Maya Kosoff:

There’s a generation of consumers now who don’t want their parents’ establishments, they don’t want their parents’ governments, they don’t want their parents’ industries, and they don’t want their parents’ brands,” could argue any of the DTC founders, but in this case, it was Tina Sharkey, the co-founder and CEO of Brandless, a home goods DTC that arrived on the scene in 2017. The San Francisco startup that aimed to upend Target set up shop on the mega-retailer’s home turf in Minneapolis — along with poaching a couple of its merchandising execs — with the audacious goal of selling private-label groceries and other home goods for a flat price of $3 each. Brandless’ rationale—if was going to spend big marketing bucks to get a customer through the door, that customer would have many reasons to keep coming back, with its hundreds of other affordable products to purchase. Along with raising $52 million from investors like Google Ventures and Cowboy Ventures, in 2018 the startup raised an additional $240 million from SoftBank.



Instead of disrupting Target, the company suddenly wanted to be sold in places like Target.



It is perhaps not surprising to learn that things did not end well for the company. Brandless found itself contending with the problems so many DTCs seem to grapple with at this stage of growth, but namely the dawning realization that building a customer base from scratch is actually quite hard — and incredibly expensive. There’s a reason DTC companies market on Facebook: Facebook ads are cheap to set up, and they let you target a specific audience. The problem, however, is that channels like Facebook have grown more saturated and more expensive. Now, everyone is armed with the same millions of dollars in funding; they’re all targeting the same users, and they’re all driving each other’s marketing costs up. (Marketing software company AdStage analyzed its Facebook impressions data and found that the median cost-per-click for Facebook news feed ads has risen from $0.43 during the second quarter of 2018, to $0.64 during the second quarter of 2019.)



By early 2019, Brandless found itself unable to honor its initial promise, and increased the price of some items to $9 and laid off 13% of its staff. Sharkey, a seasoned executive and Silicon Valley fixture, stepped down, and a couple months later John Rittenhouse, the former COO of Walmart.com, was brought in. In a move almost verging on parody, he pivoted Brandless to selling CBD products, along with pricier, branded products. Last fall, Rittenhouse said Brandless would try to get into major retail stores, shifting away from its online-only business model. Instead of disrupting Target, the company suddenly wanted to be sold in places like Target—a common trend among many once digital-only DTCs. But even this never ended up happening; in January, Brandless announced inveseit would shut down.

Lavishly funded Compass has also received substantial SoftBank investments.