Startup “Brandless,” Implements Different Business Model in Online Retailing

Sharon Terlep reported earlier this month at The Wall Street Journal Online that, “A new online retailer is betting it can get American shoppers to break up with big brands from Colgate to Heinz.

Called Brandless, the San Francisco-based startup on Tuesday [July 11] started selling generic, health- and environmentally conscious consumer staples, such as fluoride-free toothpaste and organic agave nectar. Everything will be priced at $3.

“The business model: Cut out supermarkets and traditional marketing, funneling that money instead toward making products that can compete with pricier, name-brand counterparts.”

The Journal article explained that, “The 115 products that will be initially available are generally more expensive than their big-brand rivals. Brandless hand soap, for instance, costs 31 cents per ounce, more than Dial, which goes for about 27 cents an ounce on Target Corp.’s website for a similarly sized bottle.

“But compared with hand soap sold by Whole Foods ’ private-label 365 brand, which has a similar emphasis on natural and healthy products, the Brandless option is cheaper, by about 9 cents per ounce.”

Ms. Terlep also noted that, “Brandless hopes its simple, one-price-for-every-product proposition will be another draw, much like the Dollar Shave Club, which upended the men’s razor market when it introduced a subscription service costing $3, $6 or $9 a month. In a few cases, $3 buys multiple Brandless items, such as a two-pack of organic macaroni and cheese. Shipping is $9, or free for orders of $72 or more. People who pay a $36-a-year membership fee get free shipping on orders of $48 or more.

The trick, industry experts say, will be to convince shoppers that Brandless products are of a high enough quality that shoppers feel like they are getting a deal.”

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