Importance Of Roll-Up E-commerce In the Success Of Direct-to-consumer Brands
Given that disposable income is going up and customers are always ready to buy something new and exciting, it's a good time to be in D2C and in the roll-up e-commerce sector
In today’s digitized world, D2C entrepreneurs are having a field day. As consumer taste shifts towards more on-demand options as well as a preference for homegrown brands, more and more young brands with big visions are entering the arena and winning consumers over. Along the way, however, some of these brands may need a little extra help, which is where the roll-up ecommerce trend comes in.
What roll-up e-commerce is all about
Simply put, roll-up e-commerce companies acquire multiple e-commerce brands and consolidate and operate them with the goal of accelerating growth. The principle is distinct from that of a takeover, where a larger firm merely buys out a smaller one and absorbs it into its own fold. With roll-up e-commerce, an individual brand retains its identity and its control over where the brand should go. At the same time, it can benefit from dedicated expertise and growth infrastructure that are essential to brand expansion and bigger profits.
The relevance of roll-up e-commerce in today’s D2C market
Today, consumers are keen to support small local brands which produce niche items, both out of a sense of community and to enjoy unique products that can’t be found at big brands or e-commerce marketplaces. This has created immense scope for small entrepreneurs to build a winning brand. However, not all small brands will have economies of scale or achieve profitability. Clear profits, moreover, may take upto several years, and brands may not have steady sources of capital to keep going in the meantime. Without assistance, therefore, many of these brands may be forced to exit the market or to sell out to a bigger company.
This is where roll-up e-commerce steps in. The firm provides the D2C brand with enough resources to reduce overhead costs and improve cash flow, enabling them to focus on their product and marketing instead. The higher the revenue and profits, moreover, the greater the valuation of the brand. For the roll-up firm, too, the model is an excellent one. By consolidating enough brands that have high-demand products and a demonstrated success rate, the firm can witness significant returns once the brands are equipped with the right funds.
Roll-up e-commerce in India
The e-commerce roll-up space in India is relatively young, but powering up. Early mover 10club raised $40 million in a seed round led by Fireside Ventures, while another fast grower, Upscalio, recently raised $42.5 million in Series A funding led by Presight Capital. Roll-up firms in India follow the Thrasio model, where they acquire and scale D2C brands that also have a presence on marketplaces like Flipkart or Amazon. The model is named after the Massachusetts-based roll-up firm Thrasio, which became the fastest unicorn in the US by acquiring Amazon sellers. D2C brands that sell on marketplaces already have reasonably large audiences and are cash flow positive, making it profitable for roll-up firms to pour money into them. Investors are also keen on supporting the roll-up model as a sustainable one amid the D2C e-commerce boom. Overall, roll-up firms GOAT Brand Labs, Mensa Labs, GlobalBees and 10club have collectively gotten $276 million in funding over the last two months. Further to achieving potential growth, these roll-up companies are partnering with D2C e-commerce platforms to drive predictable growth.
In short, roll-up e-commerce is the ideal solution for D2C brands seeking funding and mentorship without the red tape involved in a VC deal. By empowering brands with granular business insights and both financial and technological assistance, roll-up firms allow small D2C brands a shot at longevity; a highly coveted asset in today’s competitive market. Given that disposable income is going up and customers are always ready to buy something new and exciting, it’s a good time to be in D2C and in the roll-up e-commerce sector.