What has caused the retail boom in online sellers?
The bar to setting up a business has lowered substantially. Ten years ago it might have taken years and plenty of capital to build a retail offering. That’s no longer the case. If you have a good idea, you can build a website in hours or set up a shop on Amazon or Etsy. As a result, there are more independent retailers than ever, creating more choice for consumers and more opportunity for entrepreneurs. Our analysis found there could be 2,795 UK-based Amazon sellers turning over £1m per year. Thrasio has created dozens of Amazon multi-millionaires via acquisitions of these kinds of sellers.
How did the Covid-19 pandemic drive changes in consumer behaviour?
When the pandemic hit, people who had previously dismissed ecommerce were suddenly forced to go online, supercharging long-term societal behavioural changes which stretch way back to the tech boom at the turn of the millennium. We saw a decade of advancement in digital adoption in just days. A 2020 study by McKinsey found that online delivery volumes grew ten-fold in a period of eight weeks last year, and online entertainment grew seven years in five months. It took Disney Plus just two months to grow to a size which Netflix required seven years to achieve. Crucially, the behavioural changes are likely to be permanent, with research by Thrasio finding that more than 50% of the UK population will buy half of their Christmas goods online this year, a 10% leap on pre-pandemic 2019.
Why is it harder for the incumbent consumer goods giants to meet consumer needs?
Consumer packaged goods (CPGs) often struggle to quickly respond to their customers’ needs because it can take a lot of time and money for them to get new goods to market. The research and development methods they use have remained largely unchanged for the past few decades. In contrast, Thrasio’s approach to building the next-generation consumer goods company is to quickly but carefully recognise and acquire brands selling high-quality products that people already love, and then help them grow. Whereas traditional CPGs still base their models around vertical manufacturing and distribution and shelf space in brick-and-mortar stores, Thrasio embraces supply chain flexibility and online search, while reviews and targeted digital campaigns replace big national advertising campaigns.
Consumer feedback is also built into the model. By finding these brands, we already know we have product market fit and quality goods, and we’re then able to apply our expertise and operating resources to help those products reach more customers. We can test and improve quickly, using sales data as the feedback loop rather than traditional customer surveys or focus groups. This approach enables digital brands to have solid signals in three to six months, not several years.
What does the consumer goods company of the future look like?
The trends towards convenience, choice and personalisation will continue to accelerate while further reducing barriers to entry for those wanting to create their own brands online. At Thrasio, as we are embedded in the seller ecosystem, we have a deep and rich understanding of how retail environments operate and can leverage proprietary consumer data to drive and adapt our approach.
As such, we’ve been able to build a diverse portfolio of category leaders in only three years, and are one of the fastest companies to reach unicorn status while remaining profitable. When we find a brand we believe in, we move quickly, making strong offers that pay at high multiples and are structured to maximise earn-outs as brands succeed. We now expect millions more entrepreneurs to start their own business and grow or sell to the likes of Thrasio to continue the brand’s journey.
For more information, visit thrasio.co.uk
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