What Amazon FBA Aggregators Mean for Independent Sellers.

The online shopping boom is well and truly underway. In 2018, it is estimated that 1.8 billion people worldwide bought goods online — compare that with the past year where over 2 billion people from different parts of the world carried out at least one online purchase. E-shopping is immutably set on an upward trajectory, with e-retail sales this year predicted to reach $4.8 trillion. The increase in the number of players in the eCommerce playground inevitably has also meant a hike in competition. There are now more sellers selling the same merchandise and brands must be creative to stand, or better still, beat the competition.

The increase in the number of independent Sellers in this highly competitive eCommerce environment, many of whom choose to sell off their brands, has spiked the rise of Amazon Aggregators. Amazon aggregators are private umbrella companies heavily funded to buy businesses from willing Amazon Sellers aiming to generate a profit for their investors. As of April, these companies had already raised more than $3.5 billion in known funding in 2021, with Thrasio being the top performer, scooping $1.6 billion alone. There are currently 40 aggregators operating in this space and the most common names being Elevate Brands, Thrasio and Perch.

Suggested reading: For more information about how to maximise your Amazon brand analytics as a Seller or a Vendor, check out our eBook — Mastering Amazon Brand Analytics 

But what does the rise of Amazon Aggregators mean?

First, it means huge competition. Sellers that choose to continue to independently run their Amazon brands will face huge competition from brands operating through Amazon Aggregators. These companies have huge funding which means they can scale up more quickly due to increased investment in that brand. Individual Sellers on the other hand will continue to face difficulty in scaling up due to limited funds for investment. However, Sellers can choose to see the competition that these big umbrella companies cultivate as an opportunity or challenge.

The challenge:

Aggregators are generally looking for category leaders. Those are Sellers that rank in the top three organically for the most relevant (highest volume) terms and have a healthy “review moat” -- i.e. a competitive differentiation regarding the number of reviews and star rating. Aggregators are also generally looking to add value, meaning that they will also often target companies that are lacking in something to break past the revenue ceiling they’ve hit and can’t supersede. 

By partnering with an aggregator, Sellers can expect to benefit from: 

• Capital: Most Sellers start off self-funded, and need to reinvest monthly profits back into more inventory. Having access to an additional source of capital makes it possible to take a longer-term view on planning — for example, investing in brand-building advertising strategies being able to wait two-to-three months to break even.  

• Industry expertise: Some aggregators have internal eCommerce expertise that can help provide structure and consultation for Sellers. 
• Support with supply chain and logistics: Amazon Aggregators typically run an umbrella of brands and with economies of scale, they are able to source quicker, more resilient and affordable supply chains and logistics for brands whose fulfillment is not by Amazon.
• Access to analytic processes and platform: Aggregators know the power of analytics and that’s where they thrive at. These platforms are at times in-house or are 3^rd party platforms. Once a Seller is acquired, integrations with analytics software are made to guide business decisions.

All of these will invariably improve the overall performance of your brand and make you more successful. So, as more Sellers crop up and get snapped up by Aggregators, there’s a seeming pressure to be acquired too so you can keep up — or alternatively try to provide the points above to your own business. 

The opportunity: 

Competition is good for Sellers and consumers for a number of reasons:

• Path to innovation: It can spur invention of better products, more efficient processes to ensure that you beat or keep up with your competitors.
• Reduces unnecessary cost: It forces you to recognize when profits are being eroded through wasted ad spend and various other variables.

• Call for self-reflection: Competition can also be a great opportunity to take time and reflect on your Seller business. For instance, why are we succeeding in the market, or why are we not breaking even? How can we bring something new to our customers? 

So while increased competition seemingly poses a threat to Amazon Sellers thanks to an oversaturated eCommerce ecosystem — it does force self-reflection and criticism which, all in all, means businesses will work unwaveringly to improve from a budget and a product perspective. 

What are your options?

