“You’ve built a successful business. We know how hard that is.”Thrasio official website “seller story” page
On the “Seller Story” page of Thrasio’s official website, this slogan was placed in the most conspicuous position.
As a company whose main business is the acquisition of Amazon’s third-party sellers, the rigorous and calm tone is very commensurate with the black, white and yellow theme color. The content of the slogan also narrows the distance between the brand owners. And under these humane words, Thrasio continued to confidently add:
“When you sell to Thrasio, everyone wins.”Thrasio official website “seller story” page
This is not a simple rhetoric. In July 2020, Thrasio announced that it had completed a Series C financing led by Advent International, with a valuation of US$1 billion, breaking the record for unicorns in the United States and becoming the fastest for-profit startup to become a “unicorn”. In January 2021, Thrasio received another 500 million US dollars in financing, the acquisition engine is tuned up to the largest.
Thrasio has the ability to achieve “everyone is a winner”. So, how does it achive it?
“Thrasio Cooperative Brand”
Thrasio is a consumer products company that specializes in acquiring successful Amazon third-party sellers business. In simple words, Thrasio uses Amazon as the foundation to find young brands with outstanding product performance and good development prospects on the platform, acquire them and further explore their potential.
After the acquisition, Thrasio will optimize the brand in terms of marketing, product development, operations and supply chain management. The acquired brands can work together to cultivate economies of scale and further enhance their competitive advantage. After the brand has experienced positive growth, the acquirer can use cash flow to earn dividends, or directly sell the brand with higher valuation (higher multiples or bigger EBITDA) to make a large amount of profit.
“We will carry out a comprehensive marketing reform for brands,” explained Joshua Silberstein, co-founder of Thrasio. “We will not repeat what these brands have done before, but will transform our previous experience into our use. In the process of strategic planning, the brand manager will understand the historical development of the product, including its competitors, rankings, threats and opportunities. After the planning process is over and everything is up to standard, we can hand over the brand to the brand management team , Let them flex their muscles.”
Specialized operating strategies for each brand
Each successful acquired Amazon brand will be equipped with a set of specialized and comprehensive operating strategies. Six Thrasio employees will form a core team that will review the 503 rules established by Thrasio within 34 days, and assign tasks to specialty team in the supply chain, law, or other departments for processing as needed.
At the same time, Thrasio will retain the original company name and Amazon merchant page of the brand, without making changes, but will add a small mark: the company is a Thrasio cooperative brand. So for consumers, the brand and products after the acquisition are no different from before.
A new exit path for Amazon FBA seller at bottleneck
As we all know, Amazon marketplace is a platform for independent e-commerce sellers or for small businesses. There are 2 different fulfillment business modes: FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant).
In these two models, FBA accounts for the majority. Data shows that 66% of Amazon’s business uses FBA. Sellers can hand over logistics and delivery to Amazon focusing only on product sourcing and promotion. So far, about 70% of GMV on Amazon have been attributed to these third-party sellers.
As these small sellers gradually grow, their business scale also expands, reaching millions of dollars. At this time, in order to maintain the continuous operation and further development of the brand, sellers need to expand the team size and improve the level of operation to meet the various needs brought about by the growth of orders.
However, due to the small operation and limited resources such as time, capital, and employees, sellers cannot take care of it, and their management capabilities can no longer keep up with the development of the store. Daily shop maintenance consumes most of the operator’s energy, and Amazon’s “volatile” policy sometimes makes sellers at a loss. On the platform, the growth potential of the store has been greatly shelved, and the growth has naturally fallen into a bottleneck.
What Thrasio does is to look for these brands with outstanding potential but trapped in the status quo on the platform, and to provide them with another development way. In this way, sellers can quickly obtain a large amount of cash flow (normally 3x to 3.5x annual profit) and professional brand operation services, while the acquirer can skip the trial and error stage and directly obtain mature market experience, operate brand stores in batches, create economies of scale, and achieve A win-win situation for both seller and acquirer.
The original brand owners team up with a professional operation team. And the acquirer can make progress quickly, help sellers achieve profitability, and further promote brand growth.
Select the “Diamond” category
Not all brands can get the opportunity to be acquired by Thrasio, they have their own logic and standards.
