Business Model Challenges for Aggregators Omer Riaz April 4, 2022

Business Model Challenges for Aggregators

aggregator for amazon

Amazon Aggregators challenges and opportunities in 2022

Amazon marketplace has become the largest E-commerce platform in COVID-19 by reaching a net worth of 1.7 trillion US dollars in 2022. Amazon Aggregators entered the market with a unique business model of acquiring different FBA businesses.

Challenges for Aggregators

The aggregators are acquiring small potential FBA businesses on Amazon that are already performing well in the market with a strong operational supply chain. These Aggregators are raising billions of dollars in funding through their investors to acquire these businesses and scaling them to generate revenue. However, these business models bring challenges for Aggregators.

E-commerce technology is transforming quickly, and it’s hard to capture the market trends without financial resources. After the pandemic, the demand and supply of goods and services have been severely impacted. Different online businesses cannot meet the rising demand for products due to supply chain issues.

The Amazon Aggregators are performing well in business acquisitions and scaling them to generate revenues. But with the changing pace of E-commerce technology, there are certain challenges for aggregators and opportunities in 2022.

Top 6 Challenges for Aggregators in Ecommerce 

Aggregators must tackle a few important challenges in 2022 that can impact their revenues and operational processes.

  1. Delays in Post-acquisition Integration

It’s fundamentally important to integrate the acquired companies’ operations into the existing system for streamlining and automating processes. Integration delays negatively impact operational efficiency and future sales. If the speed of integration is fast, it will be helpful to maintain the sales volume of the acquired business.

To avoid this, having pre-built integrations to connect and replicate acquired business processes will increase the revenue in post-acquisition.

  1. Visibility into critical data of business 

If you are delaying the process of visibility into product sales data and the necessary actions required, it can impact your business performance. One of the tough challenges for aggregators is that you have to improve the Amazon Bestseller Rank (BSR) to achieve high sales volumes, which can only be done through analysis of your business-critical data.

For instance, poor visibility into inventory levels will drastically impact the inventory management system resulting in stockouts across FBA warehouses. Additionally, poor visibility into product sales will delay the process of necessary action required to improve product performance. You know that performing effectively at a fast pace in the modern competitive environment is essential to sustain.

Both these situations can lead to deterioration in your BSR seller rank. If you properly analyze your inventory management levels through data, it will assist in reducing FBA storage fees and getting rid of slow-selling inventory.

  1. Following some regulations and policies 

There are multiple data and tax regulations across the globe. Currently, Amazon operates in more than 16 marketplaces, and every Amazon business operating in these areas has to follow its tax and data regulations to avoid financial penalties.

Additionally, Amazon businesses have to follow marketplaces policies as Amazon is very strict in instantly suspending the violator’s account. Through the process of automation, these human errors in challenges for aggregators can be eradicated.

  1. Supply chain effectiveness 

Supply chain issues severely impacted the business operation in 2020, and still, there is a high probability that it will continue in 2022.

The impact of the pandemic on Amazon Aggregators is mostly driven by supply chain issues. It would be best to have a network of backup suppliers that can manage your inventory needs in difficult situations.

Using the latest technology to automate your supply chain can provide your business with agility. Automation makes it easy to place orders with suppliers across different locations. If you work with hundreds of suppliers, then automating the process is even more critical.

  1. Scaling operations 

Scaling market operations is important to compete in the Amazon marketplace. For instance, the sales prices for holidays need to be updated before the holiday starts. Failure to do so will decrease sales volume, and competitors will take the market share.

Including an upgraded system that can manage several transactions and data volume is necessary to scale business operations. If Amazon Aggregators do not install these upgraded scaling operations, they might lose their market share instantly.

The Opportunities for Aggregators 

We have discussed challenges for aggregators so far. However, there are multiple opportunities in the market for Amazon Aggregators, which they have to opt to generate profits for their investors. The business acquisition decisions of these aggregators should be productive and profitable to make good use of invested money.

Below are a few important opportunities that these aggregators need to acknowledge while making business acquisitions.

High-profit margins 

Amazon market has more than 200 million active users, and it’s a highly profitable market. However, the competition on the Amazon platform is rising as millions of sellers are providing their products and services.

As we know that Amazon Aggregators are eager to buy third-party businesses on Amazon due to their higher sales volume and profitability. 3rd party sellers generate more than 50 percent of Amazon sales. In 2020, nearly 80.5 billion US dollars were generated by Amazon through 3rd party services. Around 130,000 FBA sellers surpassed the sales volume of 100,000 US dollars.

FBA businesses are attractive to Aggregators as their supply chain management is aligned and managed by Amazon itself. Moreover, these businesses are highly profitable and easy to manage.

Aggregators can find these profitable FBA businesses on Amazon and acquire them to scale and generate sales. In 2022, the sales and revenues of 3rd party sellers are projected to increase, which is a great opportunity for aggregators to process acquisitions and generate high profits.

Reduction of Costs 

The maximization of profits results when a business generates high sales with minimum expenses. If Aggregators acquire 3rd party sellers’ businesses, they should analyze how to minimize their costs and generate healthy profits.

Amazon FBA sellers don’t have to take the pressure of supply chain issues as their product packaging, shipment, and delivery is done by Amazon. As Amazon Aggregators are running multiple FBA businesses, the FBA modeling of acquired businesses will be helpful to minimize their costs with improved supply chain management.

The 3RD party business on Amazon reduces the supply chain cost of these aggregators and manages their business operations efficiently.

Competition in the market

Amazon market is getting aggressive in terms of competition among different sellers to take market share. Businesses having rich financial resources can strive in this competitive environment.

E-commerce Aggregators have vast financial resources that they can use to scale their acquired business and beat the market competition with full force. So, it’s a great chance for these Aggregators to acquire FBA businesses in 2022 to create success.

Concluding Remarks 

With the impeccable technological revolution in the E-commerce industry, it is becoming hard for online business sellers to compete. Amazon marketplace is already the top E-commerce platform globally, and Aggregators are acquiring potential FBA businesses to scale them.

There are many challenges for Aggregators that they have to address for making their business model successful in 2022. The supply chain challenge is important to consider and resolve for extracting positive outcomes from acquisitions. Moreover, the FBA sellers’ revenues are expected to rise in 2022, which is the perfect time for Aggregators to acquire these businesses.