” of Brandless: A Company Overview  …………………………………  4

1. Market Potential: Trends in CPG  ……………………………………………….  9

1. SWOT Analysis  ………………………………………………………………………..  11

1. Recommendations  ………………………………………………………………….   14

1. Appendix  ………………………………………………………………………………..  17

I. Introduction

The rise of Amazon has left Consumer Packaged Goods (CPG) companies at a crossroad. Or rather, two crossroads. First off, e-commerce is no longer optional for CPG companies. While the pace of growth for overall retail sales has been slow, the digital portion of sales continues to expand rapidly, as evidenced by market research company eMarketer’s projections (Appendix; Figure 1). Internet sales represented nearly 10% of total worldwide retail sales in 2017, and is projected to constitute nearly 16% of all retail sales by 2021.^[1] Yet, CPG players have been relatively slow on getting onto the e-commerce bandwagon. According to IRI, even in the U.S. which is ahead of the curve, ecommerce constituted a mere 8% of all CPG sales in 2016.^[2] However, in the same report, internet sales is expected to make up approximately 11% of CPG sales by 2022, hitting nearly $88 billion in revenue.^[3] Second, consumers are becoming increasingly less loyal to specific brands. There is a growing consensus amongst industry thought leaders that brand-name loyalty is diminishing, especially amongst millennials. With consumers now having a huge array of personalized products and services to choose from right at their fingertips at all times, consumers value brand connection to the products they purchase less than other factors like price and quality.

Brandless is a CPG start-up that is attempting to address both the industry trends or gaps outlined above. Launched in July 2017, Brandless is an online-only, consumer goods retailer that sells ‘unbranded’ products all for $3 apiece. Positioning itself as the “next Procter & Gamble for millennials,” Brandless’ value proposition is simple: better products for less money. By eliminating “brand tax” and inefficiencies in the supply chain, Brandless is able to sell “mostly organic,” gluten-free, vegan, and environmentally and fair trade friendly products at a forever discounted price of $3.

This paper will attempt to evaluate Brandless’ current marketing plan by unpacking the company’s product, price and targeting strategies, its competitive environment, as well as general CPG industry trends and consumer behavior. This paper will then provide recommendations to Brandless on steps it should take to become a viable and profitable venture in an extremely dynamic and competitive sector.

II. 4 “P’s” of Brandless: A Company Overview

Product: Brandless was conceived in 2014 by two experienced and savvy entrepreneurs Tina Sharkey (who co-founded iVillage) and Ido Leffler (who co-founded Yes To products) on the premise that consumers shouldn’t have to break bank to buy healthy, natural, organic products. By ditching branded goods altogether and selling directly to consumers, according to them, that is possible.

For the past three years, Brandless rigorously vetted, tasted and sampled hundreds of formulations to create a collection of products that span six categories: food, household, beauty, personal care, home & office, and health.^[4] Brandless launched in July 2017 with 115 packaged, non-perishable basic items, under the six categories, such as dish soap, coffee, peanut butter, cookies, body lotion, corkscrews, kitchen linen, toothpaste, and measuring spoons. While it has plans to add more items to its inventory (as of August 2017, Brandless is selling just over 200 items), according to co-founder Sharkey, “it’s overwhelming to use a web service with a database of millions and millions of products to figure out the ones you want, how to shop, how to identify the values. Brandless is about limiting the choice. It’s about curating the just what matters.”^[5] Which is why there is only one choice for any item you’re looking for on the Brandless website.

Brandless’ minimal labeling is slightly reminiscent of the generic, no name brands of the 1970s and 1980s, which were heavy recessionary periods (Appendix; Figure 2). All  Brandless products come in different single-color packaging with a white box in the middle that contains a checklist of key product descriptors and “values” front and center on the packaging.^[6] For example, their bottle of dish soap includes ‘EPA Safer Choice Certified, Nontoxic Formula, No Dyes, and Removes Grease.’ Similarly, their can of tomato sauce just contains ‘Organic, No Artificial Colors, No Artificial Flavors, and No Artificial Preservatives’ (Appendix; Figures 3 and 4). While a Brandless logo doesn’t feature prominently on the packaging, each checklist in the white box does end with a trademarked “BrandlessTM.” According to Co-Founder Sharkey, the descriptors in the white box for each product are chosen based on data about successful products and household penetration, research, and focus groups by group of Brandless employees knows as the “white box council.”^[7]

 Though their name might belie it, Brandless doesn’t consider itself “anti-brand.” In fact, it calls itself unapologetically a brand (evidenced through their smart trademarking). According to them, they’re just attempting to “redefine what it means to be a brand.”^[8] It seems Brandless has managed to achieve a tremendous creative feat that might appear counterintuitive on the surface - ‘branding’ themselves in a way that panders to millennials’ aversion to specific brand-name commitment, while at the same time cementing their own brand.

Price: The big innovation, at least for an online retailer like Brandless, is that it’s able to make a wide range of household staples available at single price of $3. Brandless is able to do that for a number of reasons. First, it stripped away what it likes to call BrandTaxTM, interestingly another term trademarked by the company, to explain the costs associated with marketing dollars that went into establishing product association in consumers’ minds. Big CPG manufacturers like P&G, General Mills and Unilever spend huge amounts of money on marketing specific products, as compared to private-label in-store brands. Consumers are constantly bombarded with massive TV campaigns, Super Bowl commercials, billboards, and cross-promotions of items like Old Spice (P&G), Dove (Unilever), and Cheerios (General Mills), all designed to get customers to buy it off the shelves during their next supermarket trip or next Amazon order.

Second, by adopting the direct-to-consumer model, Brandless is able to cut the stocking fee that name brand manufacturers have to pay retailers like Walmart to get shelf space.^[9] It also saves on all “middleman” expenses that are generally charged by wholesale distributors to transport the products from the manufacturer to their final destinations. Third, by limiting its inventory to just a couple hundred items, Brandless is able to minimize inventory holding and other logistics expenses.  By circumventing all these costs that are usually passed along to customers, Brandless is able to price products at, what it claims to be, an “average of 40 percent less than competitors.”^[10]

        The $3 price was chosen because the co-founders saw it as a middle point between value and quality.^[11] For example, a regular Dial hand soap on Target.com retails for less than $2 dollars while Mrs. Meyer’s organic soap is closer to $4. Brandless’ strategy is to fall squarely in between the two.^[12] And some of the cheaper items on Brandless.com, like lip balm, napkins and dish cloth, are bundled together to reach a fair price. Having said that, Brandless doesn’t claim to save you tons of money. For them, it’s about selling quality without the exorbitant prices.