How roll-ups are adapting to sluggish ecommerce growth

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“There’s a ‘Game of Thrones’ vibe around this entire industry,” Juozas Kaziukenas, CEO of Marketplace Pulse, a firm which tracks ecommerce aggregators, told Bloomberg last month. Fans of the HBO superhit series would know that’s not a good thing – there’s a lot of drama waiting to unfold and blood to be shed.

In 2021, investors poured over US$12 billion into this new breed of startups that emerged from the shadows of ecommerce pioneer Amazon.

With a focus on acquiring sellers on the US giant’s third-party marketplace, roll-ups rose to prominence following the seismic consumer shift to online buying during Covid-19 lockdowns. These firms went on a debt-fueled splurge. For instance, Thrasio, the nascent industry’s poster child, snapped up more than 200 brands.

But the “spray and pray type of investing,” as Neso Brands CEO Bjorn Bergstrom puts it in today’s featured piece, is no longer in vogue. Funding has mostly dried up for these aggregators as cooling ecommerce sales led to a punishing 2022.

While the signs increasingly point toward consolidation as a means of survival, today’s premium story also explores the sluggish pace of acquisitions and the different ways these roll-ups have responded to the ecommerce slowdown.

Today we look at:

• How roll-ups have adapted to the turning tides of ecommerce
• The layoffs and reorganization of GoTo’s consumer lending team in India
• Other newsy highlights such as the secrets behind Temu’s rapid rise and Ant Group’s mammoth R&D splurge

Premium summary

Time for roll-ups to buckle up?

Image credit: Timmy Loen

Matters haven’t gone in favor of ecommerce aggregators amid the macroeconomic downturn. But the current predicament has perhaps opened up a window of buying opportunity for these firms.

JJ Chai, CEO of Singapore-based Rainforest, believes that revenue multiples – a way for roll-up companies to value brands – have “definitely gone lower” than the previous range of 1x to 1.5x.

• Narrowing focus: Rainforest initially focused on mom and baby goods, home items, and pet and personal care, but the firm has trimmed this down to just the first two. Zeroing in on one vertical gives the company a better grasp of its end-consumer: parents. Cross-selling products such as diaper bags, play mats, and feeding equipment is also easier.
• The new folks in town: Neso Brands, a subsidiary of direct-to-consumer eyewear retailer Lenskart, could be an indication of what a new breed of aggregators might look like. While Rainforest took months to refine and settle on its strategy, Neso had a single focus from the onset: eyewear.
• The globetrotters: Others, like Una Brands, continue to spread their investments across geography, ecommerce channels, and product categories. Una, which operates over 20 ecommerce brands, shed under 10% of its workforce in June 2022. Since then, the Singapore-based aggregator has raised US$30 million and is now targeting to achieve EBITDA profitability by end-2023.

GoTo’s Indian rejig

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