What Amazon Aggregators are looking for?

The role of Aggregators in Amazon 

The Amazon space is becoming more and more attractive for investors. They are acquiring hundreds of brands and bringing them under the Amazon aggregator figure. Aggregators are working actively into the market acquiring Amazon brands and accelerating their growth. 

According to Fortunet’s survey, aggregators are considered the main drivers of the Amazon merge and acquisition (M&A): around 18% of aggregators have acquired more than 21 businesses each. The demand of FBA business has developed significantly, and acquisitions plans by aggregators seem to continue growing in the next few years.

Amazon business acquisitions are expected to exceed 1,000, with aggregators being a major player. Let’s know more about aggregators...

What aggregators are and why they’re operating in Amazon

An Amazon aggregator is a business that acquires multiple Amazon brands to make them grow. Lots of these aggregators started working in 2020, so then, they have not made many acquisitions. They are raising funds and it is expected that acquisitions grow in 2022. 

Why do these kinds of acquisitions take place in Amazon? 

1. Amazon is the e-Commerce sales leader with $309.5 billion in the U.S. in 2020.
2. Third-party sales on Amazon are growing at 52% annually.
3. More than 50% of U.S. customers start their product search on Amazon. 
4. Outsourcing fulfillment to Amazon helps drive sales through a great customer experience that is supported by timely and accurate shipments. 
5. The model of growing an Amazon business is repeatable, once we understand what the market dynamics are, we can repeat the model with different brands. 

Why are Aggregators key players in Amazon?

As we have already mentioned, aggregators are increasingly acting on Amazon, looking for businesses to acquire to grow and consolidate them. Many of them are getting the financing they need to carry out these operations, which reflects that there will be a lot of activity in the coming months. 

One of the main concepts taken from Fortunet's report is "build to sell" as a formula for Amazon sellers to make a quick buck. So, in Amazon we find Amazon sellers making their brands more and more attractive and aggregators looking for the most attractive brands. Both of them can build a perfect tandem. 

For this strategy to be successful, we need to know more about the aggregators: who they are, what kind of businesses they are looking to acquire, what sectors they prefer…

We have summarized some of the most important aspects from Fortunet's analysis.

How many FBA aggregators are there? 

As the might of Amazon grows, so does the new wave of new aggregator companies. According to The Philadelphia Inquirer, approximately 40 Amazon aggregators have emerged in the past few years.

Here are some of the well-known aggregators: 

• Thrasio, a U.S.-based aggregator that was born in 2018, has bought more than 100 Amazon sellers and surpassed a $1 billion valuation in June of last year. 
• Elevate Brands, a New York- and Austin-based startup that acquires and runs third-party Amazon merchants, has picked up $250 million in funding, with 25 brands currently in its stable. 
• Perch, founded in 2020, has raised $130 million and has already acquired nearly 30 brands. 
• Unybrands, an e-commerce platform aimed at acquiring successful Fulfillment by Amazon and direct-to-consumer sellers looking to scale. To date, they have raised $325 million in funding.
• BBG is particular in that it is much older than the rest. Founded in 2005, it has already acquired 15 brands. 
• SellerX and Razor were founded in 2020 and are based in Berlin, and have acquired around 30 brands, according to Sifted.
•  In the UK, Heroes and Olsam were also founded in 2020, and in Canada, Heyday with total funding of $245 million.

All you need to know about Amazon aggregators

According to Fortunet’s survey, there are some common features in aggregators’ behavior through Amazon. Although they are a very recent player on Amazon (most of them since 2020), we have learned some interesting things about them.

1# Sales are Important for Aggregators

Most aggregators who are looking for an Amazon business to acquire do not give importance to the number of platforms used to sell their products. What is interesting and what brings real value to aggregators are the sales. So, contrary to what Amazon sellers often think, using multiple platforms does not make a business more attractive, it is its sales that will attract the attention of aggregators. 

2# Aggregators are in the Center of the Acquisition Strategy

Acquisition expectations for next year are very high, which puts aggregators at the center of the strategy. Of course, they will have to be prepared for the volume of acquisitions they are looking for. That means to be ready with the necessary technological and human resources to deal with it. 

3# Get Funded for Brands Acquisition

Most aggregators started working on this business model in 2020, so they have not yet made too many acquisitions. They are currently reaching the necessary funding to grow in the number of acquisitions by 2022. According to FE International, these are the most significant Amazon FBA aggregators, their total funding, and the companies and investors who are funding them.

4#Aggregators Prefer Evergreen Products

From Fortunet's report, it is clear which sectors offer the best business opportunities with the lowest multiples. Aggregators prefer evergreen products (easy to operate and not subject to massive regulatory requirements). The most interesting categories are Home and Garden, Pet Supplies, Baby Products, Outdoors and Health, and Personal Care.

5# Tandem Between Aggregators and Amazon Sellers

The "build to sell" concept. A real strategy that brings sellers and aggregators closer together.  The concept of “build to sell” as a very quick monetization route for Amazon sellers. Many aggregators are open to acquiring very young businesses for a minimum period of one year only, as long as profitability is at least 15%. 

What do we expect from aggregators in 2022?

1. Aggregators are considered the main drivers of the Amazon M&A: around 18% of Aggregators have acquired more than 21 businesses each. While almost 64% of the Aggregators have acquired 1-10 businesses, the majority intend to purchase more than 15 businesses in the next 12 months. 

2.  Aggregators prefer some categories: 1. “Home and Garden” (over  88%), 2. Pet Supplies (over 78%), 3. Baby Products (67%), 4. Outdoors (64%), 5. Health and Personal Care (64%).

3. 46% of the Buyers assert that they require a minimum operating history of one year only for acquisitions targets.

4. Over 50% of Buyers said that they require at least a 15% SDE profit margin for Amazon FBA businesses.

5. 65% of respondents acquire FBA businesses with a minimum purchase price of 500k-1M, and 52% of the buyers assert that they do not have an upper limit for their acquisitions.