Retail

SoftBank-Backed Brandless Goes Bust

SoftBank Vision Fund

For its three years in operation, Brandless generated no shortage of buzz with its concept of “private label for less” and the idea that the best brand is no brand at all.

The secret sauce, according to then-CEO Tina Sharky when PYMNTS spoke to her in 2017, was its elimination of what she called “the brand tax,” which typically pushes up prices on brand-name beauty products and household goods by as much as 30 percent. Instead, Brandless launched with a universal and unvarying $3 price point and an unwavering conviction that given a choice, a consumer would want a simplified and streamlined option for the purchase of household, personal care, baby and pet products.

But while many consumers did — and the firm was at times was called Proctor and Gamble for the millennial generation — as of this week, Brandless announced on its website that it is shutting its doors, ceasing its sales, turning out the light and singing off for good.

“While the Brandless team set a new bar for the types of products consumers deserve and at prices they expect, the fiercely competitive direct-to-consumer market has proven unsustainable for our current business model,” the Brandless site stated.

So what went wrong?

The beginning of the end for Brandless would have been almost impossible for anyone to spot — since it was a massive infusion of funds via SoftBank’s $100 billion Vision Fund to the tune of $240 million. The Vision Fund has also been behind other high profile funding of other high profile start-ups, most notably WeWork and Uber.

A little under a year after the investment, however, managerial turbulence set in. The firm’s Co-founder and CEO, Tina Sharkey, departed (though she remained on the company’s board)  and was replaced in the role John Rittenhouse, the former chief operating officer of Walmart.com, who took the job in May 2019. Under his leadership, the plan for the brand was to pivot into higher-margin, bigger ticket products such as CBD oil and move Brandless onto store shelves. The goal was profitability by 2023.

And the game of executive musical chairs was only part of the problem. According to reports, Brandless was also under tremendous pressure to achieve profitability from SoftBank — a mark it never actually crossed — but the efforts to do so reportedly cause massive operational issues. The firm found it was losing an ever-increasing amount of money to the high cost of shipping, and any attempt to raise prices to $9 on some items (away from their traditional $3) cause depressed sales. Moreover, because of the set-up of its deal with SoftBank, it was only paid out investment funds when specific markers were cleared. Because Brandless had more difficulty than expected clearing those markers, it never actually received the full $240 million. Facing a growing cash crunch —  and trying to streamline its operation — Brandless laid off 13 percent of its staff last March.

Unfortunately, it didn’t make enough of a difference, and by December 2019, Sharky had quietly stepped down from the board and Rittenhouse announced leaving the role of CEO. The firm’s Chief Financial Officer Evan Price stepped into the CEO role again, after an interim stint between Sharky and Rittenhouse. After about a month of meetings between Price and the remaining member of Brandless’ board, the decision was made that it would be better to shut the firm down now while there was still enough money left to pay out severance for its employees, according to reports in Protocol.

“I’m proud of what we created at Brandless and the hard work and dedication of everyone on the team,” said Brandless’ Price in an email to Protocol. “Brandless set a new standard in the wellness and sustainable products industry, and while we weren’t able to compete competitively in today’s DTC market, I’m confident the next great brands of tomorrow will be built from this experience.”

And it is true there is no shortage of other brands hoping to take up the Brandless mantel and make it work where Brandless could not. Public Goods, for example, launched at roughly the same time as Brandless with a similar offering — household, personal care and grocery items — in minimal packaging and only offering one version of everything.  You may not have heard of Public Goods because its growth trajectory has been much, much slower than Brandless’ was — raising only $3 million in 2018 to Brandless’ $240 million.

But while the start-up community loves to move fast and break stuff, it seems that in this instance, Brandless was perhaps broken by moving a little too fast. Public Goods, on the other hand, is still out there — living to fight the simplified goods fight for another day.

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