Amazon Aggregators – Consolidating for Growth and Prosperity
The last year and a half have seen extraordinary growth in eCommerce as many buyers have abandoned shopping malls for the safety and convenience of the online store. The movement to online shopping was bound to continue to grow, but Covid-19 saw vast numbers of shoppers move online.
According to Amazon estimates, third-party sellers made profits of between $25 billion and $39 billion in 2020. Such profits attract attention.
The growth in eCommerce has spurred new investment in the Amazon ecosystem. Businesses with marketing and logistics expertise and money to spend have been buying Amazon sellers and brands. These funders are known as Amazon Aggregators.
What are Amazon Aggregators?
An Amazon Aggregator is an organization that seeks out and acquires a number of Amazon brands and sellers. The aim of the acquisition is to consolidate these entities into a single larger organization. Many of the aggregating companies will look for brands that sell related products. Then they combine the offering with partner products.
Top Amazon Aggregators provide the resources and software solutions to enhance sales and grow the business. Most are eCommerce experts. So, they use their marketing and logistics knowledge to scale the brands they buy.
They have become major players in the world of eCommerce.The aggregator business model works for both the acquiring business and the Amazon seller.
Investment partners such as banks are backing Amazon aggregating companies with funds. By all accounts, the action is heating up with aggregators offering incentives to sellers for their businesses.
According to Market Place Pulse Amazon Aggregators have attracted more than $7 billion in capital since April last year. There are more than 69 of these companies across twelve countries. So, if you’re an Amazon seller and you are ready to sell, this may be the time to do it.
What do the top Amazon Aggregators Look For?
The biggest Amazon Aggregators are savvy investors so they apply a stringent set of criteria to their due diligence. They will only buy businesses that have the potential to succeed. You’ll have to prove that your brand offers value for money if you hope to sell at a good price.
So, what do they look for?
- An Amazon Aggregator want sellers that produce their own products or have privately labeled or branded merchandise
- Each aggregator will have different financial criteria but most will ask for the following;
- Annual net profit of at least $200k
- Margins of 10% to 15%
- Aggregators look for sellers with a loyal customer base and products that will stand the test of time. They don’t want products that won’t continue to sell and grow over the long term
- If you sell on more than one marketplace, the aggregators will want to know what percentage of your sales are made on Amazon. Some will want to see sales in the region of 75% while others may be happy with a lot less
- Aggregators choose their markets carefully, so they will look for niche products within a specific product type
- They prefer businesses that make more money from fewer SKU’s rather than depending on a vast range of products that complicate the supply chain
- If you or your business have been in breach of the Amazon terms and conditions, aggregators won’t buy
- Aggregators don’t want to deal with packing, distribution or returns so they prefer businesses that use Fulfilment by Amazon. They are also interested in Amazon Prime which is so much easier to acquire on FBA.
In a nutshell, Amazon Aggregators are interested in successful businesses that have the potential to grow. They crunch the numbers and they use their knowledge of the business to decide which Amazon businesses will succeed.
Is it time to sell your Amazon business to an Amazon Aggregator?
With online shopping growing, now is the time to scale your business. Amazon aggregators have the resources that few small businesses can access on their own.
Aggregators have the knowledge and expertise to help a small business to take advantage of opportunities. This experience can also help to install efficiencies that will save costs.
In the end, whether you should sell or not, boils down to whether you love your business and would prefer to stay involved. If this is the case then selling it is not for you.
If, however, you’re in it to make money, and your business meets the Amazon aggregate criteria, now might be the perfect time to sell.
You’re Not Sure Which Brand Acquirer to Choose?
Tell us about your Amazon brand so that we can match your business with an Amazon Aggregator we think will serve you best.