The Complete Guide to Understanding Amazon Aggregators
Would you sell your FBA brand if you were offered $1.9 million?
That’s how much Amazon aggregators have paid on average for an Amazon FBA listing on our marketplace over the past two years.
This group of 89 venture-backed, fast-growing companies acquiring FBA brands has raised $13 billion at the time of writing to buy FBA brands. Buyer appetites of companies like Thrasio and Razor Group are still high as they look to increase their deal flow in the coming years.
That means there’s a chance an Amazon rollup business could approach you with an offer.
To make sure you’re better prepared for those conversations, we’ll explain all you need to know about Amazon aggregators and how to get the best deal for your business if you want to exit.
What Are Amazon Brand Aggregators?
We previously discussed how private equity firms would soon enter our space in droves. They’ve finally arrived, but in a different form than we expected: Amazon aggregators.
Amazon aggregators are firms with the primary goal of acquiring Amazon FBA brands.
Aggregators recognize how powerful the Amazon FBA business model is in launching a profitable DTC brand on the Amazon marketplace. They also recognize that it takes a long time to get a brand off the ground. It’s why brand aggregators specialize in accelerating the asset flywheel instead of creating brands from scratch.
Brand aggregators buy Amazon businesses that are already strong and that synergize with other assets in their portfolio. When they acquire assets in shoulder niches, it’s easier to cross-sell products and bundle them, providing even more value to different audiences.
For example, an aggregator may already have a fitness brand with exercise equipment as its most popular products, also known as “hero SKUs.” It makes total sense to acquire a sportswear brand that sells towels or sweatbands to sell alongside their fitness gear.
To increase the potential of their assets, brand aggregators have operational teams with strong talent who can pull growth levers.
Some of these growth opportunities include:
- Optimizing PPC ad campaigns,
- Completely redesigning brands,
- Retiring SKUs to focus on hero products, and
- Leveraging logistics and supply chain networks.
With a well-oiled scaling machine in place, it’s easy for brand aggregators to improve their assets. That’s how they can secure funding from private equity (PE) and venture capital firms that look for high ROI.
Let’s explore what Amazon aggregators consider a worthwhile deal.
Brand Aggregator Deal Activity: The Figures
Amazon rollup firms don’t reveal all of their statistics when it comes to deal sizes. According to Fortia Group, these figures are a good estimate of deal activity so far:
- 47% of deals sell between $2 and $5 million.
- 24% of deals close for under six figures.
- 12% of deals sell for over $5 million.
These numbers land similarly to the figures we saw after we analyzed 59 deals that aggregators made on our marketplace in 2021:
The wide range of deal sizes shown above indicates that businesses of all sizes have a chance of being acquired.
So, what do brand aggregators look for in a deal?
What Amazon Brand Aggregators Look for in an Acquisition
Across those 59 deals, we discovered a few due diligence criteria all aggregators had in common.
In general, Amazon brand aggregators look for established FBA brands with in-demand products that generate steady income. These assets must also still have growth levers to pull after the sale.
Aggregators prefer FBA assets with primary revenue streams from private label sales rather than wholesale or retail arbitrage.
Let’s dig deeper into some of the analyses we’ve done on other typical brand aggregator due diligence criteria.
$1 million in Revenue or $20,000 in Annual Net Profit
Amazon aggregators look for businesses that make either of the above figures. Furthermore, most aggregators will require your brand to have at least 15% profit margins. Margins lower than that will be seen as not having enough growth potential to move forward.
The average monthly net profit across 59 deals with aggregators on our marketplace was $41,687.
Your Amazon brand doesn’t even need to earn that much. If your monthly net profit is $25,000 and your business is valued at a 40× multiple, you could sell for at least $1 million. Check out this guide to learn more on how FBA valuations work.
Private Label Brands
All of the businesses sold to aggregators on our marketplace were private label brands.
Private label FBA brands source their own products and have their own branding on their products. This is different from retail arbitrage, where someone buys a discounted retail product from a shelf in store and sells it on Amazon for a profit. With private label selling, you can build a brand and launch different products while controlling the pricing, which is much more difficult to do with retail arbitrage.
There aren’t any requirements to start selling private label products on Amazon, but it’s highly recommended that you sign up for Amazon Brand Registry and trademark your brand. All of the businesses bought by aggregators were part of the Brand Registry program, and only one of the 59 FBA businesses didn’t have a trademark.
