Top Amazon Aggregators Raised $10 Billion in Venture Capital but Is the Trend Sustainable?
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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.
As more independent and small-scale sellers look to claim their share of a rapidly growing e-commerce market, the online marketplace ecosystem remains fragmented. On Amazon.com Inc. (NASDAQ: AMZN) alone, there are more than 1.6 million active sellers, representing approximately $300 billion in gross merchandise value (GMV), which accounts for 62% of the total GMV of the world’s leading marketplace platform.
Spurred by the e-commerce boom during the global pandemic, venture capital and other investors are jumping at opportunities to get a slice of the growing online marketplace market. For the most part, they are doing so by buying up dozens of e-commerce storefronts, especially on Amazon, earning the collective name of Amazon FBA aggregators.
This brand aggregation approach, while popular, comes with its fair share of risks and strategic gaps that may render it unsustainable in the long run. Cognizant of these high risks, some key players — like Kaspien Holdings Inc. (NASDAQ: KSPN) — say they are instead focusing on alternative approaches for capturing the market. Namely, developing marketplace services that accelerate brand growth across today’s leading online marketplaces.
Amazon Aggregators Flood the Online Marketplace Space
Over the past couple of years, dozens of Amazon FBA aggregators have cropped up on the market. To date, there are about 80, some operating more quietly to secure deals behind the scenes and others announcing large fundraising rounds, scaling rapidly and making major acquisitions.
Thrasio, one of the more well-known and established aggregators, just announced that they raised another $1B in funding, and has purchased 90 companies in a series of deals totaling $1.75 billion since it launched in 2018. In September alone, it added 3 more brands to its portfolio, which together are expected to generate $90 million in revenue during their 1st year. The larger brands and rapid purchase rate reflect the company’s increasingly aggressive acquisition strategy that may be meant to edge out competing aggregators.
Even so, competition is getting fierce. As more aggregators enter the market, the going rate for small brands grows increasingly expensive, sometimes exceeding 50x the brand’s monthly net profit. As a result, newer aggregators will have a harder time gaining a foothold without generous access to capital.
Growing Brands Requires More Than Investment Dollars
While the flow of capital into these smaller brands from aggregators with deep pockets can certainly provide the resources necessary to fund growth and scale activities on paper, doing so in practice requires much more than just capital.
Every brand an aggregator acquires has its own supply chain, its own manufacturer, its own shipping containers, etc. Consolidating those supply chains to achieve economies of scale is a monumental task; one which may prove too much for many brand aggregators. The vulnerabilities inherent to this model have become painfully evident in 2021 as global supply chain issues plague all industries.
Today, many Amazon FBA aggregators might not be giving enough thought to operations or long-term growth strategies for the brands they’re buying. Instead, they may focus on driving incremental growth in value through continuous acquisitions that build up the aggregator’s portfolio.
This can end up doing little to help the brands in those portfolios actually realize their potential. The possible result: A dynamic in which aggregators, lacking the operational expertise and infrastructure they need to grow their brands, fail to achieve their full growth potential and deliver returns on their investments.
Enter Kaspien’s 1-Stop Shop Marketplace Services Platform
Seeing the enormous growth potential of the online marketplace space being bottlenecked by this misguided focus on incremental aggregation, Kaspien committed itself to creating the most comprehensive and customizable suite of marketplace services available.
While Kaspien continues to explore acquisition opportunities, it also offers an omnichannel platform that sellers can use to manage their inventory and supply chain, automate marketing and leverage Kaspien’s retail and software services.
Kaspien states that its full suite of offerings are accessible via 4 main avenues: retail partnerships, agency partnerships, Software-as-a-Service and Kaspien brands. The diversity of partnership models allows the platform to be tailored to brands at every stage of their marketplace lifecycle. For brands, that means full support that meets them where they are in the present and - critically - can grow with them into the future, no matter how their goals or needs change.
For Kaspien, the platform approach presents an optimized ecosystem for driving retention and increasing revenue, as a brand, once onboarded, can continue to benefit from Kaspien’s services even as its business grows and changes.
The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.
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