Do You Really Need An Amazon Aggregator?

When the Amazon aggregator climate shifts, does that spell doom and gloom for all Amazon sellers? The truth? No, not even close. Here’s why.

Amazon aggregators once emerged as strategic allies and intermediaries, consolidating portfolios of brands and streamlining operational processes, from inventory management to marketing strategies.

At their peak, aggregators were taking on too much debt before the massive rise in interest rates. The writing was on the wall. Debt payments rose, and eventually, aggregators found themselves unable to fork out the cash for their investments, infrastructure, and even their payroll. A true sign of the shift in the aggregator market occurred more recently when Thrasio filed for bankruptcy alongside over 100 other aggregators. By examining the Amazon aggregator market and providing guidance on alternative strategies, we empower you to make informed decisions about your Amazon business. Your business can thrive without aggregators inflating the market.

What is an Amazon aggregator?

Amazon aggregators consolidate Amazon FBA (Fulfillment by Amazon) businesses, acquiring multiple brands and streamlining their operations under one umbrella.

One of the primary functions of an Amazon aggregator is to provide liquidity. By acquiring established brands, aggregators offer sellers an exit strategy, enabling them to monetize their businesses and unlock capital for new ventures or personal gain.

By centralizing functions such as inventory management, logistics, and customer service, aggregators help streamline processes and drive efficiencies. This centralized approach extends to marketing efforts, with aggregators deploying sophisticated strategies to enhance product visibility, drive traffic, and optimize conversion rates on the Amazon platform. The reality of the current aggregator market is more complex than what you may have seen on the surface in 2020.

How the pandemic helped fuel the Amazon FBA acquisitions

The outbreak of the COVID-19 pandemic in 2020 dramatically altered consumer behavior and accelerated the shift towards e-commerce. Amid lockdowns, social distancing measures, and the closure of brick-and-mortar stores, online shopping surged to unprecedented levels. This surge in e-commerce activity created a fertile environment for the rapid growth of the aggregator market. Here’s how the pandemic played a significant role in fueling the aggregator boom:

1. E-Commerce boom:

• With physical retail severely impacted by lockdowns and restrictions, consumers turned to online platforms like Amazon for their shopping needs. This surge in e-commerce activity created a wealth of opportunities for Amazon sellers, driving increased demand for aggregator services.
• The rapid expansion of e-commerce during COVID-19 highlighted the potential profitability of Amazon businesses, attracting investors and entrepreneurs to the aggregator model.

2. Seller demand for exit strategies:

• Many Amazon sellers, particularly those in industries heavily impacted by the pandemic, sought exit strategies to cash out their businesses and mitigate financial risks.
• The uncertainty surrounding the economic outlook and the desire for liquidity prompted sellers to explore options like selling their businesses to aggregators.

3. Accelerated digitization:

• The pandemic pushed businesses and consumers to adopt online channels for commerce and communication.
• This accelerated digitization expanded the pool of potential Amazon businesses available for acquisition as more traditional retailers and entrepreneurs ventured into e-commerce to survive and thrive in the new economic landscape.

5. Remote work and entrepreneurship:

• Remote work became the new norm during the pandemic, freeing individuals from geographical constraints and empowering them to pursue entrepreneurial ventures, including selling on Amazon.
• The rise of remote work and entrepreneurship contributed to the proliferation of Amazon businesses available for acquisition, further driving the growth of the aggregator market.

The pandemic propelled the aggregator market to new heights. Doubt would soon be cast on the market’s long-term sustainability, and for good reason.

The rise and fall of the Amazon Aggregator

Amazon aggregators, often backed by substantial venture capital funding, set out to acquire and consolidate Amazon businesses, promising an easy exit and resources to scale. The current reality of the aggregator market is far different from what it was in 2020. Let’s delve into the factors behind the rise and fall of Amazon aggregators.

The Rise of Amazon Aggregators:

• E-commerce explosion: With the explosive growth of e-commerce, particularly on Amazon, sellers looked for ways to optimize and scale their businesses. Aggregators stepped in to capitalize on this trend by offering sellers an alternative to traditional exit strategies or assistance in scaling their operations.
• Venture capital influx: Flush with venture capital funding, Amazon aggregators embarked on aggressive acquisition strategies, snapping up numerous Amazon businesses in various niches. This influx of capital fueled the rapid expansion of aggregator portfolios and heightened competition in the market.

What happened to Amazon Aggregators?

