More than half a dozen companies are bidding to acquire sub-scale online brands, opening up a new avenue for exits. But fundamental differences between local and global markets make this business operationally complex in India. Can India generate Thrasio-level profitability?
June 14, 2021
8 Min Read
Acquiring to build a ‘house of brands’ is fast emerging as a concept that businesses like Supam Maheshwari’s GlobalBees, Ananth Narayanan’s Mensa Brands, Rishi Vasudev’s Goat Brand Labs are building. These three and other startups in the space have collectively raised $150-175 million in recent months from investors including SoftBank, Falcon Edge and Accel, as well as from online retailers like Flipkart.
Close to half a dozen other companies including 10Club, EvenFlow and UpScalio are also looking to build an organized online scalable house of brands. While their business models and category focus varies, they are broadly built on the same principles—scaling online sellers.
What is the business? Just as in the offline market, where there was a move from unbranded to branded and unorganized to organized, these startups are looking at organizing small online businesses.
“In India, a deep understanding of marketplaces and categories will be essential for value-addition to the sellers and the ecosystem,” said Rishi Vasudev, CEO, Goat Brand labs.
The sweet spot is brands making Rs 10-30 crore ($1.5-4 million) in revenue, in the middle to mass premium range across high-margin categories where competition is limited and there is potential to grow. These companies are also looking at taking brands global, where margin structures are more conducive to profitability.
Some of these segments include products such as dog bowls, fitness gear, swaddlers, notebooks, pasta sauce, hair styling mousses, and foot supports.
Once they acquire these companies, these startups apply a layer of technology and logistics, and expand sales and distribution to include B2B and international markets to fire them up. They eventually also bring in cost efficiencies by renegotiating supplier contracts to minimize the cost of goods sold and improve lead production time, among other things.