Why Brandless Failed When Aldi Succeeded

It had its thesis right. People don’t care about big brands as much as they care about ingredients. They love a good price. If you give people what they could trust at the price they can afford, there is a big company to be built.

ALDI now focuses on premium products with natural ingredients at an affordable price for the middle-income group. Brandless’ thesis is ALDI’s playbook. But ALDI mastered the cost structure that is needed to make the model work. Brandless kicked the problem down the road with SoftBank’s money.

Brandless’ proposition of good products at a great price works if they a sustainable cost. Being an eCommerce company, the CAC is a variable that grows with sales. At $3 per product and a CAC that grows along with the volume of sales, the model looks very different and inferior to ALDI’s. For the whole of 2019, as Brandless’ traffic was unravelling... See more

ALDI’s secret sauce is staying retail and dabbling with eCommerce as an afterthought.

It turns out, that big company is ALDI.

I don’t buy the argument that being brandless was a mistake. Brandless is the brand and it was very clever of them. If there is something they got right, it was the branding. What undid them is the cost of goods sold. It’s beyond me as to why they didn’t go premium with pricing and focused on lesser categories. But they had a thesis to follow and r... See more