It’s important to build a moat around your brand to make it more defensible from copycats stealing your idea and selling your products, so it’s worth registering for Amazon Brand Registry and a trademark sooner rather than later. That said, Amazon Brand Registry or trademarks are great to have but not the be all and end all. The important thing is that aggregators look for brands that sell their own unique products.
Small SKU Range
On our marketplace, the average number of SKUs for done deals were 14 (we had to remove an outlier as one business had nearly 2,000 SKUs, raising the average significantly).
It’s normal for third-party sellers to offer a wide range of color and size variations of their hero SKUs.
To keep operations simple, a lower number of SKUs makes it more manageable to update and maintain a brand, especially since a lean team of operators will need to keep an eye on dozens of FBA assets, each with potentially dozens of SKUs to maintain.
To keep this range as manageable as possible, brand aggregators will delist some SKUs, especially if they don’t contribute much in terms of revenue. Additionally, optimizing and maintaining product listings is easier if the product SKU range is smaller.
Majority of Sales and Revenue Are through Amazon
Savvy entrepreneurs often diversify their sales channels by selling their products outside of Amazon.
While becoming less reliant on Amazon helps build a bigger moat around your brand, Amazon aggregators will look primarily at assets that generate the most revenue through sales on the Amazon marketplace.
We often get asked, “What types of niches sell the most?”
There are few undesirable niches. Your primary focus should be on building a solid brand that has steady income and clearly differentiated products.
We found in a previous data study that niche doesn’t affect your ability to sell your business as much as people might think.
The same holds true for FBA assets, as brands sold products successfully across 37 unique niches.
As long as you’re not selling products in a fad trend, such as fidget spinners, your brand is worth a look.
Brand strength is hard to quantify, but we know Amazon aggregators pay attention to product reviews and ratings.
Strong branding usually looks like high average ratings and positive social proof.
Quality over quantity is reflected in user reviews and conversion rates. In a recent CRO experiment by Conversion Crimes, customers clicked on a listing with 10× fewer reviews than a similar listing, which even had an Amazon’s Choice badge. At face value, the listing with more reviews seemed like a better choice, but it had several reviews with customers complaining that the product was faulty or not working as intended.
Quinn Zeda and her team found that listings with fewer negative reviews about the product quality received more clicks. The types of reviews left by customers influences buying decisions.
Provide excellent customer service to try and turn the experience into a positive one with the hope of a disgruntled customer taking down or changing their negative feedback. Amazon’s Buyer-Seller Messaging service lets you reach out to customers and start that conversation.
Brand aggregators take these quality factors into account when reviewing your product range.
Focus on building high-quality products. This might require you to order samples from different suppliers until you find one that can make the SKUs according to your requirements.
Once you minimize production quality issues and have a proven minimal viable product, you can then turn your attention to ranking higher in product categories. If you can win the Buy Box or receive an Amazon’s Choice or Best Seller badge, this shows even better proof of high market demand.
Evidence of Customer Loyalty
Another aspect of strong branding is how well FBA sellers build up an audience.
Having a built-up email list is one way to nurture an audience, as is growing a following on social media.
Better evidence of customer loyalty is how well you can create recurring revenue. Amazon sellers encourage repeat purchases at discounted prices by offering the Subscribe and Save program to their customers. Offering the option to buy at discounted rates could be a strong win for brands that sell consumable products, such as supplements or pet food.
Leveraging an engaged audience through subscription-based plans like Subscribe and Save increases the chance of gaining repeat customers. Recurring revenue from returning and new customers shows aggregators that your brand generates revenue from different avenues.
The majority of aggregator-acquired FBA brands sell on the Amazon U.S. marketplace, although the EU marketplace is growing.
Aggregators like Berlin Brands and Benitago are recognizing the EU market potential and making waves there.
What Are the Top Amazon Aggregators?
Amazon aggregators have raised $13 billion, and the top nine aggregators account for nearly 70% of that funding.
Here are the aggregators that have the deepest pockets right now.
Thrasio is the leader in the Amazon aggregator space and for good reason. Started in New York in 2018, Thrasio has the distinction as the fastest-growing unicorn in the U.S.
