Last week Walmart announced that it’s launching two new standalone brands: Allswell for mattresses and other bedding products, and Co Squared for beauty and personal care. (Interestingly, the former will be part of Walmart, while the latter is a part of Bonobos, which Walmart owns.)

These are the first two standalone brands Walmart has launched since its Bonobos and Jet.com acquisitions, under the guidance of their respective CEOs, Andy Dunn and Marc Lore.

Both brands, which aim to target moms and single women, will have their own domains and will not be available, advertised or “cross-marketed” on Walmart.com or Jet.com. As online-only brands, they will not be available in retail stores. Allswell—run by Arlyn Davich, who also leads Walmart’s brand incubator—is aggressively priced, at $495 for a twin mattress (compared to $595 at Casper) and $1,035 for a king ($1,195 at Casper). One of Walmart’s goals is to “create enough buzz around the two brands to eventually attract more upscale companies and customers to Jet and Walmart,” according to The Washington Post; the company is also talking to celebrities to be the face of Co Squared.

These details raise skepticism and a number of questions about Walmart’s strategy and the larger brand-building ecosystem.  

How will the brands scale and what will it cost?

The best way to think about the potential scale for consumer product companies today is through the prism of audiences. The companies with the biggest and most-dedicated audiences that cost the least amount to build will win. This is the biggest reason private labels are exploding—retailers, with their built-in audiences, seek to capitalize on private label by efficiently producing high-margin products for the digital or physical shelf space they control. Private labels work because the audience is captive—the retailer just needs to put product in front of it.

Brands, conversely, need to build audiences from scratch (leaving out celebrity-driven ones). This is expensive and time consuming, which is why most digitally-native brands have had to raise tens to hundreds of millions of dollars to fund their expansion and marketing costs. Over $2 billion has gone into the top ten direct-to-consumer and digitally-native brands.  

Through this lens, it’s unclear why Walmart wants to create standalone brands that are explicitly barred from its massive audience as the largest retailer in the world. If these brands are not available on the company’s websites or in its retail stores, it means that Walmart will need to compete with everyone else for rising digital advertising costs when a company with Walmart’s massive size would normally use its existing infrastructure to drive effective marketing costs down to zero. Sure, Walmart’s collective advertising buying power is much greater than most digitally-native brands, but this does not seem like a big enough advantage that would make its two new brands more profitable than those unaffiliated with Walmart altogether.

Should other digitally-native brands be worried, especially in the mattress space?

Mattresses and other bedding are mostly commodities, which means price matters more while brand and quality matter less—assuming the product is good-enough. The companies that make good-quality mattresses that are aggressively priced and widely available will succeed. Many of the benefits that early digitally-native brands provided—a bed in a box, a free 100-day trial, free returns—are tactics that Allswell also employs, but they are now commodities that fail to set any brand apart from the pack.

One of Walmart’s big (theoretical) advantages is its scale, which would allow it to be more competitive on price while seeking similar margins. Allswell undercuts Casper by $100 or more on most SKUs, showcasing this advantage. (With this pricing architecture, Walmart is striking an interesting balance between being competitive on price without cheapening its product so drastically that it signals poor-quality.) But, again, without leveraging scale on the front end—that is, tapping into Walmart’s existing audience—the back-end scale potential is limited.

What is the plan, then?

If one looks at the growth trajectory of many of the brands that Walmart is now competing against, there is a clear shift from online-only sales to retail and wholesale because of rising digital advertising costs. Casper partnered with Target and just announced its first permanent store, while competitor Leesa works with West Elm and Pottery Barn. Bonobos, where Andy Dunn made his name, was one of the first to employ this strategy and now has close to 50 retail stores as well as partnerships with Nordstrom and other retailers. Walmart does not even need to partner with any third party retailers—it simply needs to tap into its existing audience, yet it has chosen not to.

The plan for Allswell and Co Squared, as it is currently spelled out, makes very little sense. It’s very possible that the reporting is wrong, and/or that the company is keeping its strategy close to the vest, but the plan that is visible today seems miscalculated. Either the online-to-offline strategy that Bonobos and its ilk employ is not working, Walmart does not see a lot of opportunity for higher-end private labels, or it truly believes it can build a big standalone brand online today.

The entire point of building within Walmart’s ecosystem is to give the businesses inside of it an unparalleled advantage. Doing the opposite defeats the entire point of being a part of Walmart in the first place.