However, the fundamentals of Amazon success don’t change — know your customers and your products, and native Amazon reporting helps you do that. Ultimately, you need to look at your performance at a granular level to determine where you’re eroding profits and how you’re not maximizing performance. Native Amazon data is confusing, myriad and quick-to-expire and so you need a third-party platform to use in conjunction with Amazon data so that you can make sense of the information in a timely, accessible and informative manner. 

1. Join the hype

As the common saying goes, if you cannot beat them, then join them. Although it’s worth noting that most owners who sell their operation to an aggregator will no longer be involved post-acquisition — i.e. you’re not still running your brand within the aggregator. However, Sellers do have the option to “get aggregated”, which can come with the benefit of a significant payout. With that said, aggregators, especially the bigger names, are very picky about the Sellers they choose to acquire. They will consider such things as — 

• Is your brand registered?
• What’s your organic ranking? 
• Do you have a review moat? (i.e. do you have more reviews and a higher star rating than your competitors?) 
• Do you operate under Fulfillment By Amazon (FBA)?
• What profits and margins are you making?
• How much of your sales are coming through Amazon?
• How has your sales/profit grown over the last 12 months?

There are quite a number of Aggregators and so choosing the right one for you is imperative. You can learn more about these companies here.

One of the key USP’s of Aggregators is that they hugely invest in data analytics for their brands. This data analysis is often done through a third-party analytics platform by using Amazon’s native data as the input, as well as broader performance data associated with eCommerce businesses.  By practicing proactive and timely data analysis, companies are able to find action-focused and meaningful insights that streamline their business. Besides data analytics tools, these companies are well-resourced with data analysts that have the expertise to effectively use the software to generate meaningful decisions. 

2. Compete on your own

You don’t need an aggregator to get access to a sophisticated data analytics platform. If joining the hype isn’t for you, you still need to get the most out of your native Amazon data, and you can do that through a 3rd party analytics platform. An ideal platform would be one that incorporates — 

• Audit: This is for brands that want to gain a granular understanding of your business using native Amazon data and wider performance data.
• Customer analysis: This feeds into customer lifetime value (CLV) — the analytics tool can help you to understand the intricacies of your customers as they relate to customer acquisition, retention and profit margins. 
• Product analysis: The analytics tool can help you to understand the intricacies of customer behaviors as they interact with your products. 

Operating in a niche market is also a good strategy for avoiding aggregators. Most aggregators are looking for brands with rapid growth potential, and that is reflected in the fact that aggregators often buy companies at 3-5x their last 12 months’ EBITDA. Fundamentally, aggregators need to see big potential in your brand. However, you can still run a very successful business within a particular niche that won’t be large enough to draw the attention of aggregators. Generally speaking, this is a solid strategy on Amazon, regardless of competition from aggregators. 

Suggested reading: For more information on how to better understand your customers through analytics, check out our blog — Improve your Amazon customer analytics in 2021 - Nozzle Insights 

The 3rd party platform you need, in any case

We, at Nozzle, pioneer data analytics innovation through our platform designed especially for the Amazon Marketplace — this gives us unparalleled expertise into the eCommerce ecosystem, allowing everyone who uses it to be intricately all-knowing about their performance. We work with both brands and aggregators (independently and together), allowing us to provide a detailed understanding of both sides. The platform can — 

• Increase ad performance: The platform has capabilities to identify wasted ad spend and to also reveal missed revenue opportunities.
• Increase sales and profits growth: It is great to grow in sales as a Seller but what’s greater is to also grow in your margin and the overall profitability of your business. 
• Save time and increase focus: Delegate the low-value value tasks to the platform while you spend your time on high-value tasks. This will generate an increased efficiency in your work as an individual or a team.
• Do better decision making: The platform enables you to make a deeper view of your customers and how their behaviors evolve. This analysis will then guide how you allocate your ad spend, generally improving your decision-making.

Most importantly it can help you stay ahead of the competition whether you’re acquired or not.  Get your free audit today!