Packable, a top seller on Amazon’s U.S. station, still failed to hold on to it, and formally applied to the Delaware Bankruptcy Court for Chapter 11 bankruptcy protection.
Although there was a highlight moment when the annual sales exceeded 500 million US dollars, due to the subsequent failure to obtain more financing and the long-term inability to increase profits, it eventually went the road of bankruptcy.
Packable's most important brand is Pharmapacks.
Pharmapacks once held the title of top seller on Amazon's U.S. third-party marketplace. In the past five years, 1,730 of the 1,825 days were number one, and the brand was Walmart's top seller.
On the Amazon platform, if you search for related products of Pharmapacks, you can find that many products dominate the BSR list, and the reviews of its products are also up to tens of thousands.
Pharmapacks quickly caught the attention of the business press, being named one of the 2015 INC 500 fastest-growing private companies with $70 million in operating income that year. Probably from this point, Pharmapacks began to pay more attention to the company's revenue rather than the real money that can actually be earned.
However, when the market environment changes, financing is not smooth, and the platform cannot run through the profit model, in the end star companies like Packable can only regret it.
Unprofitability is the Achilles heel of Pharmapacks.
According to its September 2021 earnings data, Pharmapacks has a gross margin of 45%, but its expenses significantly exceed that. Sales in 2021 were $452 million and losses were as high as $112 million.
In fact, the hidden danger has already been planted. In Pharmapacks' business plan, after obtaining financing, it will still lose money from 2021 to 2023, and it will not be profitable until 2024. This is still a judgment based on optimistic market facts.
Everyone knows that this year's market is not optimistic at all.
Starting from the capital market, it can be described as a sudden change in the wind direction. In March, Packable called off a deal to take the company public, citing "adverse market conditions." Packable founder and chief executive Andrew Vagenas quietly resigned in April, just days before Highland Transcend's planned shareholders meeting.
It is understood that in its 2021 financial report, half of the company's revenue is spent on sales and distribution costs, and the other 20% is spent on warehousing and management costs. Under such a mode of operation, even if it operates in a mode with relatively sufficient cash flow, Pharmapacks still needs a lot of financing support.
It had to close as cash burn increased, the SPAC merger failed, and assuming no other investors joined. On August 28, its parent company, Packable Holdings, filed for Chapter 11 bankruptcy.
For now, most Amazon sellers have shifted their focus to building their own brands, but Pharmapacks is betting on exclusive wholesale relationships with brands and insisting on self-fulfillment for consumers. Unfortunately, in the current e-commerce environment, a profitability level of only 15-25% is hopeless.
In addition, according to the latest information obtained during an online bankruptcy court hearing, Packable's lawyers said that Packable currently needs to deal with nearly $272 million in debt and plans to sell the remaining inventory valued at $79 million in the next six months.
It's very sad! Once the cash flow breaks down, even for a star company, the final plan can only be to dismiss employees, clear inventory, and repay debts.
Of course, the collapse of Packable is also a warning to Chinese sellers: if a company wants to operate for a long time, it is untenable to rely on huge revenue alone, and cash flow and profits are indispensable.
At the same time, it also reminds sellers not to blindly pursue scale, do a good job of refinement, do a good job of lean management, and survive this chilling stage is the most important!