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MarketScreener Homepage  >  Equities  >  Tokyo Stock Exchange  >  SoftBank Group Corp.    9984   JP3436100006

SOFTBANK GROUP CORP.

(9984)
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SoftBank : Online Retailer Bows Out

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02/15/2020 | 02:48am EST

By Sharon Terlep

Brandless Inc., a startup that set out to challenge household names like Crest and Kraft with a one-price-for-all online store, has shut down, becoming the first venture backed by SoftBank Group Inc.'s $100 billion Vision Fund to fold.

Brandless launched in 2017, selling generic consumer staples attuned to personal health and the environment, all for $3. The idea: cut out supermarkets and traditional marketing, and funnel the money toward making products to compete with pricier name brands.

But it appears American shoppers need more than a $3 price tag to part with brand-name peanut butter and hand soap.

In pulling the plug this week, Brandless's investor-led board said the market for selling goods online directly to consumers is "fiercely competitive and ultimately proved unsustainable" for the company's business model.

Brandless had a high-profile backer in SoftBank, which promised the Silicon Valley startup $240 million but delivered only $100 million, people familiar with the matter said. Investors grew frustrated with losses at Brandless, and pushed for a quicker path to profitability, before ultimately deciding to close the company, some of the people said.

The shutdown came days before SoftBank disclosed that its operating profit fell by 99% in 2019's final quarter. The poor results at the Japanese technology giant were tied closely to its high-profile Vision Fund, which has been hit by steep declines in the value of two of its largest investments, ride-hailing giant Uber Technologies Inc. and the parent company of U.S. shared-office operator WeWork.

The fund stopped making new investments last year, after doling out about $80 billion in two years.

Brandless adds to the collection of startups that have found that selling household staples online makes for a fast-growing business, but not necessarily a profitable one. Onetime startup Amazon.com Inc. has had mixed success with its own private-label products, analysts say, while experimenting with different subscription models.

A number of upstart online consumer brands -- from Harry's razors to Native deodorant -- started selling their products in stores and even shopped themselves to bigger companies. Consumer-products giants collectively have invested billions of dollars in such startups in recent years, and are now grappling with how to make them profitable. Some are also working to sell more of their traditional brands online by way of Amazon.

Beyond the challenge of competing as a direct-to-consumer business, the Brandless proposition of selling a private-label brand online was flawed, said Gary Stibel, chief executive of New England Consulting Group. Shoppers prefer unbranded items from retailers they trust, such as Whole Foods and Trader Joe's, and go online for sought-after names, Mr. Stibel said.

"The brand was dead on arrival," he said of Brandless.

In its final year, Brandless replaced two CEOs, including founder Tina Sharkey, and tried to overhaul its business model by abandoning the $3 price point and getting into the cannabidiol, or CBD, business.

And there was another fundamental problem: the Brandless price wasn't necessarily a bargain. Products on the site were generally more expensive than their big-brand rivals, though they were cheaper than many higher-end offerings.

Brandless halted sales Monday and is laying off roughly 70 of its 80 employees. A company spokesman said it is possible the brand could be acquired or reinvented and that a decision will be made in coming weeks.

Write to Sharon Terlep at sharon.terlep@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
SOFTBANK GROUP CORP. 2.40% 5664 End-of-day quote.1.23%
UBER TECHNOLOGIES, INC. -4.50% 38.895 Delayed Quote.36.92%
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Financials (JPY)
Sales 2020 9 693 B
EBIT 2020 817 B
Net income 2020 956 B
Debt 2020 14 162 B
Yield 2020 0,70%
P/E ratio 2020 13,8x
P/E ratio 2021 25,7x
EV / Sales2020 2,67x
EV / Sales2021 2,68x
Capitalization 11 732 B
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Mean consensus OUTPERFORM
Number of Analysts 18
Average target price 6 656,79  JPY
Last Close Price 5 664,00  JPY
Spread / Highest target 44,8%
Spread / Average Target 17,5%
Spread / Lowest Target 1,87%
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NameTitle
Masayoshi Son Chairman & Chief Executive Officer
Raul Marcelo Claure Chief Operating Officer, Director & Vice President
Yoshimitsu Goto CFO & Senior Managing Executive Officer
Ken Miyauchi Director
Yun Ma Director
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