Brandless, an e-commerce startup that originally sold all of its “brandless” products for a single fixed price point of $3, has officially closed its virtual doors. When Brandless launched in 2017, it reminded me of the early 90s romantic comedy “Singles,” which has this scene during a Seattle grunge concert where a guy starts hitting on Kyra Sedgwick’s character. The pursuing guy claims “he doesn’t have an act and that he was just being himself,” to which she responds that she “thinks that he has an act and that not having an act is his act.”

In my opinion, not having a brand was Brandless’ brand. The “brandless” concept attacked the so-called “brand tax,” which includes costs associated with fancy packaging, expensive marketing, inefficient distribution, and bloated retail margins. Brandless’ closure presents an interesting irony, as the concept of retailers offering cheaper alternatives to nationally recognized brands has never resonated stronger with consumers. Brandless was certainly on-trend, but that wasn’t enough in today’s hyper-competitive market.

This article will explore several lessons that e-commerce executives at major CPG brands should take away from the meteoric rise and fall of Brandless.

Don’t Play Amazon’s Game

Brandless built its business on low prices and convenience. The problem is that Brandless played Amazon’s game on Amazon’s home field. Amazon has famously built its retail flywheel around those same features (plus many others like selection), but it is leaps and bounds ahead of any effort Brandless was able to put to market. If a business wants a surefire way to close its doors, it should compete directly against Amazon’s strengths.

Lesson: CPG brands should consider where Amazon falls short in the market. Align your business towards creating exclusivity in your brand story, product innovations, and customer experience to stand out in the market against Amazon.

Leave Room for the Loudspeaker

Brandless was caught in a Catch-22 situation. The CPG market is arguably the nosiest (and/or most competitive) it has ever been in its history. That is certainly scary, but it pales in comparison to the fact that tomorrow and every day thereafter will be increasingly nosier and even more competitive. The fastest way to cut through the competitive noise is to spend big on marketing, but that didn’t align with the Brandless pricing model, which only left razor-thin gross margins. This created a predicament, since Brandless needed marketing to create awareness, but it also couldn’t be profitable at its current scale.

Lesson: CPG brands looking to sell through digital channels today must know their numbers. With rising customer acquisition costs (CACs) from fiercer e-commerce competition, brands must understand how small changes to those calculations could cause major issues with profitability.

Don’t Be “Too Cheap”

This lesson is focused on the importance of properly aligning price points and product features in the consumer’s mind. When Brandless first launched, the product assortment had a single fixed price point of $3. Now, if you consider the arbitrary number of $3 in a vacuum, it doesn’t set any alarms off in your head. The problem develops when you start to consider some of Brandless’ product propositions. Brandless products were often advertised as organic, “healthy” and sustainable. If you combine the $3 fixed price with those premium product features, you tend to draw skepticism from consumers.

Lesson: There is actually a pricing threshold that can make your CPG products “too cheap” in the mind of a consumer. Brands should consider the Van Westendorp Price Sensitivity Meter when they are looking to set a range of acceptable prices for their products.

Don’t Be the Fastest Jack of All Trades

Regardless of the product category, competition in the CPG industry today is downright tough. Brandless quickly grew its “private label” assortment to everything from tomato sauce and cotton balls to spatulas and even shave gel. Though I didn’t see it the last time I was on the Brandless website, I wouldn’t be surprised if they also started selling canvas prints that had corporate mantras like “Time is money” written in a shiny golden font. The speed of product development at Brandless was unfortunately combined with a lack of focus and quality, which left the startup doing everything mediocrely well.

Lesson: CPG brands that try to appeal to everyone often end up appealing to no one. Instead of offering every product under the sun with mediocre value, brands would be best served to focus on a smaller assortment of products that they can build advocacy around before quickly jumping to the next set.

One Size Fits All is Yesterday’s News

Today’s consumers have so many shopping choices that it can cause massive headaches. Think about the last time you bought household items online; you likely had to choose from a variety of different sizes, scents, formulas, brands and even pickup and delivery options. Those choices can certainly cause some decision fatigue; on the other hand, however, having a retailer dictate a single acceptable way to shop might cause a consumer’s head to explode. Brandless had a simple pricing model, but that simplicity didn’t match how consumer’s shop for CPG items through pure-play online retail. By basing the individual unit’s quantity, volume or overall size on how well it fits the $3 fixed price point, it made it impossible to reward customers for bulk purchases or give them incentives for stocking up on products they loved from Brandless.

Lesson: Selling the same assortment online and in stores is a recipe for disaster for CPG brands. To be successful, product offerings must align with the natural way a shopper behaves in a specific sales channel.

Conclusion

While hindsight is closer to 20/20 vision, it’s difficult to know for certain if any of the different strategic paths outlined above could have actually “saved” Brandless. The “brandless” movement, in its basic form, is growing in popularity with an increasingly larger customer base. For those readers who are interested in seeing how this trend might play out with a different startup, consider looking into Public Goods.