Amazon brand aggregator market is on roll, and investors are putting in billions of dollars in this space for some years now. The reason is obvious, Amazon's third-party marketplace contributes to a majority part of the sales that Amazon does. For example, in 2020, Amazon’s entire gross merchandise volume was $490 billion, and its third-party marketplace accounted for a whopping $300 billion of it. It points to over 61% share in Amazon’s GMV. Amazing! Right?
Interestingly, Amazon’s third-party marketplace revenue was $200 billion in 2019, which means that between 2019-2020, the growth in its third-party marketplace GMV was 50%. Such stats are sure to attract the attention of the scores of investors. Now, the question is, what will be the Amazon brand aggregator market like in 2022 and beyond? Well, we will look at that in this article.
We also talk to Daniel Vogler, CEO of AMZScale, to get his opinion on which direction the Amazon brand aggregator market is moving. AMZScale is a platform that allows private investors to invest in promising third-party products on Amazon, making this space more accessible. Let’s dive into it now.
#1. Aggregators zeroing on specific brand categories
“When it comes to the most popular product categories among the Amazon brand aggregators, home care, sports and fitness, and garden and outdoor segments are among the top ones,” says Vogler. A recently conducted survey, too, supports this thesis. As per the survey, Amazon brand aggregators are most interested in the home care segment, with 72% of them having bought third-party brands from this space.
The sports segment, on the other hand, was second-most popular, with 69% of Amazon third-party aggregators dealing in this domain. Garden & Outdoor was the third-most favorite product category, with 66% of third-party aggregators dealing in this space. Food, electronics, and apparel were among their least favorite categories. Apparel, in particular, is pretty much the most unpopular segment among them, with 55% of Amazon third-party aggregators saying no to buying any apparel brands. The kind of brands that they prefer are the ones that sell high-margin, evergreen products.
#2. Making Amazon third-party space accessible
Amazon's third-party branded products generate billions of dollars in sales, making them one of the hottest segments in the global eCommerce market. But launching a new third-party brand on Amazon is easier said than done. It requires tremendous planning and large investment to launch a new brand on Amazon and generate sales for it, which is only possible for big companies and high net worth individuals.
When it comes to small-time individual investors, it is almost next to impossible for them to launch or invest in any of the hottest third-party brands on Amazon. Thanks to AMZScale, this is no longer the case, as it allows investors to invest in some of the most promising third-party brands on Amazon with as little as €500 through a digital participation certificate, and any user that invests through AMZScale will receive security tokens, which is proof of their investment.
According to Vogler, “security tokens are at the center of the AMZScale Invest platform. The investors, regardless of the amount they are investing in through AMZScale, will receive participation certificate-based security tokens. With these participation certificates, investors will be entitled to earn a part of profits in form of interest and repayment. It is a huge deal for private investors, as they can now participate in the fast-growing global eCommerce market.”
Having recently raised multi-million dollar funding, AMZScale will be doubling down on expanding its business and entering the United States and the United Kingdom market. So, the Amazon third-party product space won’t remain an exclusive domain for big corporations and large investors alone, as AMZScale is democratizing this lucrative industry.
AMZScale has some grand plans for the future, as its founders have plans to smoothen the process of how private label products are sold. To do so, AMZScale will launch its own products and also provide services to large aggregators such as Thrasio or Seller X. They will open the trading of digital participation certificates on their marketplace in Q2 2022 itself.
In Q3, they will expand AMZScale to other European countries, and in Q4, they will be launching their own eCommerce fund. In short, AMZScale founders will pursue aggressive expansion plans for its software and service platforms and scale internationally. To know more about AMZScale, you can join the White Label Expo World in London, which will be attended by its co-founder and co-CEO Daniel Vogler as a speaker.
#3. Doubling down on brand acquisitions
COVID had a severe impact on Amazon third-party aggregators’ revenue in 2020 & 2021, as it had affected the global supply chain. It was all because of the sourcing and shipping-related challenges that were caused mainly due to COVID-induced lockdowns globally. What it did was that the products the brands had stocked ran out, and there was no new stock coming in because of supply chain constraints.
There is a piece of good news, as 2022 and beyond will change it all. In Vogler’s own words, “for time being, the number of deals in the Amazon third-party aggregator market has come down considerably. But, it's only because the companies are taking a breather now and will soon double down on acquisitions.”
#4. Higher acquisition cost of private label brands
The trend of increasing Amazon seller valuation on a year-to-year basis will continue in 2022, as well. It has continued since 2020, as this was the year when Amazon aggregators found prominence and started gaining mainstream attention. Vogler mentioned that back in 2020, there were only a few Amazon aggregators, but today, it is no longer the case. Now, the concept of acquiring Amazon seller businesses is common knowledge in the eCommerce space.
As for the number of acquisitions made by Amazon aggregators in 2021, it was in the low hundreds, but with the growth in Amazon’s third marketplace GMV, more and more new Amazon aggregators are entering the market. So, the demand for successful Amazon private label sellers is heating up, with many Amazon aggregators vying to buy them outright. Thus, their valuations are also on a rise since 2020.
For instance, big-ticket Amazon sellers were fetching valuations up to eight times their Adjusted EBIDTA. Compared to this, Amazon private label brands were valued at only 2.5X-3X of their Adjusted EBIDTA in 2020. These figures have kind of become a benchmark in the industry, as per reports from experts who have kept the track of the market from its early days.
What does the future hold?
As Vogler predicts, there will be challenges ahead for Amazon third-party sellers as the risks of COVID-induced lockdowns still looms large in various parts of the world. Thus, it will take some more time to get over the supply chain issues that have been haunting the industry for the past two years. But, he reassures, there are many pluses as well that will add to the attractiveness of the Amazon aggregator market.
For example, the democratization of the third-party Amazon brands market because of players like AMZScale will help the industry attract the scores of private investors, bringing in more investments, which, in turn, will fuel the industry’s growth. Also, the reports indicate that the global eCommerce market will grow at 22.7% between 2020 to 2027. It means that the sales on Amazon’s third-party marketplace will continue booming, as Amazon is the largest eCommerce market in the world. Some reports even indicate that from every dollar spent in the online space in the United States, 50 cents goes to Amazon. So, the Amazon aggregator market will grow rapidly in 2022 and beyond.
