The Amazon landscape is more complex than you may think. Amazon is no longer just made up of sellers and customers; there is also something known as an Amazon aggregator.
The role of aggregators has and continues to grow in the Amazon landscape, but what is an Amazon aggregator? Read on to find out.
What is an Amazon Aggregator?
Amazon aggregators acquire small Amazon businesses and consolidate them under one umbrella to scale them and grow revenue. They are also known as acquirers or consolidators.
Amazon aggregators tend to be large; professional companies made up of e-commerce, Amazon, SEO, logistics and supply chain experts. They use their connections and expertise to streamline business operations, save costs and grow revenue.
Amazon aggregators have become an integral part of the Amazon landscape, allowing customers to choose from a wide selection of products at an affordable price. This is because aggregators can easily cover business costs and grow small businesses in a way that would not be possible otherwise. They essentially act as investment firms using funds, experience and knowledge to grow small businesses into global brands.
Amazon aggregator firms have a keen eye for selecting the right businesses to drive profit. The theory is that companies can make more money selling a wider range of products under a single entity rather than under multiple different stores. Due to this, aggregators may select businesses that sell complementary products to build a cohesive brand.
For example, an aggregator may try to acquire a company that sells hair care products and another that sells skincare products to consolidate them under one beauty brand.
As a small Amazon business owner, you may be wondering how you can sell your business to an aggregator. Whilst there may be an opportunity to sell, there are certain things aggregators will look for to determine potential.
What are Amazon Aggregators Looking For?
To receive a top-selling price from Amazon aggregators, you need to make your business look attractive. Aggregators must be able to see the potential to grow and make money from your business.
Registered brands are the most attractive to aggregators. These are Amazon businesses that sell private label or self-manufactured products. Those with a high-quality brand are more likely to receive a better sale price.
Think about your brand reputation, consistency, and tone of voice. Is your brand cohesive? Does it represent your products?
Potential and Profitability
The end goal of Amazon aggregators is to make a profit, so it’s no wonder they use previous profit data to determine potential. Aggregators look for an annual profit of around $200K and a profit margin of about 10-15 per cent before they consider buying a business.
They will also look at market data when making their purchase decision. They may look at factors including industry trends in profits, interest, and overhead costs.
Aggregators will look carefully at the products you sell. They will avoid businesses that sell fad products, looking for those that sell timeless items that will not fall out of fashion.
They may also look at the number of SKUs you have. Businesses with fewer SKUs generating higher profit levels will be more attractive than those with lots of SKUs generating little profit.
Percentage Sales Through Amazon
As a small business, you may sell on multiple platforms. Amazon aggregators will look for those that do a high proportion of their sales through Amazon. While some aggregators look for around 30 per cent of sales through Amazon, others may look for 75 per cent.
What’s better than selling to a customer? Selling to the same customer multiple times.
Aggregators will look for businesses that have repeat appeal. The market may become saturated for products where repeat purchases are unnecessary. If products could be purchased multiple times but are not, this may signal poor product quality or brand reputation.
In such a busy marketplace, having a niche is an advantage. Competition for generic products is high. Developing a niche makes it easier to stand out and reach a specific customer segment.
Some aggregators may also be looking for Amazon businesses within a particular sector to match other product offerings. In this case, having a niche could help you stand out to the right aggregator companies.
For Amazon FBA businesses, Amazon takes care of warehousing, picking and packing orders, and dealing with simple admin and customer service tasks. Eighty-two per cent of top sellers on Amazon use FBA. This is an attractive proposition for Amazon aggregators as it means simpler logistics and admin and allows products to qualify for Prime status.
Adherence to Amazon Guidelines
If a seller doesn’t adhere to Amazon’s guidelines, their shop may be shut down. Aggregators will only purchase businesses fully compliant with Amazon guidelines to ensure there is no risk of the shop being closed.
Amazon aggregators look to create global brands to reach new audiences and drive profit. For businesses that already sell internationally, aggregators have a head start.
If you sell in multiple marketplaces, you have already navigated the challenges of going global successfully, allowing aggregators to further build on this success. The key markets aggregators will look for are the US, UK, Canada, Mexico and the EU.
Should you sell to an Amazon aggregator?
Selling to an aggregator may sound like a great way to make money from your small Amazon business, but there are certain things you need to consider before selling up.
Do You Want to?
The most obvious but important question is whether you want to sell your business? If your Amazon business is more of a passion project, selling it to an aggregator may not be the best choice.
Do You Meet the Qualifications Aggregators Look For?
Whilst you may want to sell to an aggregator, a sale is unlikely if you do not meet the necessary criteria. If the end goal is to sell your business for a profit, focus on getting your business in good shape to attract aggregators and fetch you a top price.
Offer Growth Opportunities Small Sellers Could Not Achieve Alone
Do you feel like you’ve reached the limit of your growth? Without funding, connections and expertise, you will not be able to scale your business in the way aggregators can. Selling to an aggregator can help to transform your small Amazon business into a global brand.
Aggregator companies generally consist of Amazon, e-commerce, logistics and SEO experts. Working in tandem with one another, this expert knowledge can help to elevate businesses, drive profit, and streamline business operations.
They will also carry out due diligence to ensure the business is the right fit. They may also expand the product line, enter new markets, or alter the supply chain to increase profits. With expertise in this area, aggregators may be better equipped to handle the challenges of scaling a business.