Unless you’ve been hiding under a rock the size of Jeff Bezos’ bank balance in recent times, you’ll have seen talk about Amazon aggregators.
- But what exactly is the business model behind these so-called aggregators?
- Who are the top Amazon aggregators?
- Is there longevity in this FBA roll-up play?
All this and more in this in-depth article!
What is an Amazon aggregator?
An Amazon aggregator is a business structured to buy, scale, and incubate eCommerce brands that utilize the Fulfilment By Amazon (FBA program).
Many smaller brands are “aggregated” under one roof to maximize efficiencies and increase overall valuations.
Backed by over $12billion in funding, aggregators are also able to hire best-in-class operators for every department of a private label business – research, development, supply chain, marketing, and so on – maximising the leverage of their size for rapid growth.
The concept of rolling up these small to medium sized Amazon businesses has become popular due to the leveragibility of Amazon’s logistics and as a result the relative operational simplicity in comparison to gross revenues.
This makes it easier for Amazon aggregators to onboard a large number of existing brands in a bid to not only grow linear revenue, but also increase their valuation multiple.
If aggregators are able to buy brands at 4-5x, and as a larger entity are trading at a 10-12x valuation for example, they instantly add equity to the bottom line each time they acquire a new Amazon business.
What are Amazon aggregators looking for in an Amazon business?
Whilst ever aggregator is looking to acquire successful eCommerce brands, the profile that each is looking for is slightly different.
This can be due to in-house skill sets, a view on the future of eCommerce, or any range of other factors.
However, most aggregators are looking for a combination of business strengths that include the following.
Strong Profit Margins
As a general standard, Amazon aggregators are looking for net profits in the region of 20% or higher.
Amazon sellers looking to exit their e-commerce brands need to be able to show strong margins in order to present upside for the future owners.
What may come as a surprise to some brand owners is that many aggregators are looking for a high level of SKU concentration.
This means they want to see a large portion of revenue coming through “hero” SKUs – just a small number of products that are towards the top of their category.
Whereas most business owners seek diversification to create security in their income, aggregators are already diversified in the number of brands they own.
So, as discussed in our podcast episode with Jim Mann (formerly of Thrasio), they are instead prioritizing brands that provide a simplicity of operations through SKU concentration.
Registered Brands With Clear Moats
Any business buyer wants to know they are making a good investment, and Amazon brand aggregators often refer to brands having a ‘moat’.
In other words, something around the business that makes it hard for rivals to compete.
This can include aspects such as high-quality products, a large review count, strong intellectual property (trademarks are a must, patents are a dream), and proprietary products.
Most aggregators are also looking for category-leading brands or at least some level of loyal customers and strength of brand that goes beyond being a one-dimensional Amazon business.
Whilst private business owners are naturally fearful about too high a percentage of revenue coming through Amazon, aggregators for the most part welcome a high reliance on the platform.
It’s a marketplace they know well that also provides a lot of volume and logistical leverage. Lots of additional marketplaces and revenue streams sound good – but they can add to the operational complexity they are looking to avoid.
This isn’t particularly aggregator-specific as most buyers will be on the same page here.
A business trending upwards will always be more attractive than a stagnant or downward-trending business.
Aggregators will study the trends of your business closely, including aspects such as annual net profit, overall revenue growth, and individual product growth.
Each aggregator will vary in its approach on this aspect, but many will prioritize certain niches.
This may be due to expertise within the aggregator’s operational staff, or it may be due to the prediction of future trends.
Either way, if you’re looking to sell your Amazon business then doing research into the aggregators that may be most interested in your niche is highly advisable.
FBA Program Utilization
Did we say operation complexity already?
Aggregators will almost exclusively be interested in FBA sellers as managing and maintaining an FBM (Fulfiled By Merchant) operation will add many extra moving parts and therefore be much less desirable.
Good Account Health
When carrying out their due diligence process on any potential acquisition, aggregators will be particularly hot on any Amazon account warnings, policy violations and the like.
Amazon sellers looking to exit should be extra diligent to ensure their account stays in tip-top condition and avoid any potential roadblocks in the sale process.
Less of a factor in more recent times, but still an area of interest to some is the location of the business.
Some aggregators will only look at business entities registered in the US, whilst others will be open to a more global deal flow.
Should I sell to an Amazon aggregator?
Before asking if you should sell to an aggregator, the question is should you sell at all?
There are a number of reasons you might look to sell your Amazon business.
To take some chips off the table
If you’re heavily financially invested in your brand – as many Amazon FBA business owners are – then you may want to cash out and put some cash in the bank.
