Why Brandless Failed When Aldi Succeeded

Brandless was primarily felled by a thesis that never panned out — that there were young consumers who craved a digital middle ground between dollar stores and malls. People who were price-sensitive, cared somewhat about quality, but not about brands. Walmart for hipsters. Trader Joe's for millennials.

I think this drives at a more fundamental failing by Brandless in particular, that is likely true broadly: the company’s cost structure was completely unsuited for DTC. My strong suspicion — admittedly biased, given Stratechery’s business model — is that the biggest opportunities in DTC are in niches, and the best way to exploit those niches is by ... See more

From the beginning, Brandless painted itself into a corner: At $3 per item, it’s hard to make a profit selling high quality consumer and food products unless you’re driving huge volume. For customers, ordering enough $3 items to hit a free-shipping minimum can be exhausting.

And while Brandless made a big deal out of the concept of a “brand tax” — the idea that products from other brands cost more because they have middlemen or other distribution costs — we now know the real story is that direct to consumer e-commerce brands have their own high costs, from engineering talent to online marketing.

My thoughts on @brandless. A thread: Putting the biz model aside, which was flawed (high CAC, low margin, low AOV), the problem, ironically, wasn’t lack of brand. Brand was clear – sleek, health-conscious, value, convenience. The bigger issue was lack of a clear identity 1/7

Brandless launched in 2017 with hundreds of products and immediately received a lot of attention — good and bad.