5 min read

How A New Business Model Is Targeting The Top One Percent Of Amazon Third-party Sellers

Alexander Antic

Oct 21, 2021

One private markets segment increasingly popping up on investors’ radar screens are direct investments in businesses currently in the late-stage venture investment and pre-IPO stage. Amazon aggregators have been a powerful example of such a segment enjoying spectacular growth rates.

The COVID-19 pandemic only temporarily bogged down rallying global equity markets. Investors continue seeking investment alternatives to traditional stocks (that could be in for a correction) and bonds (that have not provided yields for some time).

Aggregating third-party sellers on Amazon

Amazon aggregators are currently turning investor’s heads as they acquire and consolidate promising Amazon third-party sellers who lack the skill, appetite, or capital to upscale their business. The aggregators acquire independent sellers (often mom-and-pop shops or “side hustles”), transforming them into more lucrative enterprises. As a result of these activities, many of these aggregators have built their own e-commerce empires at lightning speed.

Significant tailwind from third-party sales during the pandemic

While Amazon sells own-label products, many products on their platform are offered by independent direct-to-consumer sellers who build their store on top of Amazon’s infrastructure. The pandemic saw many new third-party sellers join Amazon’s platform as they battled to stay afloat during lockdowns. According to Amazon’s financial statements, third-party sales have grown to 56% of units sold in 2021.[1] However, estimates show that, of the 5 million third-party sellers on Amazon today, only around one percent are generating over USD 1 million a year.

Amazon supports its third-party sellers with inventory management, payment processing, shipment tracking, and reporting tools. In parallel, the customers’ purchasing experience from independent sellers has improved due to Fulfilment by Amazon (FBA) and Amazon Prime. Still, many independent Amazon sellers hit the ceiling with their business and struggle to scale up despite having a successful product.

The aggregation business model – a recipe for repeatable and scalable success

Aggregators identify sellers with potential and offer them an exit opportunity. They use their economies of scale, resources, access to funds, supply chains, analytics, and expertise to optimize these companies. Ultimately, the aggregator boosts sales and margins while leveraging the seller’s positive brand equity (great product, reviews, ratings etc.). An acquisition can be rapid – Thrasio’s typical purchase is completed in less than 35 days – and the business typically enjoys a massive 30% sales jump in just two months.[2]

USD 9 billion raised in record time

Money has flooded investment funds that focus on Amazon’s third-party sellers with nearly USD 9 billion in capital raised since April 2020[3], including Branded, Thrasio, Berlin Brands Group, Heyday, and Perch.

News site Market Pulse believes this market took off in 2020 due to three factors:

  1. The pandemic drove sellers and buyers online
  2. Thrasio, one of the Amazon aggregators, secured nearly USD 1.8 billion in financing – more than any other buyer in the market
  3. Chinese computer accessory manufacturer Anker went public. With a market valuation of USD 11 billion, Anker was one of Amazon’s most successful third-party sellers.

Refer a seller, get a Tesla

Competition to acquire Amazon third-party vendors has been fierce. At the recent Prosper Show in Las Vegas (a networking event for Amazon sellers), the aggregator Acquco launched a referral program that raised eyebrows. They gave away Tesla cars worth a total of USD 10 million to anyone referring a seller Acquco that successfully purchased (even handing out promotional t-shirts with the slogan “Refer a seller, get a Tesla”). Thrasio, another aggregator, threw an exclusive party for sellers at the famous Bellagio hotel and casino.

Source: https://www.marketplacepulse.com/articles/amazon-seller-acquisition-market

Today, several firms adopting this business model have raised substantial venture funding. Here’s a quick (non-exhaustive) list of the key players:

Amazon’s aggregators add it all up

There can be no doubt of the enormous overall potential of Amazon’s marketplace. In fact, Marketplace Pulse[4] describes it as akin to the 50th largest economy in the world – below New Zealand’s GDP, but bigger than Qatar’s.

As we have shown above, to say that investors are interested in the aggregation business model is an understatement. With a lack of successful, profitable, fast-growing direct-to-consumer traditional competitors, these Amazon aggregator businesses are growing rapidly in comparison, with highly scalable models and compelling return on investment.

Contact Stableton or sign up to explore our investment opportunities

In the past, accessing a high-potential segment like Amazon aggregators meant either seeking early access through venture capital funds (which, once well-established, might not even be interested in your commitment). In addition, it involved high investment minimums, cumbersome paperwork, scarce information (often not even knowing what you will be investing in), and long holding periods.

Today, there is an alternative. Accessing promising businesses via late-stage investment and pre-IPO investments is increasingly popular. For one, investors know the name of the company they are investing in. Secondly, as in the case of Amazon aggregators, the product-market fit has already been established, and the path to profitability is clear.

To hop on an investment at this stage means a lot of upside potential, while the risk level stays relatively moderate.

Stableton is Switzerland’s leading provider for access to late-stage venture capital & pre-IPO Investments to smaller qualified investors. Our mission is to help investors getting access to the otherwise secluded private investment market. With a minimum of CHF 10’000, this type of investing should be considered as part of a portfolio. This article only scratches the surface of the opportunities late-stage VC and pre-IPO investments investing present. Contact your Stableton representative to learn more and find out about those opportunities that exist right now.

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    *Disclaimer: The above article is for educational purposes only and does neither constitute investment advice nor should it be considered to be an invitation or recommendation to buy securities or any other investment products. Please consult your financial advisor about the risks and opportunities prior to making investment decisions. By clicking on that link you confirm that you are a resident of Switzerland and a Qualified Investor according to the new Swiss legislation on collective investment schemes (CISA and CISO).


    [1] https://www.ft.com/content/abbf6bc2-93f1-4cbc-b596-9a7e6f814cfb
    [2] https://www.cnbc.com/2021/05/25/thrasio-disruptor-50.html
    [3] https://www.marketplacepulse.com/acquire
    [4] https://www.marketplacepulse.com/articles/amazon-seller-acquisition-market

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