This online supermarket is sort of a (three-) dollar store crossed with a Trader Joe’s
A new online grocery store is setting itself apart by ditching fancy labels and complex price tags.
Brandless, a San Francisco-based startup from serial entrepreneurs Tina Sharkey and Ido Leffler, sells everything from snacks and meal kits to toothpaste and cleaning supplies at the same price: $3 per item.
As the name of the company suggests, all of the inventory comes in spare, generic packaging marked only with an individualized checklist of moral or health-conscious "values," like whether it’s organic, gluten-free, or non-GMO. The site currently stocks 115 products that span food, household supplies, and beauty and personal care.
Just days into the site’s official debut this week, it’s already raised $50 million in pre-launch funding from investors including Cowboy Ventures, New Enterprise Associates, and Redpoint.
The goal is to offer a quality, bargain-bin alternative to a burgeoning online grocery space in which convenience or niche focus often come at the expense of savings.
How does Brandless plan to do so without succumbing to the tradeoffs and compromises that usually come with dollar-store prices? The key is something Sharkey, the CEO, calls a "brand tax."
That’s the mark-up most retailers and vendors charge for the value added by their brand name and all of the connotative meaning with which consumers have been primed to associate it. The cost reflected is the marketing dollars that went into establishing that association in shoppers’ minds.
"If we could eliminate that brand tax because of the inefficiencies in a system that was built hundreds of years ago really," Sharkey says of their formative thinking, "then we could actually offer tremendous value to be able to shop the values you care about at a value that would blow the doors open to a much broader swathe of the American population."
Name-brand labels aren’t the only frivolity Brandless carved out for efficiency’s sake. Each of the products also comes straight from the manufacturer, whom Sharkey says the company works with extensively to ensure that every item is more or less distilled into its most elemental form. Everything’s then shipped directly to customers.
That may sound like just common sense, but Sharkey says that kind of simplicity is rare in the industry. More often, middle-men such as wholesalers, vendors, and shippers weigh on retail supply chains, each with their own added cost of business.
"How something leaves a factory and makes its way to a consumer—it has to go through all these channels," she says. "And those channels end up adding on lots and lots of costs."
Then there’s the premium that can be charged for the laundry list of attributes savvy modern consumers tend to care about—whether or not a bag of coffee beans meets fair-trade standards or a bottle of soap was tested on animals. Brandless considers those ideals built into the price rather than a means to charge more.
The result at the end of the day is a shopping experience cheap enough—an average of around 40-percent less than comparable goods by Brandless’ own estimates—to reach a stratum of coupon-cutting customer that’s currently underserved in the web’s virtual grocery aisles, Sharkey says.
Conceivably, there’s a lot of opportunity in that segment; only around 1 percent of retail grocery sales currently happen online, according to the U.S. Census Bureau. Along with perishable food safety, price is one of the most commonly cited concerns among people who are hesitant to go digital.
The company also wants to eventually prioritize "food deserts," areas of the country singled out by the U.S. Agriculture Department as lacking affordable produce and other fresh goods due to sparse supermarkets and other providers. Sharkey says she’s proud that in the site’s first 48 hours of operation, orders poured in from 48 states.
Brandless also currently donates a meal to nonprofit Feeding America’s hunger relief efforts for every order made on the site.
Of course, no online grocery business today can escape a new elephant in the room: Amazon’s pending $13.7 billion acquisition of Whole Foods, a convergence of which the mere idea is credited with tanking Blue Apron’s newly minted stock and dinging those of around a dozen other retail chains. It’s especially pertinent to Brandless as Amazon doubles down on its own lines of private-label premium foods offered at a discount.
Sharkey is diplomatic about the Goliath competitor.
"If Amazon can make [quality organic food] accessible to people who are living in a food desert or don’t heretofore have access to those kinds of foods, we think that’s fantastic," she says.
Ironically, it’s Brandless’ brand that she says will ultimately set it apart from Amazon. Like many companies seeking to draw a contrast with the e-commerce giant, Brandless claims to offer the kind of product curation and level of trust that can’t necessarily be found among Amazon’s pages upon pages of overwhelming options.