Acquisition of Amazon brands is a growing trend, with Bloomberg taking note. A recent Bloomberg article discussed the growing interest in the Amazon acquisition space. Price competition buyers are often finding themselves in bidding wars. Wall Street funding has cemented a new businesses model, “aggregators.” These businesses buy Amazon brands and attempt to leverage their existing success to build mature brands. Per Bloomberg, “Since April of 2020 more than 60 of these aggregators have raised almost $6 billion.”
An ever-popular one of these aggregators, Thrasio, having just raised $260 million dollars at a 1 billion dollar valuation, is alleged to be “the fastest US company ever to reach profitable unicorn status.”
This makes a lot of sense from an investment perspective. Outside investors are looking for a few items that Amazon brands hit on the head.
Amazon brands are predictable, as the algorithm favors the products that are already selling well. When a product has taken the number one spot for a keyword, the system works circularly. The product pops up more often when the keyword is searched, thus resulting in more purchases, more reviews come in, and the product continues to pop up in the searches. Some products have thousands more reviews than the competitors, making it nearly impossible to overtake them. Additionally, all the reports for a business are uniform, making it quite easy to evaluate. This type of stability acts more like a dividend paying stock than a product line.
Additionally, Amazon provides a rigid framework for the acquisition houses to follow. Instead of buying three brands which sell through three different website hosts, each brand is simply listed on Amazon. Instead of a messy change over with hacked together pieces, a simple few clicks can integrate the product line directly into the inventory of the new owner. Thus these aggregators can do more deals at a higher rate as the after deal management is much lower.
Furthermore, these aggregators will look to find products leaning heavily on Amazon. This allows for significant growth if the brand is able to transition their success to website and eventually retail; a category large aggregator Foundry knows well (their team includes a former Walmart Executive). These businesses provide the additional structure many Amazon sellers lack.
Lastly, it seems as if these outside investors are simply reading the room. In store brands and grocery took a massive hit during the pandemic. This expedited the shift away from in store shopping to online, as shown from Amazon’s bullish stock ticker. The future is Amazon, why not get in while it’s still growing?
Not to mention, the money is one step away from the actual transactions. Venture capital funds lend to an aggregator, and the aggregator gets to eventually spend the cash on the deal. If any one deal doesn’t work well, that can likely be overcome by sheer volume of deals. These businesses are more like mutual fund pickers than they are business buyers.
Yet right now, interest in acquisition is outweighing the availability of options. Per Bloomberg, “Mark Daoust, whose Quiet Light brokerage expects to close more than 100 deals this year, says Amazon brands that sold for $3 million last year now fetch as much as $5 million -- and even more if there’s a bidding war.” One such brand is even giving away Tesla’s for brand referrals.
We personally have received dozens of letters from companies in this space asking if we would be interested in, “selling our brand.” A quick search from a prominent letter mailer, Heyday, shows they raised $175 million and then another $70 million in the last year alone. Money is flowing in this space without always the knowledge of what to do with it next.
This only indicates that Amazon brands have staying power, and the value of an Amazon brand may supersede day to day sales. Grocery stores certainly use this data to determine placement of new products, and many customers want to shop from a brand’s own website. The Amazon ecosystem is a, “point of departure, not the point of arrival,” stated aggregator Foundry’s CEO.
Even getting a quote from an Amazon aggregator may help brands with lines of credit, banking and supplier relationships, and understanding of the ecosystem. It’s hard to say what these Aggregators look for in a brand acquisition, but the simple things ring true. Mature brands have well developed listings, performing ad campaigns, numerous high reviews, and success off the platform.
If you’re considering selling your brand, it might be the right time to begin positioning for that. Just make sure to say that Alex sent you to Acquco, and let them know I prefer a Cybertruck with a Tri Motor.
Alexander V. Johnson, Mixt Solutions.
Mixt Solutions is an online sales company specializing in Amazon based consulting. They are a top 500 Amazon Seller worldwide doing over 1,000,000 transactions on Amazon per year. They partner with some of the biggest companies in the industry.