It can be stressful building a cashflow intensive business, and taking some equity off the table to create further stability in your financial journey is completely understandable.
To focus on other areas
If you’re like most entrepreneurs, you have a new business idea most days!
So when the opportunity surfaces to be able to sell your e-commerce brand and allow you the capital and time freedom to invest in other areas, it can be tempting to explore.
You’ve taken it as far as you can go
You may feel like you have exhausted your strengths and abilities and grown the business to the limit of where your capital and skillset can take it.
Once you’ve decided that, yes, you do want to sell your FBA business then approaching Amazon aggregators should absolutely be part of your acquisition process.
Aggregators aren’t the only type of buyer interested in eCommerce businesses so you shouldn’t limit your strategy only to them, but they should definitely be a part of your strategy.
What questions should I ask Amazon aggregators?
Finding the right buyer for private label FBA businesses is absolutely crucial – particularly if your deal structure involves some kind of earn-out.
An earn-out is an aspect of a deal structure that involves the new buyer paying out some of the agreed deal based on the ongoing performance of the business.
Naturally then, if this is going to be part of the acquisition process, you want to ensure you sell to an operator you have confidence in to take the FBA business on and continue its success.
So, some questions you may want to consider asking could include:
- What product categories do you specialize in?
- What specifically are you looking for in Amazon brands?
- What is your track record when you acquire brands?
- What is your strategy for Amazon FBA brands post acquisition?
- How will you improve this business post acquisition?
When is the right time to sell my Amazon business?
There are a lot of factors for Amazon sellers to consider when it comes to selling their private label brand, and timing is up there among the most important.
As previously mentioned, potential acquirers are looking for growth opportunities evidenced in positive trends.
They want to see any acquisition they make gain revenue over the initial ownership period, so solid sales history in the months and years leading up to a sale will be essential.
For this reason, you ideally don’t want to look to sell your business if sales are down or stagnant and instead should look to grow revenue and annual net profit before looking to exit.
Given valuations are carried out on trailing twelve months’ profits you should also consider the timing of an exit in relation to the annual flow of your business.
By timing the sale process with upward trending profits you can maximize the valuation of your business and ensure you’re getting the best possible offers from Amazon aggregators.
Timing is everything when growing your business, and equally important when exiting it.
Don’t wait until you’re tired, bored, or lacking the motivation to sell – by the time the acquisition process plays out your business may have plateaued as a result ultimately impacting the price you can sell for.
Can I stay with my brand after acquisition?
Whilst most aggregators will look to include some kind of post-acquisition incentive for brand owners, most will not require the owner to stay on in any functional capacity beyond an initial handover period.
They have specialized operational staff that will come in to manage the private label brands they acquire and as such it’s unlikely they will look to keep you involved over the long term.
How many Amazon aggregators are there?
At the time of writing, Marketplace Pulse puts the aggregator count at 92, whilst other outlets claim up to 150 are active in the space.
This number will continually fluctuate as more aggregators enter the market and also as aggregator consolidation plays out as some bite off more than they can chew in a fast-paced e-commerce industry.
Who are the top Amazon aggregators?
The majority of Amazon FBA aggregators are privately traded and do not reveal the total number of FBA businesses they have acquired.
As such, they are usually ranked by total capital raised.
This is a continually moving number, but we’ll take a look at some of the most significant movers in the space.
1. Thrasio – Walpole, MA
The (once) daddy of aggregators, Thrasio has raised over $3bn to aggressively acquire Amazon businesses and was the fastest US company to reach a $1billion valuation.
However, in recent times news suggests that they may have bitten off more than they can chew.
With increasing costs of borrowing and rates of inflation, Thrasio appear to be struggling and the end for them may be near.
February 28th, 2024 Update: Thrasio has filed for Chapter 11 bankruptcy. It says it will continue to operate its acquired brands as normal throughout the bankruptcy process.
#2: Berlin Brands Group – Berlin, Germany
Second highest in the capital raising stakes, Berlin Brands Group aims to “create, build, buy and scale brands globally since 2005.”
Given their long history in the eCommerce space, expect to see this aggregator withstand the test of time.
#3: Perch – Boston, MA
Perch don’t look for any specific product categories and instead simply looks for high-quality products and brands.
They look for brands that have strong customer reviews and are consistently one of the top products within their category.
Their portfolio consists of online businesses in the home & kitchen, apparel & beauty, health & wellness, and toys niches.
They seek brands with a minimum annual revenue of $1M or roughly $200k annual net profit.
