Amazon rollups are the hottest deals
A new generation of companies is forming to scoop up Amazon marketplace sellers — and venture capital firms are writing big checks to support the effort.
Why it matters: These e-commerce aggregators are all about data and using it to optimize and turbocharge sales, which means they’re using Amazon’s own playbook.
The big picture: Amazon’s third-party seller marketplace generated between $25 billion and $39 billion in profits in 2020, the company estimates, and experts expect it to only keep growing.
- One example is China's Anker Innovations, which is best known for its phone chargers and other consumer electronics accessories sold exclusively on Amazon. It's now valued at nearly $56 billion, following an IPO last summer that was hailed as a milestone for third-party Amazon sellers.
How it works: The aggregators target sellers that have found “product-market-fit" but still have a lot of room to grow. Otherwise, what upside would there be to acquiring them?
- They tend to pick businesses whose products are established and will continue to be popular in their respective category, instead of chasing quick hits or fad-based products like fashion. Aggregators also tend to be generalists instead of focusing on a product vertical or category.
- They also provide an exit path — and crucially, liquidity — to the entrepreneurs whose businesses they’re buying. For these small-business owners, this is likely the only kind of exit even available for them. Not everyone can have the trajectory of Anker.
Between the lines: Despite Amazon’s size and power, the consolidators don’t seem worried that the retailer could hike its fees or make other changes that would mess with their businesses.
- In short, they don’t believe it would be in Amazon’s best interest to hurt such a crucial piece of its empire, which would ultimately affect its ability to offer more and better products, at the lowest prices to its customers.
- “There’s this story out there that Amazon is this big threat,” says Thrasio co-founder Carlos Cashman, whose company raised $850 million earlier this year and is profitable. “Nobody looked at [Simon Property Group] as a competitor to Foot Locker — they’re not. They’re renting Foot Locker space for a store in the mall.”
Meanwhile: Some consolidators are specifically focused on acquiring successful businesses outside of Amazon’s marketplace.
- OpenStore, quietly founded earlier this year by Atomic’s Jack Abraham and Founders Fund’s Keith Rabois, plans to buy up companies using Shopify’s tools and make their wares available via a “single unified experience,” which Rabois loosely compares to a shopping mall experience.
Look ahead: It’s still early innings, and acquirers will falter if they don't properly manage the sellers they’ve bought. Plus, there's sure to be consolidation among the consolidators.
The bottom line: “It’s an economy on the verge of institutionalization,” Sebastian Rymarz, CEO of aggregator Heyday, tells Axios of the burgeoning sector.