Thrasio, the startup-that-could, is now filing for bankruptcy. The company had been focusing on acquiring, optimizing, and scaling Amazon FBA brands in the past few years and quickly became the largest Amazon aggregator in the space.
From 2018 to 2019 they focused purely on expanding their roster and earned 160 million purely on acquisitions but there was evidence of trouble earlier this year when they began laying off 20% of their staff.
So what went wrong?
The Amazon aggregator admitted many missteps led to their downfall.
While they hastily acquired brands during the first few years, a lot of these brands were overvalued and underperformed (meaning they overpaid and didn’t get their money back).
This comes as a huge shock since they raised a total of $3.4 billion dollars and seemed poised for success.
Pilothouse’s Lead Amazon Media Buyer shares: “Thrasio's strategy of acquiring brands later in their lifecycle proved costly, as earlier entry would have been riskier but more cost-effective.”
❌ Major mistakes they made:
- Slow to drop underperforming brands from its portfolio
- Underestimated the intricacies of running an Amazon business
- Dealt with inventory issues and rising freight costs during COVID
- Experienced funding challenges this year
🔧 How Thrasio plans to pivot:
Although the company filed for bankruptcy they aren’t done just yet. They plan on offloading underperforming brands and optimizing their top performing brands to stay profitable.
What this means for ecommerce (and in particular brands on Amazon):
Since Thrasio was a rising star in their industry, people are going to start being more hesitant in working with Amazon aggregators to supercharge their brand and sales.
The Takeaway? 👇
Ample funding cannot cover up a failing business model
For brands looking to sell their companies: They may be more apprehensive about working with ecommerce aggregators and do more of a deep dive into their expertise and resources.
For ecommerce aggregators in the game: Aggregating doesn’t come without risks. Be prepared to be met with an air of skepticism after the rapid rise and fall of Thrasio.
Learn to mitigate risk, diversify and manage portfolio closely, and do your due diligence when acquiring brands.