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Selling An Amazon FBA Business: Everything You Should Know
By Quiet Light
An intriguing trend has steadily begun to emerge over the past 18 months. The number of Amazon businesses for sale have increased dramatically.
Here at Quiet Light Brokerage, we are very extremely busy dealing with a huge surge in requests from Amazon business sellers who are thinking of selling up. In our database of online business listings, an increasing percentage of them are primarily Amazon-based.
This trend is not just limited to Quiet Light Brokerage either. I’ve spoken to our competitors who are seeing a similar trend. I reached out to Jock Purtle from DigitalExits to confirm that his firm is seeing a similar trend. This is what he had to say:
We’ve seen a massive influx of valuations and also deals we have listed in Q1 of 2016. From what we can tell there were 15 transactions in 2015 of Amazon businesses. I feel we have already surpassed that amount to date this year and it will only grow in the years to come. I believe this has been caused by the Amazing Selling Machine course that was started in 2014 teaching private labels sellers how to sell on Amazon and we are starting to see that wave of companies come onto the market.
So why are Amazon businesses flooding the marketplace? In the past, any influx of sellers from one niche or category of businesses has been a classic warning sign that bad changes are coming to that niche. Is that the case here? Or are we just reading too much into it?
How a Flood Of Businesses For Sale Can Be a Warning Sign
Anyone who has followed my writing or attended any of my conference presentations has undoubtedly heard me tell this story (in fact, I mentioned it in last week’s blog post).
Several years ago I noticed an influx of website valuation requests for e-cigarette stores. To get a couple of requests in a month wouldn’t be that unusual, but now there were nearly half a dozen within a month. Sure enough, a little research found that the FDA was trying to regulate the industry and shut down existing retailers (especially those who marketed the devices as a smoking cessation device).
Added to which, this wasn’t the only time I’ve seen an influx in valuations for an industry in trouble.
So the question that looms with the increase of Amazon businesses for sale is: are they in trouble? Are Amazon business owners seeing the writing on the wall and cashing out while the money is good?
Are Amazon business owners seeing the writing on the wall and cashing out while the money is good?Click to tweet
Reasonable Explanations Behind The Increase
I think there are several reasonable explanations for the increase we are seeing with regards to Amazon businesses for sale. The explanations below are based partly on existing data, as well as conjecture developed from speaking with dozens of Amazon sellers.
Theory 1 – Amazon Businesses Are Finally Old Enough
Although Amazon does not release specific details on how many sellers are participating in their sellers program, vendors program, or FBA programs, they do release enough details to know that growth has been significant over the past three years.
This graph from Google Trends gives us a glimpse of how the program has caught on since 2012 and 2013.
In addition, Amazon gave us a glimpse into their marketplace for 2015:
Although the Amazon marketplace started in 2006, it really increased in traction and widespread adoption from 2012 onwards.
This means that all the sellers who adopted the program in 2012 and 2013 are now coming upon their 3rd and 4th years of being on the Amazon platform. For the most part, serious entrepreneurs tend to consider selling after only a few years of being in business.
So it is possible that the influx of Amazon-based businesses is partly a result of these businesses coming of age.
Theory 2 – People Are Learning Amazon Businesses Can Be Sold
In March of this year, I spoke at the PROSPER show, a conference focused on Amazon selling. During my talk (which focused on creating a sellable Amazon business), I was interrupted more than once to address the elephant in the room – “doesn’t Amazon prohibit the transfer of Amazon seller accounts?”
Sure enough, Amazon has traditionally held a stance that seller accounts cannot be transferred. But this hasn’t stopped Amazon sellers from actually selling their stores. Most sellers and buyers realized through stock sales or other mechanisms, that selling and transferring an Amazon business wasn’t that difficult.
Amazon has traditionally said seller accounts cannot be transferred. But this hasn’t stopped Amazon sellers from selling their stores.Click to tweet
But this was always done with some discretion and a good amount of trepidation. It was, of course, concerning to us here at Quiet Light Brokerage. If Amazon was really against the sale and transfer of seller accounts, buyers were at risk of losing their investments if they were caught.
So to get in front of this issue, we encouraged our sellers to be honest and seek permission from Amazon. If Amazon gave their stamp of approval, buyers and sellers could breathe a little easier and become more comfortable participating in the sale.
Below is an email from Amazon seller support authorizing the transfer of a seller account:
As more Amazon sellers learn that their business could actually be sold and transferred, a certain percentage of them will naturally explore that option.
Theory 3 – A Higher Percentage Of E-commerce Stores Have An Amazon Component
Most Amazon sellers stay on Amazon’s marketplace. However, nearly a quarter of Amazon sellers also have an online store.
If I had to make an educated guess, I would say that the number of Amazon sellers who have an online store is growing every year. From what we’ve seen at Quiet Light Brokerage, most Amazon stores that are for sale originated as e-commerce businesses with an independent online store.
At some point during the growth of those e-commerce stores, their owners added Amazon as an additional sales channel.
So rather than question why there are so many Amazon businesses for sale, it might be more logical to consider that more e-commerce stores for sale are participating in Amazon.
Amazon Seller Growth Is Consistent
If an entrepreneur added Amazon to their sales channels sometime between 2010 and 2013, they would have likely seen a rapid rise in their Amazon sales without having to do much independent work.
This is supported by Amazon’s reported data. In 2013 Amazon’s marketplace grew 40% to reach 1 billion items sold. In 2014, this number doubled to reach over 2 billion items old.
Although Amazon did not specify how many items were shipped in 2015, they did report that “sellers added more new selection and shipped more items than in any previous year”.
The Growth Of Amazon Businesses For Sale Has Many Reasons
There is no single reason leading to the growth of Amazon businesses for sale. More likely, the increase is just a combination of the reasons I’ve just stated and perhaps a few other factors I haven’t identified.
As a result, I do not believe this rise is necessarily driven by sellers seeing impending doom around the corner. It is more likely a result of the Amazon marketplace becoming such a dominant force in e-commerce, coming of age, and producing strong viable businesses.