THE BIG STORY

Will India’s 10-minute quick commerce model last?

Image credit: Timmy Loen

The 10-minute delivery is taking India's ecommerce industry by storm. But is the business model viable in the long term?

THE HOT TAKE

Can Thrasio beat its clones in India?

Photo credit: Thrasio

Here’s what happened:

• US-based Thrasio officially entered India earlier this month by acquiring Lifelong Online, which designs and builds home products for consumers. The ecommerce aggregator giant reportedly paid US$150 million to US$200 million for the deal, its first acquisition in the country.
• Thrasio’s CEO noted that India is a “long-term bet.” Half a billion dollars have been set aside as “a baseline commitment” and part of Thrasio’s China manufacturing will be moved to India.
• The US roll-up major’s India debut comes at a time when its model has been cloned by local startups at an unprecedented pace. For instance, GlobalBees and Mensa Brands joined the unicorn club within a year.

Here’s our take:

Thrasio is one of the pioneers in rolling up ecommerce brands, particularly third-party sellers on Amazon. In just three years, it has popularized the business model to the point where hundreds of similar startups are operating worldwide.

In March 2021, Tech in Asia saw how the trend was picking up and soon after, it spilled over to Southeast Asia. Thrasio-style firms like Rainforest and Una Brands began springing up in the region.

With a valuation of at least US$5 billion, Thrasio has become a beast with an enormous appetite. It’s reportedly buying 1.5 businesses a week and has amassed a portfolio of about 200 brands.


Marketplace Pulse estimates that Amazon aggregators worldwide raised about US$12 billion in 2021. / Image credit: MarketplacePulse

There’s a roll-up frenzy in India; we estimate that nearly US$1 billion has been poured into local players within a couple of years. Mensa Brands and GlobalBees lead the pack in terms of funding raised, bagging about US$300 million each (counting both equity and debt).

Why India? The short answer is that it’s potentially a massive market. RedSeer Consulting projects that by 2030, the Indian online retail market will become the world’s third largest after the US and China. The country is also undergoing a revolution in direct-to-consumer brands, fueled by pandemic-induced demand.

With Thrasio now in the arena, the roll-up race in India is bound to go up a notch.

Clearly, Thrasio isn’t guaranteed a smooth ride in the country. Despite growing fast, ecommerce as a share of India’s entire retail market is still relatively low and is expected to reach 7.8% in 2022, according to eMarketer.

The US roll-up major was credited with creating the Amazon aggregator category. The model works because Amazon can provide aggregators with quick access to transparent data on third-party sellers. That is often not the case with other marketplaces or D2C brands.

Unlike its pole position in the US, Amazon doesn’t dominate in India despite having invested about US$6.5 billion since 2013. The US tech behemoth has been facing mounting regulatory pressures in the South Asian country.

Third-party sellers on marketplaces like Flipkart and Nykaa or D2C brands can be attractive acquisition targets, but the model has to be localized.

In fact, GlobalBees has snapped up 15 D2C brands in just months. Its CEO noted that the company doesn’t want to model itself after Thrasio, adding that its brands will also operate brick-and-mortar stores. In fragmented markets like India, taking the omnichannel approach is the way to go.

In its home turf, Thrasio itself is teaming up with brick-and-mortar retailers, signaling the growing importance of physical stores even for digital-first brands.

But it might not have the early-mover advantage in India, where in some cases, a bunch of buyers are vying for the same assets. This means higher valuations can be a roadblock to Thrasio India’s acquiring spree. The heated market could drive brand founders to rush towards the exit door without building strong fundamentals for their businesses.

Nonetheless, Thrasio’s entrance is expected to trigger consolidation in India’s roll-up playground.

The company has tasked the co-founder of Lifelong, its local partner, to lead the operations for Thrasio India. If things go well, Southeast Asia could be its next target.

-- Huong

NEWS YOU SHOULD KNOW

Check out Tech in Asia’s coverage of Asia’s ecommerce scene here.
 

1️⃣ Chinese fast-fashion giant Shein has reportedly revamped its plan to list in the US, according to Reuters. Its founder, Chris Xu, is eyeing a Singapore citizenship to dodge China’s strict rules for IPOs abroad.

2️⃣ Shopee has been accused of selling fake products in India.

3️⃣ Global investment firm KKR has poured US$45 million into Growsari, leading the series C round of Philippines-based B2B platform.

4️⃣ Indonesian ecommerce enabler Sirclo has acquired Warung Pintar, another homegrown startup that builds solutions for mom and pop shops. The deal value was not disclosed.

FYI

1️⃣ Alibaba, Tencent’s SEA investment spree in 2021

As the Alibaba-Tencent rivalry heats up in Southeast Asia, new alliances are being forged, and more industries in the region are set to be disrupted.
 

2️⃣ Behind Ula’s entry into social commerce

The Jeff Bezos-backed company said that the number of transactions for its social commerce feature, Teman Ula, are now at around 70,000 orders per month.

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