In this piece you'll learn
Things are changing fast for Amazon sellers. Suddenly, they’re going toe to toe with a foe beyond any of them. No, it’s not a Balrog – nod to LOTR. It’s an army of 100+ Amazon seller aggregators and it’s becoming a major player on a global scale.
Today we look into what makes an Amazon brand aggregator such a threat, and why many sellers don’t have the means to fight back. We also reveal why it may be time for you to scale your business, and rather than throw in the towel, start competing with Amazon aggregators.
What Is an Amazon Aggregator?
The aggregator model refers to a business that collects data from other businesses. It then displays this data on its own website for users to compare. But Amazon seller aggregators are a very different thing. Amazon aggregators buy 3PThird-party sellers are independent indi… More sellers out.
In our post titled How to Optimize Your Amazon Listings This Q4, we briefly mentioned this business model. And we explained that an Amazon aggregator tries to consolidate its portfolio by buying small brands and pushing them to grow. So, to them, 3P accounts are cash cows.
That’s not to say that an Amazon brand aggregator is some sort of lean, mean, business machine. Some aggregators are venture capitalists, private equity firms, investment banks, etc. But some are veteran sellers and ex-Amazonians. Either way, their aim is to make brands global.
The problem with Amazon aggregators is that, due to the pandemic-driven shift to e-tail, they’ve raised $10b in capital this year, says Marketplace Pulse. And as large 3P sellers are going public (e.g. Anker), small sellers are left alone. And they face a serious dilemma: beat’em or join’em?
Major Amazon Aggregators Today
These being private companies, Amazon aggregators keep their business private. But thanks to sources like CAPFORGE and MarketPulse, you can get a pretty good idea of who the top players are and what they’re looking for in a 3PThird-party sellers are independent indi… More seller business.
- Thrasio is the best known aggregator. After reaching $1b in valuation this year, it also reached unicorn status. It acquires FBA brands with $1m+ in annual revenue.
- Perch wants high-ranking, evergreen products with great reviews that generate $1m+ in annual revenue, but is open to suggestions.
- Branded prefers $1m+ generating FBA brands to do with lifestyle.
- D1 Brands is run by 3P sellers and encompasses 2,000+ brands.
- Benitago is less picky about products, and it’s known best for its Aggregator Match Guarantee (i.e. they throw in $250k on top of what another aggregator is willing to offer). But it’s only interested in brands with $1m+ SDE or EBITDA.
- Foundry is interested in great digital brands from any platform (Amazon, Etsy, Walmart).
- Intrinsic works exclusively with health and wellness products.
- Sorfeo will settle for sales of $200k-$1m per year.
- Accel Club is casting a wider net. Revenues of $600k-$25m will do and the sky’s the limit. They also offer revaluation, paying the seller back for a threefold growth in value within six months.
- Elevate Brands is also made up of veteran sellers. They’re interested in strong branding and/or proprietary products, and $2m+ in revenue.
- Yaba wants PL brands on EU venues with €500k in revenue or €170 SDE.
- Rainforest is happy with $600k-$15m in annual revenue, but only from businesses set up in the Asia Pacific.
- Boosted Commerce wants CPG brands $1m+ in revenue and at least 20% in margins.
- Suma Brands will make do with $500k+ in revenue, and the sale takes place in a few weeks.
- Forum Brands is made up of Amazonians and financiers and it wants MCF businesses with $1m-$10m in revenue.
- Moonshot is looking for anything that rakes in $2m-$30m per annum.
- Upsellon wants FBA businesses with $1m-$10m in revenue.
- Unybrands is for sellers with $1m+ in revenue. They specialise in expanding brands internationally with proprietary software.
- Greenhaus works on a variety of channels, including e-tail, D2C, and brick & mortar, and it’s looking for businesses with $750k-$10m in revenue per year.
- Dwarfs.io works with FBA businesses in the UK and the EU, €500k-€5m in revenue, 20%+ in margins, and under 200 SKUs.
