ecommerce roll-up companies: Ecommerce roll-up companies pause brand buyouts, seek funds for survival

The ecommerce roll-up model, in which a company acquires and scales up multiple brands, is showing clear signs of distress with key players pausing fresh buyouts as they look for capital, multiple people aware of the matter said.

Goat Brand Labs, among the better funded startups in the sector, is racing against time to raise fresh capital amid a widespread slowdown, people aware of the matter said. The Tiger Global-backed startup’s travails come after nearly two years of record funding that helped roll-up ecommerce firms like Goat bulk up their portfolio of brands, spurred also by the entry of industry pioneer US-based Thrasio into the Indian market.

Smaller startups in the space like 10club and Upscalio have also either pivoted or are looking to be acquired while bigger rivals such as Mensa Brands and FirstCry arm GlobalBees are focusing on sustainable growth of select brands from their portfolio.

Chasing Capital
Meanwhile, Mumbai-based Good Glamm Group – which acquired brands like The Moms Co – is expected to clock a slower rate of growth in the ongoing fiscal year as it has been trying to reduce burn and find a path to profitability.

Goat’s Challenges
“This is the moment of truth for Goat… (it) has about a quarter of cash runway left. Talks are on with existing lenders and venture debt firms to arrange for working capital,” said one person cited above.

Also read | Rollup ecommerce: an idea whose time has comeGoat, which had acquired the likes of home and lifestyle brand Chumbak in a slump sale, now requires fresh capital to also service its existing debt. Noting that there is “high scepticism over the model now,” sources aware of the matter said that Goat may yet receive financing, but will have to bring in a new investor to lead the round that could be smaller than planned.

Goat Brand Labs founder and chief executive Rishi Vasudev did not respond to a detailed email query sent by ET. People aware of the cash crunch at Goat said the company is also facing challenges in its offline sales through third-party retail stores.

“Offline stores will not make the payment for sale of goods until they are actually sold. Ecommerce and offline retail work differently. So, while the sale would have happened on paper with certain inventory moving to stores, revenue will come only once they are actually sold,” a person aware of the matter said.

Also read | Shake-up looms as funding party ends for roll-up ecommerce model

Financials
GlobalBees — which acquired stakes in twenty-one entities and took over five entities through business transfer agreements — has been working on building in-house brands in certain sub-segments like car maintenance and small furniture. It reported revenue of Rs 897 crore in FY23 and Rs 256 crore for the June quarter in the current fiscal year.

Mensa Brands is said to have an annualised revenue run rate of Rs 1,600 crore. In FY23, it reported a loss of Rs 214 crore — a twofold jump — while revenue grew 150% to Rs 505 crore.

Good Glamm, which raised $135 million from Prosus, Warburg Pincus and others, was on an acquisition spree in 2021-22. Sources close to the company estimate it is expected to grow by around 50% in the ongoing fiscal year —slower than previous fiscal. “The company has cut its on-roll team by over 10% and has to show better quality of growth in order to arrange new capital. That is the reality for everyone in space,” a person aware of the thinking at the firm said.

Darpan Singhvi, founder and CEO, Good Glamm Group, said the company “went from Rs 50 crore revenue in FY21 to Rs 210 crore revenue in FY22 and closed FY23 with Rs 650 crore. For FY24, we are looking to close at Rs 1,000 crore”.

Its FY23 financials are yet to be filed with the Registrar of Companies.

Thrasio’s Woes
Once one of the top sellers on Amazon, had ambitious plans for the local market but has since seen a massive change in its fortunes.

Abruptly, it gave up control of Lifelong last year, exiting the market after running into rough waters in the US market as well. This led to top-level changes including appointing a new CEO –Greg Greeley. The company, according to reports, is staring at bankruptcy now.

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