Tag: Shopify

Amazon Aggregators vs Ecommerce Aggregators (And The Value Of DTC)

Posted on by Amazon Aggregators

It’s fair to say the Direct to Consumer (DTC) model of e-commerce is a difficult nut to crack.

Trust me, I speak from experience.

In fact, since publishing my very first WordPress site in 2006 all the way up to 2021, I tried monetizing products on WooCommerce, Magento, Shopify, and everything in between.

What did I learn in the process?

Launching a private label brand on Amazon FBA was an absolute breeze compared to DTC.

And 99% of sellers would agree.

Until recently*, that is.

* See – Amazon restock limits, PPC costs, seller performance, ASIN hijacking, Chinese competitors, and so on.

Amazon vs Shopify Revenue

With all that being said:

And as we have stated many times.

Amazon aggregators look for different things in a private label business.

Whether it’s the number of SKUs, product category, marketplace sales, geographical location, revenue, margin, or SDE.

Richard and I are often amazed at the types of deals aggregators pursue, and the ones they pass on.

Needless to say:

No matter what type of brand you have created, buyers will come to the table if the business profile and – crucially – the financials hit the buyers’ pre-determined sweet spot.

Now, on that very subject.

An interesting trend appears to be emerging in recent months.

And that is a preference amongst many Amazon aggregators for brands with strong DTC financials.

To put that another way:

If you have managed to crack the code of making your Shopify (or equivalent) store profitable, your business is in great shape to be acquired this year.

Particularly if you have weaned yourself off the 100% Amazon teat and can boast a more diversified split of revenue streams.

Amazon Aggregators vs DTC Ecommerce Aggregators

This brings us neatly around to your selling options.

Specifically:

    1. Brokers
    2. Amazon aggregators
    3. DTC Ecommerce aggregators

At the risk of (once again) offending our friends in the broker world, I’d like to focus more on the latter two.

In fact:

Since the subject of Amazon aggregators has already been comprehensively covered on this website, let’s dive into DTC Ecommerce aggregators, and why you might want to sell your business to one.

Ecommerce aggregators

Okay, I know what you’re thinking.

What is the difference between an Amazon aggregator and an Ecommerce aggregator?

Well, consider this.

The e-commerce ecosystem is enormous.

And although it might come as a surprise to some FBA-only sellers, an entire world of online riches exists outside of Amazon.

Of course:

The strategies for operating a true DTC brand are more complex in nature compared to FBA.

But the rewards, many would argue, can be infinitely more lucrative.

Why?

Because although Amazon does a lot of the heavy lifting (customer service, fulfilment etc) in an FBA-only business, they ultimately own the relationship with the customer.

And this is where the real value lies.

In short:

Amazon aggregators acquire and add value to brands predominately selling via FBA.

These brands ‘piggyback’ off Amazon’s core USPs of price selection and convenience. They are, however, heavily reliant on marketplace sales.

Ecommerce aggregators, by contrast, seek out brands that exist independently of third-party marketplaces like Amazon, eBay and Etsy.

They understand the complexities of the DTC business model but consider it a longer-term play, with fewer downsides.

Bottom line?

Whilst the market is flooded with Amazon-only aggregators, there is still plenty of buyers for DTC businesses trading via Shopify.

If you brand pulls in orders across several platforms, you’re potentially in line for a higher exit multiple.

With both e-commerce aggregators and Amazon aggregators competing to acquire the business you have created.

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.

Amazon USA Hikes FBA Fees (And Sellers Are Not Happy)

Posted on by Amazon Aggregators

It’s getting a little heated in the Amazon FBA Seller Forums this morning.

In fact, a quick glance at the US Announcements section makes for a rather unpleasant reading.

Bottom line:

Starting April 28th, Amazon will add a five per cent ‘fuel and inflation surcharge’ to its existing FBA (per unit) fees, and it’s safe to say that sellers are not happy.

Why?

Several objections have been raised. Let’s take a closer look at each one.

Lack of notice

First up, is the notice period, or lack of it.

In total, sellers have just fifteen days from the initial announcement to the implementation of the surcharge.

This, in the words of one seller, is simply “not enough time” to adequately prepare for the rising costs.

Certain ASINs, for example, will no longer turn a profit. If these have recently been sent into FBA, you’re in dire straits.

This leads us to the second objection.

Amazon’s record earnings

Numerous sellers have commented that Amazon (and other US blue-chip companies) use global inflation to justify price increases, yet continue to deliver record earnings.

This, indeed, is a bitter pill to swallow.

Particularly given that cost prices are not, in theory, ever going to drop. A surcharge, in some sellers’ eyes, is nothing more than a stealth price increase that directly adds to Amazon’s bottom line.

Unable to increase retail prices

This is a long-term bugbear of many sellers.

Here’s the deal:

Amazon uses an automatic ‘Pricing Error’ algorithm that essentially prevents sellers from raising their retail prices beyond a certain limit.

How?

By either temporarily delisting the ASIN until the ‘error’ has been fixed or by removing the buy box entirely.

Upon receiving said notification, a seller has no option but to reduce the price back down to below the minimum threshold.

Very frustrating.

And as discussed above, if costs continue to increase, this pricing threshold could well mean that the numbers no longer stack up.

Or to put that another way, you lose money.

Summary

Regardless of what you think of Amazon, it is still an incredibly lucrative channel for your private label brand.

The way I look at it is simple:

Inflation is here, period.

In fact, it was here 12 or even 18 months ago, and all sellers are in the same boat.

Yes, a 5% increase in FBA fees is unwelcome. But if you’re running a tight ship, financially, this can easily be absorbed into your P&L without too much pain.

Remember, Amazon aggregators will only look at businesses with a profit margin of 20%+.

Some aggregators even insist on a minimum of 30%.

In short:

If an ASIN is no longer wiping its face, post-April 28th, perhaps it’s time to take a good long look at your brand and decided if a purge of products is required.

Amazon FBA may be more expensive than it was last year, but it’s still infinitely cheaper than Shopify with FBM.

And that, my friend, is a fact.

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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