Will rolled-up online brands see same-channel sales slump?

Scaling a brand requires the founder’s personal touch. This may be difficult once a roll-up company acquires it and brings it under a centralised structure. Also in The Crux newsletter: Banks rush to guard systems against a major security flaw and Paytm slips below decacorn valuation

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By 

Aditi Shrivastava

Pratik Bhakta

January 14, 2022

5 Min Read

Indian startups, either Thrasio-like rollups or direct-to-consumer aggregators, are swiftly consolidating smaller rival brands. But I expect same-channel sales of these brands (excluding store or channel expansion) to dip by 20-30% in the short term.

This has something to do with the acquirers’ centralised structure for managing multiple brands. Let us explain.

  • In India, the landscape of online consumer brands is in nascent stages and D2C firms’ volumes have just started to pick up. I believe that in these conditions, it takes founders’ intervention, especially a personalised marketing approach, to scale up the brand.  
  • The hitch is that founders of many online brands lose control over operations once they sell their companies and are unable to register a meaningful impact. It’s ironic because their payouts hinge on brand growth. 
  • Things are different in mature markets such as the US and UK. Backend supply chains and processes are more streamlined and regulatory risks are relatively low. Companies are also profitable, unlike most online businesses being acquired in India. 
  • Amazon dominates ecommerce in the US. In India, it’s Amazon and Flipkart. Then there are vertical retail operators such as Nykaa, Myntra and Ajio. I think the unique complexities of these marketplaces need a focused and nuanced approach. 

Can roll-up players provide or maintain this level of attention with a centralised structure? The competitive advantage of their model has not been established yet.

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