They have secured $3.4 billion in funding to date and completed over 25 deals last year, adding to their 200+ brand-strong portfolio.
Thrasio typically acquires seven-figure businesses in the home, cleaning, and fitness categories, among others.
Berlin Brands Group
The second-largest Amazon brand aggregator by funding is Berlin Brands Group. They sell in 28 countries and have raised $1.3 billion in funding so far.
This aggregator shows no sign of slowing down, as they have over 1,000 employees to scale their portfolio, which contains more than 45 brands in the consumer electronics, sports, and home and living niches, to name a few.
Acquired brands usually generate seven figure revenues.
Perhaps the fastest-growing aggregator so far, Heyday has raised $800 million in total funding since launching in August 2020.
The San Francisco-based company recently raised $555 million in November 2021.
Little is known about what types of brands they acquire, but knowing they are backed by the Raine Group and General Catalyst means Heyday’s strategy is attracting serious interest.
With $775 million so far and more than 70 acquired brands, Perch is one of the most well-known Amazon aggregators out there.
Similar to Thrasio’s requirements, Perch looks to acquire FBA brands making $200,000 in annual profits or $1 million in revenue. They pay attention to strong branding and evidence of a large customer base.
So far, Perch’s portfolio includes products in the apparel, beauty, home, kitchenware, and health and wellness categories.
Another Berlin-based company, SellerX has raised over $767 million in funding to date.
They have over 30 Amazon native brands in their portfolio.
SellerX looks at businesses generating over $1 million in revenue that show signs of significant growth, reflected by over 20% year-on-year profit margins.
Razor Group will consider acquiring FBA brands that meet these criteria:
- Brand has clean bookkeeping, with all existing financial statements;
- Generates a minimum of €100,000 EBITDA;
- Has at least 10% profit margins;
- Established at least 2 years ago; and
- Has a registered trademark.
This Mexico City platform was launched in late 2020 and focuses on acquiring Latin American e-commerce brands.
Merama has raised $445 million in funding to scale Amazon FBA assets. Their model is slightly different to other aggregators in that they act like an incubator. Merama will buy a majority stake in a company and work to help the owner exit in 3–5 years while growing the business.
Growve was founded in 2018 and focuses on brands in the health, wellness, and beauty categories.
The Florida-based aggregator has acquired over 25 brands and raised $400 million in funding. Growve scales FBA brands through omni-channel selling and can help with logistics, as they have their own logistics network to manufacture and distribute products.
Elevate Brands has an ambitious goal to place a product from their portfolio in “every human’s hand by 2030.”
To achieve this, the New York-based group has raised $372 million in funding and focuses on established brands with great reviews and strong sales.
Their portfolio includes brands in a wide range of categories, such as beauty and personal care, pet supplies, home and kitchen, and baby products.
To be considered for acquisition, Elevate Brands looks at FBA businesses generating $1 million in annual revenue with over 20% profit margins.
Mantaro Brands was founded in 2021 and looks across product categories and seeks purpose-driven and environmentally-conscious brands they think can have long-term impacts.
They acquire brands that have a minimum of $500K in annual seller’s earnings, with a sweet spot of $5M.
Their average acquisition time frame is 30 business days.
Other notable mentions include:
- Boosted Commerce,
- Forum Brands,
- Accel Club, and
- D1 Brands.
For a full list of aggregators, check out Marketplace Pulse.
The Future of Amazon Aggregators in 2022
2021 was a great year for Amazon aggregators, and we expect 2022 to be another growth year, but only for some.
The focus of most rollup firms, many of which started only last year, has been on acquisitions. As a result, some companies haven’t optimized their infrastructure to manage new assets properly.
To refine operations and create a better system that sustainably houses new and old FBA brands, some aggregators may be more selective about which acquisitions they’ll go for. Since deal flow will slow down, this might result in more competitive bidding wars.
Some aggregators may even consolidate and merge with other similar-sized companies if they can’t grow quickly enough.
On top of making sure their brands and finances are sorted, brand aggregators may need to strengthen their existing portfolio by diversifying sales channels. One example of this is Thrasio acquiring brick and mortar businesses.
Setting up accounts on other ecommerce platforms like Walmart, Shopify, or eBay is one way to increase brand exposure and gather more sales. Aggregators may also want to establish more customer acquisition channels outside of PPC marketing. Organic traffic takes time to build up but has proven to be much more cost effective than paid advertising.
