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amazon marketplace - Ecommerce Aggregators

Pay-to-Play FBA: How Amazon Became an Inorganic Jungle

I’ve read two stand-out reports this month; neither would give me any confidence as a current FBA seller. In fact, the prognosis makes it clear why so many of you are swotting up on Amazon aggregators.

Here are the key findings that have me — and (probably) you — so worried about Amazon’s profitability in the mid- to long term.

Why confidence is key to sales

First of February, 1988. My first job: a sales trainee at a brick ‘n’ mortar business. Quite literally; it was at a builders’ merchant, and a successful one.

What made it a success? Many elements, but two of the cornerstones were its supply chain and reputation.

Those factors subconsciously gave me confidence in what I was selling. As I’d find out later, confidence is everything when it comes to sales.

Research 1: ‘Buried’ organic search results

On any search engine, the absolute majority of consumer activity happens on the first page’s results.

Of that activity, most is attributed to the highest-displayed products, of which the majority are paid positions. So much so that, for organic results, you may as well place position 5 as 25*.

The reason this is such a concern with Amazon is that sponsored “brands” often occupy that first place. The subsequent product results hierarchy was found to be thus:

  • 4 × sponsored;
  • 4 × organic;
  • 4 × sponsored (based on reviews);
  • 1 × sponsored video advertisement.

To infinity, and beyond

Beyond these first products, Amazon search results display a host of offers, including editorials and Amazon Choices.

In short, if you don’t appear in those first four organic results, conversions won’t come easy. FBA sellers adopting pay-to-play strategies are almost certain to do better than you if you’re not paying to advertise.

*To get to the fifth organic result, the researchers had to swipe three browser windows (mobile).

Research 2: The value of advertising to Amazon

To many longstanding Amazon FBA sellers, those organic results won’t shock you. They may surprise you, but they’re nothing you didn’t already suspect.

What you may not know is the extent to which Amazon Retail relies on that advertising to keep it out of the red.

Amazon advertising clouding the picture

Back in 2015, Amazon’s retail business was still in the black. Just. Since then, profit from its retail outlets has eroded year on year.

Both the Amazon Cloud (AWS) and advertising have offset those losses by billions! Looking into the most recent figures, 2021, shows you by just how much.

Overall, Amazon advertising in 2021 brought in just north of $31bn. The company then registered its final retail operations income at just over $6bn.

The difference is a staggering (almost) $25bn loss, most of which came from product sales.

It’s a Prime time to sell your FBA business

Prime membership income is also included in those operational figures. In 2019, Tamebay research showed that the UK had 15,000,000 Amazon Prime members. At the current rate of £7.99/mo (UK), that’s another chunk of money we can also factor into the true loss of Amazon Retail.

And it’s not getting any better. The most recent quarter showed Amazon Retail losing $1.8bn; even advertising couldn’t pull it into the black.

Then, consider the broader taxes Amazon FBA sellers have to pay, and the huge potential for supply chain disruption. We’ve already covered imminent external barriers to global shipping, too.

All of these factors bring me back around to my initial ‘confidence’ argument. Based on these reports, how confident are you that Amazon has your back? I’ll just leave that there for you to think about.

In the meantime, remember there are plenty of Amazon aggregators still actively looking for good quality FBA businesses to acquire.

If you think your brand fits the profile, why not start the process today?


Further reading:

This website was created by ex-Amazon FBA sellers, Martin Smith and Richard Turnbull.

To learn about our story, our private label FBA brands, and our first-hand experience selling to Amazon aggregators, click here.

You may also wish to check out our 2022 Definitive Guide to Amazon Aggregators.

Written for FBA sellers, this simple, easy to follow document takes less than 5 minutes to read and represents the culmination of over 100 hours of research into the Amazon aggregator space. To access the guide today, click this link.

Is Thrasio Eyeing UK-Based £1M+ Amazon FBA Sellers?

What type of products produce £1M/year small businesses on Amazon, do you think? Funny you should ask, because Thrasio, one of the top Amazon aggregators, seems to be thinking along the same lines.

Looking deeper into the UK Amazon Marketplace, their research turned up some surprising numbers. From the mundane to the unexpected, a broad spectrum of categories produces £1M+ sellers.

