Over the past few years, many venture capital firms have invested a lot of money acquiring FBA businesses. These companies buy Amazon third-party businesses, and their acquisition numbers are rising. FBA acquirers aim to scale these businesses and upgrade them to gain maximum revenues.
The acquisition of these businesses is worth millions of dollars. In return, these acquirers sell products and services of these companies at a higher price by turning them into larger multinationals.
This model is not new in the market. Previously many acquisitions have taken place in the market by different acquirers. However, the market of acquirers got a significant boom in the last two years.
Many successful brands operate most of their business through the Amazon marketplace. After COVID-19, many brands on Amazon observed recorded sales. It has motivated FBA acquirers to buy more 3rd party brands on Amazon and scale them accordingly to generate revenues.
Why are FBA Acquirers Rising?
Before diving into the rise of FBA acquirers, let’s go through the fundamental factors to understand the FBA business. FBA business utilizes the fulfillment of Amazon and their warehousing services to sell their products to customers. The probability of generating plenty of money with sustainable growth is high in this business, due to which many acquirers are entering the market. This type of investment is attractive for these acquirers as it promises higher returns.
Another important aspect to note is that this micro acquisition is unique from other businesses as owners have complete control over growth from the beginning. Most of these businesses are managed by two to five people.
Many believe that this investment has no benefit; it is crucial to know that most Amazon revenue comes from third-party sellers.
Why is the FBA Market Booming in Comparison with Other Businesses?
Many Amazon FBA acquirers are entering the market to acquire different FBA businesses. There are many reasons for this to happen. One of the fundamental reasons is the stability of this marketplace for many years. Acquirers consider stability the most important factor before making any acquisition.
Another important factor is the future projection of the FBA marketplace. The number and revenues of 3rd party sellers are increasing every year on Amazon. These reasons deliver the message of low risk in this marketplace and promising secure investment for acquirers.
Another factor leading to this trend is the challenges and difficulties that one has to face when starting a business from scratch. You have to take care of several things in this procedure, like company registration, hiring perfect talent, managing market operations, and many others.
Moreover, these acquirers are highly likely to increase these businesses’ sales and reach more customers to enhance business growth. The online platform’s convenience and easiness are other factors for acquirers to enter this space.
FBA Acquirers Business Model
Most of the time, acquisition companies operate through a buyout process. The company will start by buying your marketplace account and IP. The acquirer takes control over every business operation, including manufacturing, distribution of products, packaging, and other activities. These acquirers offer a revenue-sharing model where the seller can have the company share in a few cases. However, in some cases, the seller has no share in the company.
Before the acquisition, sellers use different strategies to scale their business while acquirers plan their strategies to operate businesses. The customer will still have the same product and service after acquisition. However, if the buyer decides to rebrand the product through innovation, then the product might change. These FBA acquirers have existing resources and pathways to track their customers. Therefore, mostly the business model is not altered post-acquisition.
How to Acquire an FBA business?
Along with multiple acquirers entering the Amazon FBA market, many others might be thinking of how to acquire FBA business. Before going through a lot of paperwork and fulfilling business requirements, you must initially check a few important things.
The next step is analyzing the type of business for acquisition. New FBA acquirers need to consider whether they have the proper investment to acquire a business. Many acquirers check the sector and background of the business. They choose those that are aligned with their expertise.
It’s fundamentally important to analyze which Amazon FBA business is effective for getting maximum returns. Having an action plan is crucial to how you will grow your business. Finally, you may have to take the financial decision of choosing where to invest and how much to invest in different operations. Consider the return on investment, profit levels, customer base, customer acquisition cost, and other important elements. The valuation of the business must be accurate to avoid any inconvenience.
Amazon Aggregators Era
The latest business model in the Amazon marketplace is FBA aggregation. Amazon Aggregators establish this model. These Amazon Aggregators raised over 12 billion US dollars in 2020 for FBA business acquisition. The new market model of Amazon Aggregators focuses on acquiring small amazon businesses that are already operating well in the market with effective supply chain management.
Amazon Aggregators are emerging from different parts of the world, backed by investors. Some of these acquirers received a record amount of funding from their investors. One market leader in the category is Thrasio, with more than 1.6 billion US dollars of fundraising. It has acquired more than 100 businesses and has a portfolio of more than 15000 products.
Reasons Why Amazon Market Is Attractive for FBA Acquirers
Amazon is the global leader in e-commerce sales. More than 200 million active users prefer shopping from Amazon.
The third-party sellers are increasing in the Amazon marketplace, and accordingly, their number of sales is also rising. More than half of Amazon sales come through third-party sellers. In the US, 53 percent of adults start their product search on Amazon. This trend is also growing in other countries where Amazon has a strong presence.
Amazon FBA service is highly supportive of third-party sellers to scale their business. Amazon handles its shipment and warehousing services and offers free shipping to its Prime customers. Moreover, the timing of the delivery is fast, which is their competitive advantage.
Once you know the main points of operating in the Amazon marketplace, you can be ready to grow your brand successfully. These are the factors in which acquirers choose the Amazon marketplace to buy Amazon FBA businesses.
The number of acquirers is rising in the Amazon marketplace. Their business model has become popular, and they have acquired hundreds of Amazon potential FBA businesses and scaled them accordingly.
These acquirers receive massive funding from the investors to acquire different FBA businesses. Due to huge market potential and promising future trends of Amazon 3rd party sellers’ sales, FBA acquirers are eager to invest in these businesses and acquire them.