Online retailer Brandless closes, laying off Mpls. workers as key investor falters

Brandless Inc., an online retailer whose products were cooked up and designed in downtown Minneapolis, collapsed this week, caught between the twin pressures of an ultracompetitive business environment and a backer that needed to cut losses due to other mistakes.

The company, which started in San Francisco in 2017, built a 30-person operation in Minneapolis after its founders selected a former Target Corp. executive to be its top merchandiser.

The Minneapolis team designed and procured hundreds of household items, from snacks, drinks and household-cleaning staples to baby products and pet foods. It shaped them to be sold at only two price levels, $3 and $9.

But the company lost momentum last spring and wasn't able to hit some performance targets set by Softbank Inc., the Japanese conglomerate that is one of the world's biggest investors in technology firms. It had offered to invest up to $240 million in Brandless if it met the targets. Meanwhile, since last summer, Softbank has reeled after mega-investments in two U.S. firms, WeWork and Uber, spiraled.

On Wednesday, Softbank reported a 99% profit drop for the last three months of 2019 and said investments from its flagship Vision Fund produced an operating loss of $2 billion.

Brandless employees were told Monday that the company was closing. It stopped taking orders and a three-paragraph statement appeared on the company's homepage announcing the closing.

"While the Brandless team set a new bar for the types of products consumers deserve and at prices they expect, the fiercely competitive direct-to-consumer market has proved unsustainable for our current business model," the company said in a portion of the statement. The firm did not mention Softbank in its statement.

Brandless founders Tina Sharkey and Ido Leffler, entrepreneurs with a track record in Silicon Valley, believed they could provide quality goods at lower prices by reducing distribution and marketing expenses.

The company opened its Minneapolis office when Sharkey and Leffler recruited Rachael Vegas away from Target to be chief merchant. Vegas didn't want to relocate to the Bay Area and convinced executives that the Twin Cities had plenty of workers with experience in the retail and food industries.

With the name and that concept, Brandless tried to craft a middle path between name brands and generic ones. In an interview last year, Vegas said that portraying Brandless goods to be generic was "probably the most insulting thing someone could say to our employees."

On Tuesday, the Brandless office in downtown Minneapolis was lit, packed with merchandise and, in the reception area, a candy jar was full. But only two people appeared to be working. An employee declined to answer questions.

At its peak, the Minneapolis office included the company's food-science, packaging and customer-service operations. It wasn't clear how many people were still working in the office when the closing announcement came this week.

The company said it would retain about 10 of its approximately 80 overall employees during the shutdown process.

The first signs of difficulty for the company came in March, when Brandless laid off about 10 people and Sharkey stepped down as chief executive. Vegas left the firm a short time later and became a grocery executive in Texas. A second chief executive left last fall, and Evan Price, who had been chief financial officer, became chief executive.

In recent weeks, the company's directors, including Leffler and Price, decided it was best to close the firm while it could still offer severance benefits to employees, a spokesperson confirmed.

"I'm proud of what we created at Brandless and the hard work and dedication of everyone on the team," Price said in the statement.

The news of the company's demise was first reported this week by Protocol, a new technology news organization funded by the owner of Politico.