The results could also give us insight into why that old adage “Mad dogs and Englishmen…” still rings true today.

The top, bottom and just plain odd

Distilling Thrasio’s results, this table shows the most and least likely product categories to pull in the £83k+ a month to produce £1M annual sales. And then there are others that some might say exhibit worrying insights into British consumers’ motivation:

Probability Product Category # of UK Amazon Sellers
Highest Grocery 667
Highest Beauty 533
Highest Home & Kitchen 370
Highest Pet Supplies 279
Highest Electronics & Photography 256
Yes, really Dog Biscuits & Snacks (outside Pet Supplies) 31
Yes, really Chocolate >> Chocolate Boxes & Gifts 20
Yes, really Day Creams >> Face Serums 18
Least Lighting 3
Least Shoes & Bags 3
Least Watches 2
Least Jewellery 1
Least PC & Video Games 1

“Fulfilled By Amazon”‘s role for top UK Amazon sellers

Thrasio’s research suggests that there are currently 2,795 individual small businesses pulling in £1M/year. Those numbers in the table above hint at where the bulk of the potential lies.

Consider the business aspect, too. Those categories boasting the most sellers will also be the most competitive.

And according to the research, most are traditional brick and mortar businesses. But almost a third (32%) are Amazon FBA sellers. This means Amazon handle storage and logistics on their behalf.

The research’s findings are no surprise to Jim Mann, Thrasio’s acquisitions’ director.

A Nation of Online Shopkeepers (as well as pet lovers)

Business owners no longer need years of experience and oodles of cash to launch an Amazon small business or private label enterprise. With astute research, Internet marketing nous and one or two decent supply chains, anyone can embark on an entrepreneurial journey.

Thrasio knows this, as they do it all (and more) at scale. But these traits also explain the key elements to Thrasio’s appeal.

Have we lost that lovin’ feeling?

In comparatively no time, an individual can grow their Amazon business online. If they build using the right metrics, they can easily blip onto amazon aggregator companies’ radars.

In days gone by, business owners weren’t so readily tempted to sell. Their years of blood, sweat and tears meant something. The brick and mortar that housed the business was part of that success, too.

You can almost hear Arkwright, now, “G-Ger-G-Granville, I’ll s-sell this ser-shop over my d-der-d-der-dead b-b-b-body.” But that’s not always the case with today’s entrepreneurs.

Launching with an Exit in mind

What’s also true is that young(ish) upwardly mobile folk are thinking differently. Their sole intention is to sell their Amazon FBA business from the start. Global ecommerce aggregators’ increasingly tempting valuations have made this business model a viable option.

Mann concludes his explanation of the research along those lines. He knows that selling an Amazon FBA business to Thrasio is incentive enough to launch or grow a storefront.

He expects to see ‘retail titan[s]’ all over the UK, integral to local economies. Moreover, “hundreds or thousands of new millionaires” being created in the process.

The circle of shelf life

We know many people are already looking to sell their Amazon businesses, and for many reasons. Competition, reduced profits, and new eco-barriers are just some.

But as Gen Z comes to the fore, it’s important to remember the entrepreneurial circle is likely to repeat itself.

Will they build their Amazon stores for the same reasons as the preceding generations? Definitely not.

Many more will leverage FBA, creating businesses from their bedrooms, never getting their hands dirty. And, when they achieve the metrics they need, they’ll begin the exit process. Perhaps even selling to Thrasio.

Do ecommerce aggregators care? Not really. They’re looking to buy small brands, roll them up and sell a more complete package to investors. And who wouldn’t want a piece of that?


Further reading:

This website was created by ex-Amazon sellers, Martin Smith and Richard Turnbull.

To learn about our story, our private label FBA brands, and our first-hand experience selling to Amazon aggregators, click here.

You may also wish to check out our 2022 Definitive Guide to Amazon Aggregators.

Written for FBA sellers, this simple, easy to follow document takes less than 5 minutes to read and represents the culmination of over 100 hours of research into the Amazon aggregator space. To access the guide today, click this link.

