Amazon’s profitability gave rise to the new Amazon aggregators business model. The Amazon aggregator business model gained immense importance due to its hyper-growth in the last few years. However, most of us want to know about Amazon aggregator pros and cons related to their business model.
Amazon Aggregators raised the total capital of more than 12 billion US dollars in 2021. The excessive funds raised added value to the acquired business and grew revenues.
The rapidly growing FBA aggregator industry attracts worldwide investors to inject money into this industry and leverage it with financial benefits. However, right now aggregator industry is facing specific challenges.
Amazon Aggregator Pros And Cons
People interested in knowing Amazon Aggregator pros and cons will know the good and bad points of the Amazon Aggregator industry. After reading the article, your knowledge about Amazon aggregator’ pros and cons will enhance.
Amazon Aggregators Pros
In Amazon Aggregator’ pros and cons, we will first explain the good points of Amazon Aggregators that make their business model attractive. These aggregators acquire profitable Amazon businesses and scale them to generate revenues.
Let’s look at some of the unique and robust points of Amazon Aggregators.
- Aggregators have excessive funding resources that make them capable of scaling acquired businesses to the extent impossible for individual sellers to achieve. Individual sellers have limited funds and can’t grow their brands like aggregators. They inject money into the acquired business and make it big enough to raise exceptional revenues. Funding is the reason that is making them grow faster enough than average acceleration.
- These aggregators have excessive funding resources to acquire any profitable Amazon brand without looking for other funding options. Their investors are big names providing their services as venture capital firms. By witnessing the strength of the aggregator business model, these venture capital firms provided excessive funding to these FBA aggregators.
- Amazon aggregators have an exceptional team that is talented enough to raise the performance of acquired brands. They have years of experience in the e-Commerce industry, and they utilize that knowledge to add value to the aggregator business model. Aggregators use data and technology to scale acquired brands’ capability of sales revenues. Their unique competitive advantages are these aggregators’ promising brand optimization strategy and fund-raising capability. Your brand is safe if you sell your Amazon businesses to these FBA acquirers.
- These aggregators only acquire those profitable companies who have long-term potential to succeed. They manage to sell the acquired brands in international places to increase brand awareness and sales. If you have thought of selling your business to these aggregators, they will take your brand to another growth level through their unique technology and data power.
- FBA upgrades every business aspect, including Search Engine Optimization (SEO), PPC, keyword and product research, etc., to keep your business stand out in intensive e-Commerce competition. Having the latest technological tools makes the overall work easy for these aggregators to manage numerous acquired brands.
- Brand Aggregators work on promising strategies to scale different brands. Their robust business model, talented team, and the latest technological tools enable them to generate higher profits.
- Aggregators have the latest e-Commerce logistics solution referred to as shipping aggregators. They can deal with supply chain challenges and have relations with a vast network of suppliers.
Cons of Aggregators
In the extensive discussion on Amazon Aggregator pros and cons, weak points in the aggregators market now come.
- Amazon aggregators can face crucial challenges in the brand acquisition process. Any exogenous shock can disrupt brand performance just after the acquisition completion. If the sales of a brand decline after the acquisition, it will impact the overall financial performance of aggregators.
- After the success of the aggregator business model, the new aggregator is continuously entering the market. The competition among Amazon aggregators increased, and the acquisition multiples escalated. Failure to acquire meaningful brands can lead to market failure. Moreover, aggregators are focusing on short-term growth rather than the long term. These aggregators can face losses under multiple market challenges without a long-term plan.
- Currently, the supply chain issues are influentially impacting the e-Commerce market. The rising cost of supply chain management and Amazon inventory fees rise to impose significant challenges for Amazon aggregators by reducing their profitability.
- Aggregators rely on extensive debt financing, and with the rising cost of interest rates, the profits of Amazon aggregators can decline. They should develop a long-term plan and sketch their targets to achieve if they want to sustain their business model.
- FBA acquirers rely on the Amazon platform for sales generation. If Amazon undertakes any operational changes, it will consequently impact acquired businesses. Any cost increase in Amazon services can reduce aggregators’ profit; changes in Amazon algorithm and supply chain challenges can affect aggregators’ performance. The launch of potential competitors in the market can also influence acquired brands’ financial flow.
- If the economy of the US slows down, it will consequently impact the e-Commerce sales ratio due to a reduction in consumer spending. The increase in the inflation rate can reduce online expenditures. So, any economic shock that is unavoidable can impact aggregators’ profitability. So, brands have to construct an effective plan to deal with these sudden economic problems.
- After the impact of the pandemic has slowed down, consumer behavior is turning back to normal. In the Covid-19, consumer behavior shifted towards online spending, and e-Commerce sales received a massive boost. As the lockdown restrictions were removed from global grounds, consumers switched to offline shopping. Amazon aggregators have to plan for retaining excessive growth under unavoidable challenges.
- In 2022, Amazon aggregators are facing severe challenges. The news of Suma Brands and Thrasio layoffs imposed negative impressions on investors and people relying on aggregators’ business models for acquiring their brands. Most aggregators planned to halt their acquisition in 2022 and focus on growing the already acquired brands. Currently, Aggregators face disappointment, and they have to develop an effective plan to reach success.
What’s Next?
Nowadays, Amazon aggregators are coming up with frightening news of a downfall in their business models. Who would have ever thought about Amazon aggregators meeting these complicated tests of survival after the period of excessive growth?
The wind of distress is not blown in the area of every aggregator. The report of Fortia Group revealed that few aggregators are performing exceptionally well under serious challenges. Still, constructing a long-term plan is essential to survive in the long run.
According to Garner Hype Cycle, the aggregator industry is now facing the trough of disillusionment where they have to develop an exceptional plan for survival. Instead of focusing on aggressive acquisition, aggregators should enhance the performance of the acquired brands.
The funds should be invested in profitable ideas that add value to the aggregator’s industry. When aggregators will successfully face these challenges, they can retain their trust and track towards high growth.
The increase in the interest rates and reduction in e-Commerce sales growth are imposing a threat to a few FBA acquirers’ existences. It has also been revealed that Amazon aggregators are running short on capital to acquire different brands. Few aggregator companies might fail in the aggregator market race. However, those who will sustain this competition will be those who came up with powerful business tactics.
Conclusion
Amazon aggregators’ business model became a billion-dollar industry due to their profitability factor in the past three years. This article discusses Amazon aggregator pros and cons in detail.
There are multiple strong points linked with the aggregators’ industry. Aggregators have talented teams, the latest technological tools, excessive funding, profitable strategies, the latest logistics solutions, and perfect relationships with multiple suppliers. All of these points are solid points or pros of Amazon aggregators.
Cons or weak points of Amazon aggregators are also part of their business. The acquired brands can face a drastic decrease in sales after the acquisition, negatively impacting aggregators’ revenue. Supply chain challenges are there as a hurdle for aggregator financial growth. The rise in business multiples due to aggressive business acquisition competition in the aggregator market is reducing aggregators’ capital. There are multiple other challenges in the aggregator market.
Overall, 2022 is a challenging year for Amazon aggregators, and they have to come up with promising solutions to survive the current aggressive market competition.
FAQs
What do aggregators do?
Amazon aggregators acquire your Amazon business and scale it to generate revenues and profits. They can expand your business products in the international market and make your brand multinational.
