In today’s Finshots we explain why the profitable US-based unicorn is trying to capture a piece of India’s growing online market.


The Story

There’s a common thread that connects Tata’s cotton mills from the 1800s to the e-commerce behemoth Flipkart. Can you guess what that is?

Well, let’s just say that both companies were “inspired” by western counterparts. The Tata Cotton Mills looked to the textile mills of Britain and Flipkart started off by selling books a la Amazon in the US. Both replicated a tried-and-tested model in India and found incredible success while doing so.

But this isn’t an accurate assessment really. Drawing inspiration is easy, but to fully replicate a model, you have to understand the nuance of the Indian market. You have to work around barriers imposed by our regulators and build something better suited for Indian consumers. So while you could argue that many companies routinely draw inspiration from those outside India, it’s also true that they aren’t just mere copycats. They add their own touch of innovation and you see this kind of thing happen all the time.

One idea that’s seeing a lot of appeal right now is a Thrasio-like model — pioneered by the US-based unicorn Thrasio that launched in 2018. You have Mensa Brands, GlobalBees, Evenflow, 10club, Goat Brand Labs, Upscalio, all going down the same road and they’re all trying to set themselves apart in an increasingly crowded market.

But wait, what’s this Thrasio model?

Well, it’s e-commerce aggregation or roll-up e-commerce. Put simply, the company discovers top-rated items from independent brands that sell only on platforms like Amazon and then they buy out these small businesses. Once that’s done, they revamp the marketing effort, optimize the sales channels, tap into their global supply chain network and source raw materials at low cost. They try and leverage economies of scale if there is any. And if they find a sweet spot, they’ll take the money, expand globally and reinvest in the hopes of finding similar billion-dollar businesses when they’re young. Thrasio, for instance, owns 150 brands and churns out over 22,000 products now.

But what’s in it for small businesses you ask?

Well, in most cases, the founders stay on and hold maybe a 30% stake in the business. This way they’ll still have skin in the game and it’s likely they’ll find more success if the brand explodes in value. More importantly, cashing out right now can be an extremely lucrative enterprise.

There are over 70 such eCommerce aggregators across the world and $9 billion worth of VC money chasing them. With plenty of sharks swimming in the same sea, you could see valuations for these top-rated Amazon sellers being driven up by competitive bidding. So in effect, there’s a lot of money for founders willing to cash out.

And those replicating the Thrasio model in India have also seen a lot of success themselves. Take Mensa Brands for instance. The startup which claims to be profitable took just a mind-boggling six months to become a unicorn. In fact, it became the fastest company in Asia to reach this landmark figure. All thanks to the Thrasio-hype and cheap internet that fueled the online shopping boom in India. According to Amazon India, in 2020, over 4,000 sellers crossed the ₹1 crore mark in sales — 29% more sellers than the previous year. And with the Indian eCommerce market estimated to grow to$100 billion — at 27% annually between 2019 and 2024, you can see why there’s so much excitement around this space.

However, as Amazon tried to outcompete Flipkart, the OG eCommerce aggregator Thrasio is itching to take a piece of the Indian pie as well. It doesn’t want these so-called clones riding the coattails of its successful model. And it’s making its entry by setting aside $500 million for Indian acquisitions — starting off with a $200 million acquisition of Lifelong Online. If you haven’t heard of Lifelong yet, go to Amazon India and type out “gas stove”. You’ll probably find them within the top 10 results. At least, that’s how I got to know about them a few months ago. But it’s not just gas stoves of course. Lifelong also makes a whole array of consumer durables — things like washing machines, kettles, smart plugs. Even fitness equipment featuring model and actor Milind Soman.

So yeah, with the competition heating up, it seems Thrasio also wants to join in on the Thrasio-like model in India and we’ll have to wait and see how things pan out.

Until then…

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