- Olsam is made up of former sellers and Amazon employees, it’s based in the UK, and it’s looking to expand brands across Europe.
- Merx also has its eyes set on Europe and welcomes European FBM sellers, but it will settle for nothing less than an annual profit of €30k-€300k.
- SellerX wants $1m+ in sales, 30%+ YoY growth, and preferably seller accounts based in the UK, Germany, and the USA. They offer sellers the option to stay on in an advisory capacity after the sale, and they set in place a non-compete agreement at category or niche level.
What Are Amazon Seller Aggregators Looking For?
No two Amazon seller aggregators are the same. They’re each looking for different things from a third-party seller’s business. But there are a few common denominators. You’ll often hear an Amazon aggregator rep mention these must-haves:
- Defensibility and sustainability. This is about owning a patent, utility, or design. Sellers must have a PL or registered brand.
- Fulfillment. FBA sellers are at an advantage because aggregators want that Prime badge.
- Channel. Amazon aggregators prefer MCF businesses that branch out on Shopify, eBay, Etsy, etc. But they also expect 1-2 thirds of all sales to go through Amazon.
- Size, growth, and margins. As seen above, this varies from one aggregator to the next, and it’s not always set in stone. But $200k in annual net profit is a good starting point, and profit margins should be at least 15%.
- Inventory size. In general, the fewer SKUs the better.
- Category. There are a few categories most Amazon aggregators won’t touch, such as electronics, fashion, supplements, perishables, seasonals. On the other hand, most are happy to work with evergreen products, preferably from these categories: Health & Household, Home & Kitchen, Arts & Crafts, Sports & Outdoors, Pet Supplies, and Baby.
- Loyalty. Return customers, subscription boxes, and a decent selling history bode well.
- Reliability. As you’d expect, Amazon seller aggregators want to work with sellers who read the small print, know all the rules, and play by said rules (i.e. they don’t like account suspensions and ongoing IP infringement claims).
How Can Sellers Deal With Amazon Aggregators?
Whether you want to sell your business to an Amazon aggregator or to compete against them, it’s in your best interest to spruce it up. Try to bring your sales up with campaigns and special offers. This would nudge those figures higher and boost the value. But there’s more you can do:
- Build brand identity on and away from Amazon.
- Build a social following (e.g. work with influencers).
- Use Amazon’s business reports.
- Optimize your listings.
- Freshen up your A+ content.
- Check your IPI score and FBA stock levels.
- Boost your reviews and feedbackA performance rating on a scale of 1 to … More score.
- Maintain stock levels with Sellery.
- Improve your performance metrics.
- Look into alternative channels (Etsy, eBay, Shopify, etc.)
- Find an investor with a last-minute cash injection for accelerated growth.
What Happens After the Sale?
Amazon brand aggregators get to work right away and turn the business around. They start with listing optimization, focusing on keywords and SEO. Then they turn to branding (images, presentation, packaging, etc.)
They look at ad spend. They adjust PPC campaigns. And they look into using various programs (e.g., Small & Light, Launch Pad). They turn their attention to pricing, logistics, and acquisition marketing through Google SEO. They also diversify sales channels and set up affiliate sites.
Some Amazon aggregators insist on drafting non-compete agreements. They could be for specific categories or niches. These will be off limits for as long as they demand. And some offer previous owners the option to stay on with the company in an advisory role.
That’s about it on the topic of Amazon aggregators. But the takeaway here should be that Amazon seller aggregators are growing fast; too fast. This brings on an entirely new set of challenges for Amazon sellers.
But the tables may turn. Unless they join forces, some of these Amazon brand aggregators may find that they’re too big for their britches. Marketplacepulse says it best in an article titled “25 Amazon Aggregators Raised at Least $100m”.
If the trend continues, aggregators will raise an estimated $10 billion in 2021 - most of that through debt that will fuel acquisitions. None have failed publicly yet, none have tried to consolidate, and none did an IPO to go public. All of those will happen
Melanie takes an active interest in all things Amazon. She keeps an eye on the latest developments and keeps Amazon sellers up to speed.