• Market saturation: The market became saturated as more aggregators entered and competed for the same pool of Amazon businesses. This saturation led to increased competition for acquisition targets, driving up prices and reducing the attractiveness of the aggregator model for sellers.
• Quality concerns: While on the surface, aggregators proclaimed staggering sales figures as a result of their efforts, the truth was a bit more murky. With the focus primarily on quantity rather than quality, some aggregators acquired businesses without thorough due diligence and a lack of experience in e-commerce, leading to declining performance and unexpected liabilities. This raised concerns among sellers about the reliability and reputation of aggregators.
• Lack of realized efficiencies: When Amazon aggregators attempted to gather diverse brands under one roof, they encountered significant inefficiencies in doing so. From marketing to operational challenges, the multitude of brands thrown together in a melting pot meant little opportunity to stand out and perform effectively.
• Challenges with market segmentation: Amazon aggregators, lacking the intimate knowledge possessed by original brand owners, often struggled to grasp the nuances of the market segment, leading to failures in product positioning and marketing strategies.

While Amazon aggregators experienced a rapid rise fueled by market demand and venture capital investment, the current landscape highlights a clear decline in the market. Saturation, quality concerns, and a changing e-commerce landscape are among the factors contributing to the shift.

Do you need an aggregator to scale and sell your Amazon business?

Is partnering with an Amazon aggregator necessary to succeed on Amazon, especially given the current aggregator climate? Let’s delve deeper into this question.

Pros of partnering with an aggregator:

• Access to capital: Aggregators can provide the capital needed to expand your Amazon businesses through investment or outright purchase.
• Operational support: Many aggregators offer operational support, including inventory management, logistics, and customer service, relieving you of these challenging tasks.
• Expertise: Aggregators typically have a team of seasoned professionals who are experts in various aspects of e-commerce, including marketing, branding, and product development.

Risks of selling to aggregators:

• Loss of control: Selling your Amazon business to an aggregator often means relinquishing control over important decisions regarding branding, product selection, and strategy. Given the effort and time they’ve put into scaling their business, not every seller is willing or able to relinquish that degree of control.
• Loss of regular income: While aggregators may provide resources and support, no earnout can occur because financial goals weren’t met since aggregators don’t always create overarching efficiencies.
• Alignment of goals: You must ensure that your objectives align with the aggregator’s objectives, as differing priorities can lead to conflicts, misunderstandings, and a challenging exit process.

What are some alternatives to partnering with an Amazon aggregator?

While an Amazon aggregator offers certain advantages, they are by no means the only option for scaling and selling your Amazon business. To avoid the rush to give up capital and relinquish control over your brand, consider the following alternatives:

• The Amazon Incubator: The Amazon Incubator, written by Lesley Hensell, co-owner of Riverbend Consulting, provides entrepreneurs with actionable strategies and insights for selling on Amazon. Unlike get-rich-quick schemes, the book focuses on building a sustainable business through case studies, real-world examples, and interactive exercises. With concise chapters and suggested action steps, it’s a valuable resource for newbies and seasoned vets looking to thrive on Amazon.
• Private equity and self-funding: Instead of relying on an Amazon aggregator, private equity and self-funding offer alternative acquisition sources, providing access to substantial financial resources and strategic guidance to address market segmentation challenges effectively.
• Outsourcing and automation: Leveraging tools and services for inventory management, advertising, and customer service can free up time and resources, enabling you to focus on growth and expansion.
• Strategic partnerships: Collaborating with complementary brands, influencers, and content creators can help increase visibility and reach new audiences without sacrificing ownership or control of your business.
• Expert consultation: Partnering with Amazon experts like Riverbend Consulting can provide personalized guidance and support across various aspects of your Amazon business. From optimizing Amazon accounts to navigating complex issues like FBA reimbursements and Amazon problem-solving, working with experienced consultants can offer valuable insights and solutions tailored to sellers’ specific challenges and goals.

While partnering with an Amazon aggregator may offer certain benefits, it is not a prerequisite for scaling and selling your Amazon business. Ultimately, the decision to work with an aggregator should be carefully weighed against other options to determine the best course of action for your goals and circumstances.

Don’t rely on the false security of the latest “silver bullet”

The rise and fall of the Amazon aggregator market represents a fascinating chapter in the ever-evolving story of e-commerce. From the initial boom fueled by pandemic-induced shifts in consumer behavior to the challenges posed by market saturation and changing dynamics, the aggregator market has experienced a whirlwind of growth and uncertainty.

However, one crucial fact remains: the success of your Amazon business does not hinge solely on the success of the aggregator market. While partnering with aggregators may have once offered certain benefits such as access to capital, resources, and expertise, many resources are still available to scale and sell your Amazon businesses successfully and, most importantly, profitably.

Whether through self-funding, strategic partnerships, or leveraging expert consultation services, you can navigate Amazon and achieve your goals independently of an Amazon aggregator.

At Riverbend Consulting, we offer comprehensive services and expertise to help Amazon sellers thrive. From optimizing Amazon accounts and navigating complex issues to strategic consultation and beyond, our team is dedicated to empowering you with the knowledge and resources you need to succeed even when times are tough.

We’re here to help.

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