Rapid growth during the pandemic pushed the e-commerce aggregator to bankruptcy, but newly appointed CEO Stephanie Fox says it has now recovered and is on the path to profitability.
The dramatic explosion in e-commerce sales during the pandemic led Thracio to acquire about 180 brands, at its peak buying a company a week. It got so big that it The company filed for Chapter 11 bankruptcy. It happened in February, it happened in June.
As part of its turnaround, the company is reducing its brands to around 50, selling those that are viable and downsizing those that are not.
“We’ve been given a second chance to build it the right way, to build it in a sustainable and profitable way,” Fox said in a video interview.
Stephanie Fox
Due to the e-commerce boom during the COVID-19 pandemic, Mammoth growth Aggregators have raised $16 billion in shopper funding, mostly through debt. In 2021 alone, equity funding for aggregator deals has topped $6 billion so far. this yearThe aggregator burned $100 million as demand waned and debt ballooned. Too big to handle.
The situation has also been exacerbated by the rise of Temu and Schein, which sell cheap Chinese products, and Amazon is reportedly planning to compete by opening direct sales stores from China.
Buying too much, paying too much
In its bankruptcy filing, Thracio reached a restructuring agreement with some of its lenders to reduce its debt by $495 million. In the filing, Thracio estimated its assets at $1 billion to $10 billion and its liabilities at $500 million to $1 billion.
Where did it go wrong? Fox pointed to overbuying inventory, overhiring and overpaying for brands.
Excess inventory is “a problem that everyone in the industry has experienced,” Fox said. “100% of Amazon sellers and retailers overbought inventory during COVID. We were across 180 brands at the time. So it wasn’t just one niche or one brand that was overbought. We were overbought everywhere, and clearing that inventory has been something we’ve been working on for the last two years.”
Fox is a co-founder of Trasio and says the early days have been a rollercoaster ride, but now “we know what works, we know what’s possible, and we have a really strong brand.” Our Portfolio.”
The company will focus on product launches, product development and channel expansion within these brands, rather than “commodity, knock-off” products that are easily imitated and cheaply produced.
“We’re very strict about that,” Fox said. “We have very high standards for what we consider to be a good brand, and we invest heavily in those brands.”
It’s a strategy that could prove successful after the frenzy of the pandemic. Mark Daoustfounder of e-commerce intermediary Quiet Light. Aggregators were forced to immediately inject capital, which became the fatal flaw that got many aggregators into a bind.
“There was a lot of irresponsible buying going on at the time,” Daoust said in a video interview in July. “If you take a more measured approach, a slower growth approach, I think you can end up with a very viable business model.”
Maybe not
Not everyone agrees. Phil Masiello, founder and CEO of CrunchGrowth Revenue Acceleration Agency, who has also built multiple e-commerce brands, said aggregation is never a good business model.
Mr. Masiello said entrepreneurs can keep costs down and profit margins high by running the business themselves, but selling to Trasio, which was hoping to benefit from scale, would mean expenses would soar and profit margins would shrink.
“People with Amazon expertise were building these smaller brands. The people they (the acquirers) put in charge didn’t have Amazon expertise. They were just stooges doing the work,” Masiello said. “It’s a broken model, and it’s never going to be successful. It’s just going to continue to decline. And while this is happening, the brands that they’ve acquired and the brands that they’re managing continue to lose sales.”
But Fox is confident it’s moving in the right direction: Right-sizing inventory and staffing, working with TikTok influencers, and boosting sales in brick-and-mortar stores. Trasio has also automated much of its customer service and successfully eliminated hundreds of jobs in the Philippines.
While the company is focused on selling brands, it is also open to acquiring brands it sees as having great potential.
Fox said good acquisition candidates are “businesses that are sustainable, profitable, growing, take care of their employees and are really fun places to work.”
