Certain estimates suggest Amazon is responsible for 40% of online retail in the US and a quarter of Europe’s e-commerce market. Spend on the platform is only accelerating with the closure of brick-and-mortar stores throughout the pandemic and the ever-growing giant is even being referred to as “the new high street”.
An opportunity has been spotted and a new breed of startup is emerging in the world of e-commerce. We take a closer look at the Amazon Seller acquisition market.
Direct-to-Consumer sales are increasingly attractive to brands that seek better control of their business and to manage the manufacturing of their products to brand image and pricing.
This strategy allows players to select the channels on which they wish to sell their products. Bypassing traditional retailers, these digitally native brands are paving their own way and selling their unique products on their own terms. Marketplaces are a great way to break into e-commerce without having to pitch your goods to a buyer—just list your products to tap into Amazon’s powerful audience and convert shoppers on your page into sales.
However, as Amazon gets more popular, several challenges are to be affronted by individual sellers. It’s increasingly hard for brands to get themselves seen, or to differentiate themselves once they are found.
An opportunity has been spotted and a new breed of startup is emerging in the world of e-commerce: firms looking to acquire and drive the growth of Amazon sellers and brands. This market had a breakout year in 2020, with nearly $1 billion in fresh capital committed to these startups.
The rise in companies seeking to invest in Amazon Sellers is driven by three key factors:
Thrasio increased brand Angry Orange’s sales eightfold to $16.5 million in two years.
More examples of young companies in this category include SellerX (Germany), Heyday, Perch (US), and Heroes (UK), but there is a long list of other FBA Acquirers. Since launching in 2018, Thrasio has acquired over 100 businesses and now sells 14,000 items on Amazon—from massage guns to hiking poles and everything in between. Last year, the company generated over $100 million in profits on $500 million in sales.
The vision is clear: these investors are looking to create the next Unilever or P&G.
With every acquisition, they work to modularize Amazon seller operations and drive growth across the portfolio. They do this by having each operation (sourcing, importing, marketing, financial planning, omnichannel) handled by a team of experts, rather than it all falling on the shoulders of an individual seller.
Some success stories from Thrasio’s portfolio include Angry Orange, whose sales increased eightfold to $16.5 million in two years thanks to redesigned packaging and partnered with social media influencers in the sector. Creative Space saved $75,000 a year on shipping costs thanks to a redesign that reduced the size of a whiteboard.
These growing businesses have real consequences for sellers and consumers alike. For Amazon entrepreneurs that can no longer drive growth due to complicated operations, these acquisitions are the perfect solution. The challenge is whether the investors will be efficient and successful in integrating a large portfolio of new brands with their different cultures and partnerships in tow.
These firms move fast to improve product and listing quality on Amazon. There is a whole industry of resellers listing identical products of low quality. For shoppers, it’s nearly impossible to separate the wheat from the chaff, whether that’s because of fake reviews or questionable product quality.
These well-funded investors can focus on creating or optimizing products that consumers actually seek. However, if these acquirers do become the norm, Amazon products might become optimized to the point of indistinction.
Investors will be interested in businesses that mean certain key criteria. Some examples:
It’s no secret: investors don’t like risk. These firms will surely be looking to diversify the sources of income for their Amazon native brands. This means opening new countries, activating new marketplaces, launching e-commerce sites (i.e. on Shopify) and diversifying traffic sources. While these investors are focusing on Amazon native brands, these efforts are to avoid depending entirely on Amazon in the future―much like what we have seen with Anker. Brands and retailers should keep a close eye on this exciting new market.
How to sell in D2C on your website, marketplaces and social networks D…Learn more
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