#4: Heyday – San Francisco, CA
HeyDay has acquired multiple brands both on and off of Amazon and prefer businesses with a little more diversification than some other aggregators.
Amazon is still a major channel, but HeyDay’s brands are often well-positioned for multi-channel growth.
They too are not partial toward product categories – instead focusing on data analysis to identify category leaders with well-differentiated products.
They typically target companies that have at least $5M of revenue, a loyal customer base and focus on building enduring brands.
#5: SellerX – Berlin, Germany
SellerX acquires Amazon third-party sellers that have established great digital brands. They look for a clear track record of e-commerce success.
They focus on brands with opportunities for growth such as expanding into multiple marketplaces.
#6: Mantaro Brands – Munich, Germany & Boston, US
Mantaro Brands is helping shape and accelerate a new era of e-commerce growth by acquiring Amazon FBA brands that are sustainable and inclusive.
Their goal is to help brands realize their long-term potential and give business owners the freedom to pursue their next big idea.
The Mantaro team, full of seasoned experts, prides themselves on a transparent and efficient buying process. They typically close deals within 30 days.
Mantaro Brands looks across product categories and seeks purpose-driven and environmentally-conscious brands they think can have long-term impacts. They acquire brands that have a minimum of $500K in annual seller’s earnings, with a sweet spot of $5M.
In addition to the top aggregators, here are a number of other buyers of eCommerce businesses:
- Elevate Brands – New York, NY
- Razor Group – Berlin, Germany
- Dragonfly – Boston, MA
- Merama – Mexico City, Mexico
- Growve – St. Petersburg, FL
- Benitago Group – New York, NY
- Boosted Commerce – Los Angeles, CA
- Moonshot Brands – Oakland, CA
- Unybrands – Miami, FL
- GlobalBees – New Delhi, India
- Heroes – London, United Kingdom
- Mensa Brands – Bangalore, India
- Society Brands – Canton, OH
- factory14 – Luxembourg
- Accel Club – Amsterdam, The Netherlands
- Olsam Group – London, United Kingdom
- Acquco – New York, NY
- Valoreo – Mexico City, Mexico
- Nebula Brands – Beijing, China
- Branded – Paris, France
- Cap Hill Brands – Seattle, WA
- Suma Brands – Minneapolis, MN
- Forum Brands – New York, NY
- D1 Brands – New York, NY
- Intrinsic – New York, NY
- Foundry – Austin, TX
- The Stryze Group – Berlin, Germany
- Yaba – Barcelona, Spain
- Dwarfs – Amsterdam, The Netherlands
- Opontia – Dubai, UAE
- UpScalio – Gurgaon, India
- Rainforest – Singapore
- Gravitiq – London, United Kingdom
- Una Brands – Singapore
- Profound Commerce – Austin, TX
- 10club – Bangalore, India
- G.O.A.T Brand Labs – Bangalore, India
- TCM Digital – Herzliya, Israel
- The Mothership – St.Andrews, United Kingdom
- Quinio – Mexico City, Mexico
- Wonder Brands – Mexico City, Mexico
- Flummox – Switzerland
- Riogrande – Mexico City, Mexico
- Boosters – Seoul, South Korea
- Forest – Tokyo, Japan
- BrandHero – Praia Da Luz, Portugal
- Markai – San Francisco, CA
- Telos Brands – San Francisco, CA
Should I use a broker when selling to Amazon aggregators?
When selling an e-commerce business, Amazon sellers would be wise to consider expert help.
After all, many Amazon sellers employ expert help in the areas of supply chain, listing creation, marketing and more.
When it comes to selling Amazon brands, it’s the stage of business that has the potential to put life-changing sums of money in your pocket and therefore expert help is even more important.
By employing the help of a broker you can position your Amazon FBA business in the best possible way, and achieve the highest possible sale price.
Yes, there will be a fee involved, but any expense should be dwarfed by the extra income you can achieve when leaning on the expertise of a good broker.
How sustainable is the FBA roll-up strategy?
Only time will tell.
The sheer volume of finance being raised by all the aggregators in the space has created what could be likened to a bubble.
There will be Amazon aggregator companies new to the industry that struggle with the challenge of operating e-commerce businesses and find things difficult.
On the other hand, there is the potential for some incredible success stories with the likes of Thrasio.
The good news for Amazon FBA sellers is that there are more options than ever before for selling Amazon brands.
With 2-3 years of hard work learning how to grow a real Amazon brand that becomes an asset, the possibility to make life-changing amounts of money is very real.
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