A New Dawn: How 3 Eastern Shopping Apps Have Eclipsed Amazon

Ask anyone what the top global shopping app is and they’d say ‘Amazon, d’uh!’, right? Well, prior to 2021, they’d have been right (D’uh-huh!).

The story’s a tad different based on new 2021 figures, though, especially in Asia. Three apps have come to prominence, shunting Amazon down to 4th in the global take-up of shopping apps.

In the U.S., Amazon remains in the top spot. But even there, downloads of its shopping app have dropped 2.4% year-on-year. So, what is this new dawn, and should Amazon sellers, and Amazon aggregators, be worried?

Shopee, Shein and Meesho: are they a threat to Amazon in the West?

I know what you’re thinking. How do I know? Because I thought it, too…
…until I looked at the figures.

You’re thinking, ‘Yeah, but that’s, like India and China. That’s not going to affect my business!’

Hold that thought, will you? Here’s why one should never assume:

Shopee, Singapore (launched 2015)

Shopee and Shein appealed to consumers more than other shopping apps in 2021 by some margin. More on Shein in a second; let’s look at Shopee, first.

203 million buyers downloaded Shopee in 2021, an annual rise of 46%. Like Amazon, it’s home to mom-and-pop stores, SMEs and larger interests. It also sells clothing, white goods and electronics. More recently, it’s moved into food and drink, including delivery/on demand.

So, yes: it’s a direct competitor to Amazon, but that’s not the big story.

Leveraging its digital gaming roots (yes, really) it appeals to current and future generations on a different level. Through gamification, customers can earn rewards and discounts to claim against purchases on its platform. Clever, right?

And it works! South-East Asia and Brazil are already in Shopee’s thrall. Poland, India and Argentina are its next targets, so expect growth to continue.

Shein, China (launched 2008)

Here’s an odd one for you. Rather than try to cover all bases, Shein concentrates on the disposable fashion market. And despite being a Chinese interest, it doesn’t sell to its domestic market. Told you it was different, right?

What Shein does really well is connect the Chinese workforce to the western world. Gen-Z can’t get enough of it, their influencers often defining new trends overnight.

Recognising that gap in the market earned them a 70% rise in global downloads (190 million) in 2021. It’s a prominent platform in over 200 countries, and doesn’t look like slowing any time soon.

Meesho, India (launched 2015)

The rise in take up of Meesho in 2021 can only be described in one word: astronomical! Downloads of the shopping app rose an incredible 744% to 153 million. And most of that was in its native India.

Meesho’s deployed another innovative strategy. First, it allows manufacturers and resellers to sell through social channels. Instagram, Facebook Marketplace and WhatsApp are the most popular.

Even with just those, customer insight data and reach are enviable. But the other reason it’s popular with sellers is that there’s no set up fee. Anyone can create an account and start selling through their social reach immediately.

The potential once it goes global? Mind: Blown!

OK, what about the Amazon shopping app, then?

Overall, Amazon’s global reach over the same period dropped by 12%. Of the top ten global shopping app downloads in 2021, only Wish and Pinduoduo performed worse.

Don’t get me wrong, Amazon isn’t going away. But here’s the thing: in 2020, only 50% of its income came from its online stores. (figures for 2021 not yet available).

AWS, Prime/subscriptions, third party vendors and physical stores made up the other half. So, does Amazon now need to innovate its online shopping experience to compete? I’d say: definitely!

What form that will take, and what it might mean for Amazon sellers one can only guess. What we know for sure is that 2021 saw it surrender its #1 spot for the first time in years.

Is it the start of a trend? Does Amazon marketplace have the flexibility to adapt? And are its vendors, especially Amazon FBA sellers, willing to change with it?

Only you can answer that, in time. If you’re even remotely interested in getting out while the going’s good, here’s our step-by-step guide to selling your Amazon business. Good luck!


Further reading:

This website was created by ex-Amazon sellers, Martin Smith and Richard Turnbull.

To learn about our story, our private label FBA brands, and our first-hand experience selling to Amazon aggregators, click here.

You may also wish to check out our 2022 Definitive Guide to Amazon Aggregators.

Written for FBA sellers, this simple, easy to follow document takes less than 5 minutes to read and represents the culmination of over 100 hours of research into the Amazon aggregator space. To access the guide today, click this link.

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