Thrasio: The Story of the Icarus of New E-commerce Aggregators

Aadrit

9 months ago

Thrasio rode the e-commerce boom in 2018 with a clever idea: buy up successful Amazon sellers and combine them for greater efficiency. They targeted established, profitable businesses which attracted investors who poured over $3 billion into Thrasio’s treasury. This fueled a buying spree and brought over 200 brands under their umbrella by 2023. At its peak, Thrasio’s valuation hit a massive $10 billion.

Thrasio’s success was not mere luck. Then what was it?

First of all, Thrasio made savvy acquisitions. They built strong relationships with sellers and offered a good exit strategy and a platform to keep growing after the sale. On top of that, they figured out their operational efficiency. Thrasio often merged acquired businesses to optimize marketing, product development and supply chain. This expertise led to explosive organic growth.

And unlike many startups, Thrasio was profitable from day one. In fact, they doubled their revenue every 73 days on average for the first two years!

That’s not all, Thrasio prioritized building a talented team with low turnover. In July 2020, they landed a significant investment from Advent International – a big-name private equity firm. This partnership provided the muscle to chase bigger acquisitions and explore new markets

Thrasio’s meteoric rise in e-commerce came crashing down just as fast. Many factors came together to create a perfect storm that led to their bankruptcy filing in February 2024.

Thrasio’s consistent success relied on buying successful Amazon sellers, and that required constant investment. But in late 2021, the tech funding spigot shut off. Suddenly, securing new funds with their $500 million debt burden became a major hurdle. This choked off their ability to keep acquiring businesses, a core growth strategy.

Thrasio aimed to merge all these acquired businesses for efficiency. They envisioned streamlining production, and distribution, and somehow keeping each brand unique. But let’s be real, merging that many companies were bound to become impossible at some point. And with the pandemic unfolding, fundraising for tech companies dried up in late 2021. It got harder for Thrasio to keep acquiring.

Operations across a vast product range became a tangled mess and maintaining distinct brand identities while saving money turned into an impossible balancing act. This operational mess likely hurt their profits and ability to meet sales targets.

The e-commerce landscape changes faster than a fashion trend. Thrasio struggled to adapt to rapidly evolving consumer preferences. Their expansive portfolio made it difficult to adjust product lines and marketing strategies quickly. This inflexibility in a fast-paced market meant they likely missed opportunities and potentially saw sales decline as consumer tastes shifted

By 2022, Thrasio was forced to lay off staff, change leadership, and scrap its IPO plans. They even started to pull out of markets like India. Their valuation plummeted to a mere $193.9 million by September 2023. Finally, in February 2024, Thrasio filed for Chapter 11 bankruptcy protection. They secured $90 million in emergency funding while negotiating to erase a significant chunk of their $500 million debt burden.

So, what can we take away from Thrasio’s downfall?

That the e-commerce landscape is constantly shifting, and companies need to be flexible and responsive to market changes.

Acquisitions are great but don’t neglect operational efficiency and the ability to adapt to consumer trends. Moreover, heavy debt financing is nothing but a gamble, especially in a volatile funding environment.

A more balanced approach might have helped Thrasio weather the storm. A 2023 lawsuit against Mensa Brands one of the most valuable aggregators in India’s D2C space comes to mind.

Bo International, a cosmetics maker, is locked in a legal battle with Mensa Brands. The dispute centres on a 2021 acquisition deal for Bo International’s Florona brand.

According to the lawsuit filed by Bo International‘s CEO, Mensa allegedly failed to uphold its obligations under the agreement.

Bo International claims Mensa missed an initial payment of ₹10.2 crore (roughly USD 1.3 million) due six months after the deal’s signing in December 2021. The agreement reportedly included a revenue-linked payment structure for Florona’s sales until 2026. Bo International alleges Mensa is withholding this portion of the deal.

The exact percentage of sales in question remains undisclosed. Bo International is seeking court intervention to enforce the original agreement and secure a deposit of ₹26.95 crore (roughly USD 3.4 million). They also intend to initiate arbitration proceedings against Mensa.

But where this lawsuit reminds us of Thrasio’s downfall is in integration struggles.

This lawsuit once again mirrors the potential pitfalls of Thrasio’s approach. Bo International also claims Mensa messed up by not marketing Florona properly after buying it. This hurt Florona’s sales, which is what Thrasio likely faced too. Integrating marketing strategies across a huge portfolio while keeping each brand distinct seems to have been a major challenge.

Maintaining distinct brands while saving money proved difficult for Thrasio too. The Bo International case reveals similar issues–Mensa’s marketing might not have worked for Florona’s existing customers.

The Bo International lawsuit suggests that integration challenges were a major roadblock for Thrasio. Merging marketing efforts, maintaining brand identity, and achieving operational efficiency across a vast portfolio likely all contributed to the downfall of both of these giants.

Both Thrasio and Mensa’s troubles are warning signs for any company on a shopping spree–integration is hard, and neglecting it can be disastrous.