By Jack M. Germain
7/13/2021 5:00 AM PT
One of the little-known marketing secrets on Amazon is how seller aggregation organizations drive product and seller buyouts.
These companies can have a huge impact on the broader market. On the surface, aggregated companies become sub-deals in the market.
One such aggregate unit is operated by Ryan Gnesin, CEO of Elevate Brands. His company buys consumer leading and Fulfillment by Amazon (FBA) brands and helps independent sellers grow their product sales to their fullest potential.
Business on Amazon is booming for both committed sellers and aggressive aggregates.
The pandemic led to a massive shift to digital / e-commerce in 2020. According to Gnesin, e-commerce grew by 44 percent compared to the previous year.
Amazon’s third-party marketplace had annual sales of $ 300 billion in 2020. That’s a significant increase from $ 200 billion in 2019.
“It is expected to reach $ 500 billion within the next five years, if not much sooner,” he predicted.
Sale of the company
Combine this flood of e-commerce with the whopping 70 percent of online product searches that have now started on Amazon. This was because the market was tapping into consumers’ desire for choice and value first, and only then for brand, noted Gnesin.
Meanwhile, a massive consolidation of hundreds of sellers acquired from third-party vendors is boosting buyer performance. In fact, in the first three months of 2021, aggregators saw a 20x growth in the number of retailers trying to sell their business.
Aggregators have acquired more Amazon marketplace sellers in the past three months than in the past two years, noted Gnesin.
More than 40 different seller aggregators have surfaced, most of which didn’t exist six months ago. The three main aggregators on the market today are Thrasio, Perch and Elevate Brands.
Almost $ 3 billion has been poured into these companies since 2019. It keeps growing every week, he said.
Elevate Brands recently secured $ 55 million in funding and has the green light to go beyond that if necessary during the acquisition spurt. The company has acquired over a dozen e-commerce brands and now makes an average of one acquisition per week.
Gnesin’s company is the only aggregator to have done this for more than four years. The company used to be a seller itself and achieved up to 10-fold growth with the brands it acquired within the first year.
One of the main functions of aggregate sellers is to better deliver each of the products they purchase. Often these companies are run by smaller operators. From Amazon’s perspective, it’s a very positive step up for the brands. From a consumer perspective, this is a godsend because they get better quality products and more of them, Gnesin observed.
Obviously, the operations of aggregators create more capital that flows into the system. That in turn activated the aggregators. When they take over a brand, they improve the product and quality, and bring new variations to the market.
Not all aggregators work the same. Not every company uses a business model. At one end of the spectrum, a seller working with an aggregator is a middle layer between the digital store owner and all of Amazon’s product control, Gnesin explained.
On the other hand, the aggregator buys the entire e-commerce shop. The seller walks away with the purchase price in hand. The purchasing aggregator owns the product line and integrates it into its entire storefront.
How it works
The way Elevate Brands works is directly taking over any digital business the company buys. Some of the other aggregators have different models where, for example, they buy 20 or 25 percent of a company and then let the operators run it.
“The logic for these guys is that at some point we’ll list the business or sell the portfolio,” said Gnesin. “We don’t think that’s a particularly great model.”
His model buys these stores and the sellers don’t stay involved. Elevate Brands wholly owns the business. There is no middle class involved.
“When we buy an Amazon account, we buy the brand, we buy the Amazon listing, we buy the website, we buy the supply chain, and we buy the relationship with the factory,” he told the E-Commerce Times.
This purchase includes the takeover of the lock, warehouse and barrel of the whole. The seller is no longer involved in any way.
From a legal point of view, it’s a clean and easy transaction. Elevate Brands swaps the seller’s LLC for the aggregator’s LLC and essentially handles everything else, he explained.
Other aggregators choose to keep the seller company’s management team. Some keep the previous owner as employees with assigned management responsibilities.
With the acquisition of a larger company, Gnesin realizes that some of the employees want to stay. The new owner who takes over as an employee can benefit from this.
“We found that someone who pays only $ 10 million typically doesn’t want to be an employee for you,” he added.
Entrepreneurs at Amazon who are successfully expanding the business of their digital shop often see potential returns in building another attractive buyout target for aggregators. You are returning to Amazon with a new line of products and starting over.
“You can’t compete directly with the business, but you can get into any other line of products. Ultimately, if they succeed across the board, you could buy them again. That’s the idea. We encourage and support them to do this, ”said Gnesin.
The great thing about the Amazon industry is that constant innovation leads to success. Product ideas don’t dry up.
Case in point
Hundreds of new sellers come to the Amazon marketplace every year with new and innovative ideas. Gnesin doesn’t see that change.
For example, he recently came across a store and bought it. The product that caught his marketing interest was an oddly shaped pillow.
The seller came up with a unique shape that delighted buyers and generated 20,000 five-star reviews.
“The sellers have a patent on it. They just came up with something new that was kind of a blank in the market. They looked like a great deal and we paid them to do their business,” said Gnesin.
There are still many options. Gnesin believes the landscape of opportunities will only expand as the number of consumers shopping on Amazon increases.
Gen Z and Millennials are approaching Amazon purchases with a new swag. This new element is another factor that strengthens Amazon’s retail future.
According to Joshua Kreitzer, Founder and CEO of Channel Bakers, these generation buyers are less focused on finding a specific brand and more focused on shopping at the best price to buy premium brands. His company helps sellers on Amazon and elsewhere to optimize their sales success.
“Baby boomers were very loyal to the brand. Either you were a Ford type or a Chevy type,” Kreitzer told the E-Commerce Times.
Knockoff brands and overseas non-branded sellers also tend to do better with Amazon’s growing and diverse shopping demographics. The shopping trend shows the desire for a good price, regardless of which brands they buy when they come to Amazon.
Kreitzer’s company is dedicated to helping brands grow their sales and strengthen their influence in their retail and e-commerce channels. Its business is based on premium brands with clients like Samsung, Calvin Klein and other big names.
Now, with the future of premium retail brands, he and similar marketers really need to focus on content and new media that shoppers have discovered, he noted. Today’s buyers are much more digitally minded. As a result, the marketing focus is now heavily reliant on video. The content of the sellers must be relevant to this new target group expectation, both on Amazon and on other sales channels.
“You can’t just run a normal, boring commercial on TV and video. You have to make your content in a way that will attract buyers. Advertisers have to tell their product story in a newly invented message, ”said Kreitzer.
This is the future of retail. To win as a premium brand in e-commerce, sellers and marketers need to figure out how to do it, he advised.
Storytelling is the key
With buyers increasing their focus on the digital, brands need to tell their story and help the next generation understand why they might pay higher prices, for example.
“The future of marketing is definitely e-commerce,” said Kreitzer. “But it’s important to tell your product story in a way that is relevant and compelling for tomorrow’s buyers.”
This storytelling mantra is a big part of Amazon’s overall marketing strategy, Kreitzer believes. Video streaming is the entertainment mode of the future. Amazon is preparing customers to flock to its online digital department stores for more than just marketplace purchases.
“Amazon is becoming a place everyone wants to search for entertainment videos and products.