That’s why we expect more content sites to be included in portfolios. Having a media publication drives traffic to those storefronts and fortifies acquired brands through thought leadership and additional income streams via affiliate commissions and display advertising.
One thing is for sure: as long as Amazon FBA continues to be one of the best ecommerce business models to start up, Amazon aggregators will continue to thrive.
Should You Sell Your Brand to a Brand Aggregator?
We said 2021 was the season of the seller, and we believe it’s still a seller’s market.
If you’re planning the next stage of your entrepreneurial journey or need to raise capital for other projects, selling to a brand aggregator could help you achieve your goals.
Before exiting your business, it may even be in your favor to wait and scale your brand more in order to fetch a higher sales multiple and deal. Scheduling a quick call with our M&A experts for a free consultation can help shape your exit strategy.
In the meantime, a brand aggregator could approach you with a private deal.
The offer could be $1.5 million for your FBA brand (usually with the majority of the cash up front and a portion of the deal in earnouts). However, you’ve only got three days to confirm before they’ll move on.
The offer might seem great at first glance, but taking the offer too quickly might mean leaving money on the table.
You’ve really only got two choices: act fast or lose out.
If you accept, you’ll be locked into a due diligence period after you sign the LOI. This prevents you from speaking with anyone else, even if they offer you a better deal. The aggregator may even back out during this period, resulting in lost time that you could have spent negotiating with a different buyer.
For first-time sellers, this is a terrifying situation to be in; $1.5 million is life-changing money for most but there’s always the chance they could sell for more. Yet, many sellers would accept the offer because there doesn’t seem to be a better option.
This is where a broker can help maximize your deal potential and save you from leaving money on the table.
How to Earn More Money from Aggregators by Using a Broker
Many sellers don’t realize that they actually have more leverage than they think. Here’s the kicker that many aggregators don’t want you to know: they will pay a premium price if a brand meets all of their criteria.
How do you get an aggregator to pay more for your FBA brand?
By creating competition.
So far, the only way to generate competition between aggregators is by using a broker. Aggregators will rarely swoop in at the eleventh hour to offer a better private deal to Amazon sellers, likely because they’re unaware that an offer has been made in the first place.
This is why aggregators hold more negotiating power in a private deal since they can generate scarcity and urgency on their own terms.
Using the right broker levels the playing field. Since all the aggregators see your business for sale, they have to submit the best offer for your business.
Now, you can choose a deal that meets your needs. And in your own time.
If you list with us, you’re giving your FBA brand the best chance of selling for its highest price. On our marketplace, brand aggregators keep a close eye on the listings because they know we list quality brands, largely due to our strict vetting process. And time and time again, sellers have received multiple offers for their FBA businesses, often at much higher prices than what their businesses were initially listed for.
Just like the 59 deals on our marketplace so far, you could sell your FBA brand on your own terms if you list with us.
Before you start imagining a profitable exit, you’ll need to get your business in shape first. So you’re in a better position to exit, here are some of the ways you can prepare your brand.
How to Prepare Your Brand to Attract Aggregators
The first thing you need to do is gauge your business’s worth. As we mentioned above, the top aggregators require a minimum annual profit or monthly SDE figure, but this alone isn’t enough to know your business’s value.
You can use our free valuation tool, which takes into account other factors to give you a rough estimate of your brand.
In the meantime, make sure you sort your finances. Hire a bookkeeper or ask your accountant to help you compile a profit and loss (P&L) statement. This document is the most important one during the sales process, because it’s how buyers do their due diligence on your business.
With your finances more clearly laid out, you’ll be able to see where you could cut expenses and streamline your operations. Brand aggregators aren’t looking for perfectly optimized businesses. They still want growth levers to pull.
The key is to make your business as turnkey as possible, which means lowering owner involvement as much as you can without compromising performance or efficiency. This could mean hiring VAs for rote tasks, improving your inventory management, or hiring agencies and experts to take over the things you’re not great at (like graphic design and PPC campaigns).
Consider speaking to our team to plan your exit strategy. Even if you’re not planning to exit any time soon, a free consultation call can help you plan to sell.
By that point, your business might be worth much more than you expected. And brand aggregators will fight to acquire it.