Thrasio's $10B Crash: What Went Wrong?

Hey there,

Largest Amazon Aggregator, Thrasio went from $10B to Bankruptcy! 📉

What went WRONG? 🤔🤔

First, let's start with understanding Thrasio's business. They're an Amazon Aggregator, known for quickly buying up various online businesses. After buying these businesses, Thrasio would revamp them. They'd tweak the product range, switch up the branding, and aim for long-term revenue growth.

So far, Thrasio has raised $3.4 billion, pushing its value close to $10 billion. The idea was to mimic the success of big consumer product companies like Procter & Gamble or Unilever, powered by the surge in online sales.

But now, Thrasio has just filed for bankruptcy. Here's what led to this downfall:

1. The COVID-19 Effect:

The pandemic initially boosted online shopping, as people avoided going out. Thrasio thrived as new and existing customers flocked online. However, once the pandemic eased, this trend reversed. People began shopping in person again, impacting Thrasio's growth.

2. Debt Burden:

Thrasio's approach was heavy on debt. For every dollar of equity, they took on four dollars of debt. With interest rates ranging from 7 to 15%, their financial model was risky. And it became even worse when they had to pay interest payments to the lenders.

3. Operational Issues and Leadership Changes:

Inside reports suggested operational inefficiencies. Tasks that needed just a couple of people were assigned to teams of ten, many employees said that they didn’t have enough tasks to fill in an 8-hour long workday. This led to rushed layoffs in an attempt to cut costs.

Adding to the trouble, Thrasio saw two CEO changes in just eight months.

In summary, Thrasio's journey underscores the significance of establishing a business with sustainable practices, rather than solely relying on transient market trends.

Moving forward, Thrasio's fate depends on its capability to either convince existing investors to navigate this situation or attract new investors for a buyout.

✍️ Jargon of the day

Sustainability - Sustainability in business is like playing the long game where a company aims to thrive not just today, but for years to come.

It's about making choices that keep things going without exhausting resources or causing harm.

Loved this edition? Or have some thoughts to share? We'd love to hear from you

Cheers,
Karthik