COMPANY THAT BECOMES UNICORN IN 6 MONTHS- MENSA BRANDS CASE STUDY.

In just six months, Mensa Brands has taken the Indian startup ecosystem by storm, raising $300 million to become the fastest-growing unicorn in Indian business history. Within this short timeframe, Mensa has acquired 12 consumer brands, including notable names like Villain and Karigari. These brands have witnessed staggering growth rates of 250% and 140%, respectively. What is even more remarkable is that while many Indian startups are embroiled in cash burn and substantial losses, Mensa has managed to achieve profitability within these six months.

Understanding Mensa Brands-

What exactly is Mensa Brands? How does its business model function? And most importantly, what opportunities does Mensa Brands create for small-scale entrepreneurs in the Indian startup space? Let's Find Out.

Mensa Brands employs a modern business model known as the Thrasio model. This model gained popularity due to the rapid rise of the American startup Thrasio. Founded in 2018, Thrasio hit a billion-dollar valuation within just two years, becoming one of the fastest-growing unicorns globally. But what does Thrasio do, and how does its business model work?

The Thrasio Model Explained-

To comprehend the Thrasio model, we must first understand the dynamics of the Amazon marketplace. Amazon operates through two types of sellers: first-party sellers and third-party sellers.

First-Party Sellers-

In a first-party seller relationship, Amazon directly invites successful product creators to establish themselves as first-party sellers. This means these creators sell their products directly to Amazon, which then sells them to customers. Amazon manages everything from shipping, product listing, pricing, and returns. The seller's role is limited to fulfilling purchase orders sent by Amazon and shipping the products to Amazon's warehouses. Essentially, the seller manufactures the product while Amazon handles the sales and logistics.

Third-Party Sellers-

In contrast, third-party sellers operate independently on Amazon's marketplace. They sell their products directly to consumers, managing everything from product listing, advertising, pricing, logistics, and returns. To ease this process, Amazon offers Fulfillment by Amazon (FBA), a service that allows third-party sellers to use Amazon's logistics network for shipping products to customers.

This direct-to-consumer model has flourished over the past two decades. In 1999, only 3% of Amazon's gross merchandise sales came from third-party sellers. By 2019, third-party sellers contributed 58% of Amazon's gross merchandise sales. This growth highlights the immense visibility and accessibility provided by Amazon, enabling small-scale entrepreneurs to reach customers nationwide. As of recent estimates, approximately 50,000 third-party sellers on Amazon make over a million dollars in revenue annually.

Challenges Faced by Small-Scale Entrepreneurs-

Despite this success, the reality for many small-scale entrepreneurs is daunting. Managing everything from marketing, listing, manufacturing, packaging, and shipping is both tedious and costly. In the competitive landscape of Amazon, scaling a brand becomes increasingly difficult. Market research indicates that most Amazon sellers hit a saturation point at around $3 to $5 million in revenue. To grow further, they often need to take on hefty loans or personal debt.

Thrasio's Solution-

This saturation point is where Thrasio steps in. Founded by industry veterans with credibility and insight, Thrasio raised substantial funding to offer exit strategies to successful Amazon sellers. Once Thrasio acquires a brand, it leverages its scale, capital, and expertise to grow the operations further.

Case Study of Angry Orange-

One notable example is the acquisition of Angry Orange, a company that produces pet odor eliminator sprays. Despite excellent customer ratings and annual revenue of $2 million, the founder, Mr. Adam, found it increasingly challenging to manage and grow the business. Thrasio offered him an exit plan, acquiring Angry Orange with a 100% payout. Post-acquisition, Thrasio rebranded the product, revamped packaging, enhanced marketing efforts, and expanded sales channels beyond Amazon, including Facebook, Google, and retail stores like Target and Walmart. The result was a revenue surge from $2.5 million to $23.1 million within a year.

The Mensa Brands Approach-

Mensa Brands operates similarly to Thrasio, with a few key differences tailored to the Indian market. Like Thrasio, Mensa surveys the market to identify gaps and potential brands. They focus on small-scale companies with a digital-first approach, quality founders, loyal customers, and annual revenues between $1 to $10 million. Digital-first means these companies have built their presence primarily through digital platforms.

Acquisition Strategy-

While Thrasio offers founders a 100% exit, Mensa keeps the founders involved, retaining a major stake in the company with plans to fully acquire the brand over the next five years. Post-acquisition, Mensa leverages its expertise in digital marketing, sales channels, and supply chain management to scale these brands both domestically and internationally. This includes optimizing inventories across popular marketplaces and official websites, followed by significant investment in product innovation to expand the brand's product lines.

Success Stories: Villain and Karigari-

Mensa's acquisition strategy has yielded impressive results. Villain, a men's fragrance and accessories brand, has grown by over 250% since its acquisition. Karigari, a high-end designer sari brand, has seen a 140% increase in growth. According to Ananth Narayanan, founder of Mensa Brands, most of their brands have grown over 100%, with plans to grow these brands by another 1,000% in the next five years.

The Future of E-commerce in India-

Mensa's rapid growth and profitability signal a promising future for the Indian e-commerce market. Here are three key opportunities for small-scale entrepreneurs in light of Mensa's rise:

1. Direct-to-Consumer (D2C) Market: The D2C market in India is just beginning to flourish. While Mensa has acquired 15+ brands, hundreds of companies in India have revenues between three to seven crores. The market is ripe for acquisitions and growth, presenting ample opportunities for new and existing small-scale brands.

2. Valuable Exit Opportunities: As the D2C market grows, small-scale digital-first brands with strong products and positive reviews will become attractive acquisition targets. In the next few years, companies like Mensa will increasingly seek to acquire these brands, providing lucrative exit opportunities for entrepreneurs.

3. Competition and Market Dynamics: Mensa's rise positions it as a direct competitor to established players like Nykaa. The competition will likely drive innovation and expansion in the beauty and personal care (BPC) and fashion sectors, which remain largely untapped. This dynamic presents significant growth potential for new entrants and existing brands.

MENSA BRANDS IMPACT-

Mensa Brands is a testament to the transformative potential of the Thrasio model in the Indian context. By leveraging technology, digital marketing, and strategic acquisitions, Mensa has achieved remarkable growth and profitability. For small-scale entrepreneurs, this emerging market offers numerous opportunities to build, grow, and potentially exit their brands successfully. The future of Indian e-commerce is bright, and Mensa Brands is at the forefront of this exciting wave of innovation and growth.