From the category point of view, Thrasio’s main focus is on the “best-reviewed and best-selling” consumer products in the niche market. They prefer to buy household and DIY products, cleaning supplies, clothing, and pet and children’s products. Carlos Cashman, another founder of the company, said that they are not interested in fad products. Rapidly changing technology products, food and grocery products are also not on their list of intentions.
SellerX, another company engaged in the acquisition of third-party Amazon brands, also stated that their acquisition focuses on “evergreen” consumer products, such as household products, pet products, garden products, children’s products, and beauty products.
Ken Kubec of the Thrasio team said that the company initially determined the acquisition target through a large number of investigations, and then developed the “R Cubed” evaluation model, namely Reviews, Rating, and Rank.
- Reviews: Are there any reviews that can show that the brand is currently in a leading position?
- Ratings: Are user ratings and brand product quality sufficient to support and maintain its leading position?
- Rank: Does the brand rank well in keywords with a large search volume?
The R Cubed model can clearly reflect the prominent position of the brand in the category, which helps Thrasio identify its brand equity, and then determine whether the brand has the value and prospects for an acquisition.
The rigorous selection criteria allows Thrasio to find the “diamond” he wants among the many brands waiting to be discovered, and its impressive results prove this. Since the acquisition, the EBITDA (earnings before interest, taxes, depreciation and amortization) of the brands purchased by Thrasio has increased by an average of 156%.
In 2020 during the economy turmoil, Thrasio’s sales exceed 500 million U.S. dollars and its profit exceeds 100 million U.S. dollars.
Before the latest round of financing, Thrasio only acquired DTC brands with annual revenues below US$40 million. But Silberstein said that through this financing, Thrasio will try to acquire larger brands with annual revenues of less than US$200 million in the future.
Refresh the “unicorn” record
Thraiso’s serviced brands have achieved remarkable results, and the company’s own development is equally compelling. Since its establishment in 2018, Thrasio has been profitable and has raised more than $1 billion in funds. These funds come from many banks and capital, such as JPMorgan Chase Bank, Goldman Sachs Capital, Royal Bank of Canada, Swiss Securities and so on.
In the past two years or more, the company’s revenue has doubled every 73 days (on average). At present, Thrasio’s valuation has exceeded $1 billion, making it the fastest profitable startup to become a unicorn.
So far, Thrasio has acquired more than 100 successful third-party Amazon DTC brands, including fitness brand URBNfit, pet deodorant brand Angry Orange, etc., with a total of more than 14,000 product categories.
In July 2020, Thrasio’s financial forecast estimated that its annual revenue had reached 300 million U.S. dollars, making it one of the top 25 sellers on Amazon.
Set off a wave of FBA acquisitions
It is worth mentioning that Thrasio is not the only player on this track.
Within two years of its establishment, it quickly became a unicorn, and news of financing continued. Thrasio’s success caused a wave of acquisitions business of Amazon FBA brand in Europe and the United States. The investment market is showing more and more positive signals.
According to a survey by the British Hahnbeck Consulting Company, 31 companies are currently engaged in successful Amazon FBA brand acquisition business, including Razor, SellerX, Orange Brands, Zeelos, Brands United, Thirstii, Branded, etc. These companies are mostly located in the United States, Germany, and Canada.
In the Marketplace Pulse 100 list, Thrasio naturally leads the FBA business acquisition field, ranking second, following Anker. Perch and Boosted Commerce, which were founded only one year ago, ranked 32 and 60 respectively, and Heyday, which was founded in August 2020, has surpassed the former and rose to 24.
Conclusion: Next-generation competitive advantage
Not long ago, Thrasio completed another US$500 million in senior debt financing, which will continue to be used to acquire third-party brands on the Amazon platform to further push the boundary of FBA business acquisition model. What they do is no longer just to enhance and accelerate the development of the e-commerce industry, but more importantly, they will bring about changes.
“Now has reached a special moment in the consumer goods sector. The competitive advantages that have defined market leaders in the past 50 years will no longer be important in the future. This $13 trillion market is now full of turbulence, and it is like Thrasio. Such companies are creating a new generation of competitive advantages.” Silberstein said.