eCommerce Aggregators in 2022: Sink or Swim?

In 2020, eCommerce exploded and with it, many new eCommerce aggregators joined the roll-up frenzy, snatching up eCommerce SMBs to scale to the next level. But as the pandemic wanes and consumer demand decreases, the aggregator space is facing a new business climate.

Thrasio, one of the largest eCommerce aggregators, with over 100 brands and $3.4 billion in funding, recently announced company-wide layoffs and a new CEO.

But they’re not the only ones reevaluating and reshaping their business model.

If the current disruptions in the aggregator space are any indication of where the aggregator market is headed, Amazon 3rd party sellers seeking an imminent exit may have to wait.

Or not.

Where is the aggregator space really headed in 2022?

Some historical context

Thrasio opened its doors in 2018 with minimal competition in the eCommerce aggregator space. By 2020, the company along with other aggregators raised approximately $1 billion combined.

When the pandemic hit in early 2020, it fueled massive growth among eCommerce SMBs and many brands significantly improved their profitability. 

By 2021, funding in the aggregator space also increased to over $12 billion in both equity and debt financing. The growth that occurred among both eCommerce SMBs and aggregators resulted in faster acquisitions and higher purchase prices. And within a short period, many more aggregators opened their doors for business.

But global supply chain issues, a rise in fuel costs and Amazon FBA-related price hikes, have currently paralyzed some sellers. In fact, 30% of surveyed Amazon sellers reported at least $10,000 in lost sales in 2021. With increased activity in the aggregator space driving up acquisition prices, the risk for aggregators has grown.

As a result, some eCommerce aggregators are starting to slow down,  focusing on improving their operations and building their current brands for long-term profitability. Suma brands, for example,  laid off a large percentage of its staff even after raising $150 million in venture capital and debt just a few months ago. CEO Andrew Savage explained to Business Insider,

“We did let a small number of people go last month which reflected a strategic decision to reallocate resources internally, but not a fundamental shift in our business strategy, as we are continuing to grow our business organically and inorganically.”

It appears that at least some aggregators are pausing, realigning their resources and reevaluating strategies for future M&A.

Aggregators and consolidation

Moonshot Brands, co-founder, CJ Isakow told TechCrunch,

“…aggregators are starting to fail, and we are purchasing assets from some of them.”

Yes, some aggregators are failing. But at the same time, a new trend is emerging.

While Thrasio has paused acquisitions to focus on its current brands, other aggregators continue to hustle, albeit with a twist. 

Amazon aggregator, Razor Group is preparing to acquire Factory14, a smaller aggregator with a 100-person workforce, the majority of whom will stay on.

The Olsam Group, a London-based aggregator, bought US competitor Flywheel Commerce in December.

Pilot Wave Holdings, a leading technology-focused acquisition firm, recently acquired Tapuya Brands, a data-driven acquisition company.

Driven by strategic goals, these aggregators seek to partner with other aggregators who demonstrate strength and talent in specific operational tasks and possess Amazon expertise in addition to their DTC skill set.

But overall, traditional eCommerce aggregators continue to forge ahead. Take GoNorth, an eCommerce aggregator based in Sweden. It recently raised significant funding, and in just a few months built a portfolio of 11 brands, aiming to acquire a new brand every week. 

And they’re not the only ones.

In Asia, over the last six months, New Vessel, Una Brands and Nebula Brands obtained funding. In Latin America, Merama and Quinio also raised funds in addition to many other aggregators not mentioned here.

But what about the challenges that eCommerce businesses face? How will that affect their ability to make an exit?

eCommerce became more competitive as a result of the surge in online shopping during the pandemic, leading to market saturation (and potentially less ROI). 

However, surprisingly, according to Jungle Scout, a popular online tool for Amazon sellers, 76% of surveyed Amazon sellers reported being profitable in 2022 despite supply chain challenges and COVID-19 disruptions.

eCommerce is not going away. 

But going forward eCommerce businesses must apply new strategies to win customers and retain them. For example, overstocking inventory and diversifying their supplier base will provide some protection against shipping delays and frustrated customers.

Expanding to international markets to reach more customers is yet another strategy companies are adapting. In fact,  76% of shoppers have already made a cross-border purchase, a 6% increase from 2019. That’s a good sign for eCommerce SMBs.

In short, eCommerce businesses must think out of the box to remain in good stead with their customers, stay afloat and ultimately become a lucrative opportunity for an aggregator.

Putting it together

For eCommerce SMB owners seeking an exit, the competition is more fierce. According to Jungle Scout’s study, 1 in 4 new Amazon sellers plans to sell their Amazon business to an aggregator. 

But despite the current hiccups,  the aggregator space continues to develop, showing no signs of giving up and still raising plenty of funds.

For eCommerce SMBs, that’s good news. If you’ve built a thriving eCommerce business or you’re on the road to success, you’ll still attract aggregators seeking to acquire your brand.

But for both aggregators and eCommerce SMBs to successfully evolve, it’s crucial for them to understand the key indicators to focus on in the coming months, implement new strategies and adjust their business models to fit the ever-changing consumer climate.

What are the key indicators and most effective strategies to grow your eCommerce SMB? Reach out to us to see how you can adapt your business to the changing times.

Meny Hoffman

Meny Hoffman is the CEO and founder of Ptex Group, the Let’s Talk Business podcast, and the Let's Talk Exits podcast and blog. He's been dedicated to building brands and advising business owners for the past 20 years. More recently, he has started educating and advising within the Amazon seller and e-commerce entrepreneur space.

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