Tina Sharkey and Ido Leffler don’t like to pay the brand tax.
According to these two serial entrepreneurs:
BrandTax™ is the hidden costs you pay for a national brand. We’ve been trained to believe these costs increase quality, but they rarely do. We estimate the average person pays at least 40% more for products of comparable quality as ours. And sometimes up to 370% more for beauty products like face cream. We’re here to eliminate BrandTax™ once and for all.
Sharkey served as CEO of Johnson and Johnson subsidiary BabyCenter and had also co-founded the online media company iVillage. Leffler, meanwhile, has found some consumer brands, including Cheeky, YesTo and Yoobi.
Unbranded products aren’t new. But their Business Model is.
Over the last three years, Sharkey and Leffler have set out to build a collection of products that span categories including non-perishable food, cleaning supplies, health and beauty products, personal care items and office supplies.
In the food category, for instance, it sells everything from canned goods to salad dressings and sauces to snacks and candies to coffee, all priced at $3 a piece. Housewares include measuring spoons, can openers, corkscrews and a selection of knives, while cleaning supplies include all-purpose cleaner and dish soap. And on the health and beauty front, Brandless sells everything from toothpaste and mouthwash to hand soap and body lotion.
Remember NoAd suntan lotion? Brandless isn’t an original idea (Think Dollar Store, Dollar General, etc.). But they are trying to change how consumers buy goods.
And, with new distributions channels like Facebook, Twitter, Instagram and YouTube, it is easier to sell directly to consumers. Without the store. Without all the added markup and cost. Everything they sell is $3.00
The Big Picture
They believe that almost every consumer packaged good sold could be less expensive. Companies add huge markups to promote their brands and retailers have to add 30-40% to make money on what they sell. Selling directly to the consumer allows the removal of inefficiencies from the system of buying goods.
We Buy For Different Reasons
Some product purchases are transactional while others are emotional. In some categories, we buy out of habit because we always bought (TIDE, CREST or FOLGERS). Many consumers buy private label or store brands, so created a brand or a non-brand, is a clever play in the space.
With billion dollar valuations for companies like Dollar Shave Club and Jet.com, it is clear that this business is challenging the way the CPG world works. With a simplified product line, they can sell the essentials and reduce choice, complexity, and cost. Target, for example, has thousands of SKU’s in the canned aisle. The consumer is paying for all of that choice.
By selling direct, Brandless can bypass all of the BrandTax that can get in the way of bringing value to customers.
Branding Lessons from Disrupting the Model
- Is there a place for a white label or store brand in your category? Would it create more or less perceived value from your target audience?
- What roles does brand play in the choices your customers face. Could “generic” make it simpler to buy coffee than if you were selling a fancy, expensive branded coffee experience?
- Most CPG companies don’t have any relationships with their consumers. They sell THROUGH stores but don’t build connections WITH consumers. Brandless is turning traditional CPG model on its head.
- By selling everything at one price, you position your brand as a place on the price/value continuum. No one expects to buy expensive, luxury goods at $3.00 Price is a powerful trigger of value. For Brandless, it solidifies their brand position.
Would you buy products from Brandless and eliminate some purchases at your favorite grocery chain? How attached are you to the brand image versus the product inside?
I”ll be watching to see how successfully it scales and how retailers respond and react to this new challenge.
Brandless has the potential to be a big disruption.
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Photo courtesy of Brandless