Brandless adds baby, pet products, moves beyond $3 pricing

Brandless Inc., the fast-growing online food and housewares retailer known for $3 pricing, is expanding into baby and pet products, categories where many shoppers are increasingly willing to pay more.

The expansion, announced Wednesday, represents the largest new-product rollout since Brandless launched in mid-2017 and pushes it beyond the $3 prices that first brought it attention.

Brandless, based in San Francisco and Minneapolis, is an e-commerce website that aims to sell better-for-you and better-for-the-planet food and household staples at an affordable price. The company was founded on two main principles: Better products don't have to be expensive, and shopping for these items should be easy.

Company executives said they remove what they call a "brand tax" that's created through supply-chain middlemen and complex inventories. It sources and develops its own product lines and sells directly to consumers.

Brandless has grown to more than 400 items from 107 when the company launched in July 2017. Wednesday's launch added about 50 more products.

Simple pricing is one of its key selling points; it has been selling all products for $3 (or two for $3 or three for $3). But Brandless' expansion into pet and baby comes with another announcement: a new class of $9 products.

"As we've introduced these new categories, we really would not be able to offer the quality we want without a new price point. Nobody wants $3 worth of diapers; it's not practical," said Rachael Vegas, chief merchant at Brandless and head of the Minneapolis office. "It's just the first of what will be new price points."

Brandless' existing products — from organic olive oil to tree-free toilet paper — will continue to be $3. The company will still price items in multiples of three, Vegas said, "because it requires us to be really disciplined around that simplicity and that curation."

But a pack of 36 diapers, or roughly a week's worth, will sell for $9. That's about 40 to 50 percent less per diaper than the high-end brands it hopes to compete with, Vegas said.

The company was founded by two Silicon Valley entrepreneurs, Tina Sharkey and Ido Leffler, who recruited Vegas away from Target Corp. to head Brandless' merchandising. Vegas accepted the job under the condition that she could open an office and build a team in Minneapolis. "The talent pool here is so rich," Vegas argued. Sharkey and Leffler agreed.

Another hallmark of the Brandless brand is its checklist of attributes — like cruelty-free, organic, non-GMO or vegan — listed on each product. The diapers, for instance, are made with plant-based materials, including wood pulp from sustainably managed forests. They are latex-, fragrance- and lotion-free, offer up to 12 hours of leak protection and don't use chlorine processing.

In addition to diapers, Brandless will now sell wipes, lotions, teething wafers and food pouches.

While the U.S. birthrate declines, many parents are spending more to buy premium products. According to Nielsen, the three leading "green" diaper brands — Honest, Seventh Generation and Babyganics — all posted double-digit growth in 2017, in both value and volume.

Meanwhile, nearly 70 percent of U.S. households have a pet and the spending on pets has increased to $72 billion a year from $42 billion a decade ago, according to the American Pet Products Association.

The company's new pet products include treats, supplements, toys and waste bags.

Brandless, which has grown from 30 to 120 employees in its first 19 months, has raised nearly $300 million in investment funding. The company hasn't disclosed revenue. But Edison Trends, a market research firm, reported that Brandless customer spending grew 413 percent between October 2017 and September 2018.