Amazon Aggregators are Booming, But How Many Will Survive?
In the last few years, Amazon aggregation has reached new heights. Companies in this space acquire sellers — many of whom are digitally-native brands — on the Amazon platform and consolidate them under a single corporate entity. From there, Amazon aggregators work to scale those brands and grow revenue.
Amazon aggregators first took off near the start of the pandemic. Shoppers shifted their dollars to online options in unprecedented numbers, and investors leapt to claim a share of the record-breaking e-commerce growth. According to a report by Marketplace Pulse, brand aggregators raised over $11 billion in 2021, after raising over $1 billion in 2020.
There is no doubt this gold rush marks a permanent shift in the world of online commerce and retail. Yet many Amazon aggregators have floundered in their attempts at striking it rich. The questions we shall seek to answer are: Why do certain Amazon Aggregators fail, and how can successful brands avoid the same fate?
Amazon Aggregators May Cannibalize Each Other
FBA aggregators face a tough challenge. As we discussed in the 2022 Amazon Business Strategy Review, the money poured into FBA aggregation in 2020 dramatically shifted the scales of supply and demand. Successful sellers found themselves receiving multiple offers per week, and prices have soared.
As a result, new brand aggregators are struggling to secure a foothold, and some of the largest aggregators have shifted focus to acquiring larger brands, where there are fewer competitors to drive up price. This intense competition has also led to speculation that the largest aggregators will start to buy up the smallest aggregators to further grow their portfolios. This monopolization strives to muscle out smaller aggregators, leaving only the lowest hanging fruit available for their growth attempts.
FBA Aggregators Must Prove They Can Grow Brands
Perhaps even more significantly, we are reaching the point when buying up brands is no longer enough. Many of these aggregators, prominent as they may be, are investors first and brand builders second. 2022 will be the first year where they must prove that they can be operators, too. It is not enough to simply buy brands; investors must also grow them.
The chief way to do that is to consolidate as many tools and processes for their brands as possible to enable economies of scale. However, this is a challenging endeavor, as each brand has its own factory, supply chain, margin considerations, marketing, and future expansion.
Aggregators with little experience in the Amazon ecosystem are naturally going to find this process more challenging, and in some cases, unsustainable. Despite significant monetary resources, which might have proven valuable in the acquisition process, these players will need more than just capital to stay alive.
What gaps need filling after aggregation? Growth on Amazon requires a strong foundation. When it comes to growing brands, there’s a variety of systems and processes to think about beyond just the initial investment. Here are a few to consider:
- Sourcing and shipping: Different brands manufacture products in different factories, different cities, and different countries. Global logistics are complicated enough for one brand, much less a collection of them. One of the most crucial (and elusive) efficiency gains aggregators can make is to consolidate where their brands source products and how they ship them. Consolidation comes with many advantages, yet there are risks, as we saw during the pandemic.
- Marketing and SEO: Driving traffic to newly acquired brands provides aggregators a rich opportunity to attract new customers in ways beyond search advertising on Amazon. Social media management, listing optimization, and targeted Google ads all play a role in the machinations of brand growth.
- Technology: Brand management (and all the moving parts involved) rely on a multitude of programs and software. Individual brands will each have their own set of necessary tools. To leverage economies of scale, aggregators need to establish consistent tools and processes across the board, which is a massive undertaking.
Brand Aggregation Demands Comprehensive Marketplace Services
To drive growth for their brands, aggregators may turn from buying brands to buying or developing operators. These are software companies, agencies, and even third-party sellers who have a track record of growing multiple brands successfully. In short, it is anticipated that there will be a consolidation of the Marketplaces Services sector, driven in part by a consolidation of Amazon brands.
The more comprehensive a suite of marketplace seller services — those that provide account management agencies, software, marketing, and other services to help brands sell online — the better. A diversified, multifaceted approach helps fortify brands in every vertical needed for running a business. Meeting brands where they’re at, tailoring management approaches to their needs, and augmenting services to whatever gaps might exist is superior to any one-size-fits-all methodology.
The Survival of the Fittest and Best Equipped
As we’re seeing, brand aggregation is booming, but it’s a more nuanced process than the term itself might indicate. Moreover, while dozens of aggregators are fighting for dominance in the space, it is predicted this won’t be the case for long.
It is estimated that in the face of increased consolidation, rapid market evolution, and continuing pandemic-related obstacles, most aggregators will either fold completely or be acquired themselves by more prominent aggregators. The survivors will have consolidated logistics chains to support scalable growth, committed the necessary dollars to create diverse and nuanced marketing strategies, and acquired streamlined tech to maximize efficiency and minimize potential points of failure.
Aggregation is trickier than acquisition, but it’s becoming an integral part of the Amazon ecosystem’s future. And as with all ecosystems, adaptation is necessary for survival.
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