The Rise and Fall of Amazon Aggregators: What It Means for Your FBA Exit Strategy

The meteoric rise and sharp decline of Amazon aggregators has far-reaching implications for FBA sellers in every industry. Over the last few years, buyer profiles and business valuations have changed dramatically, creating an entirely new landscape for selling your Amazon business. As a result, knowing how to craft an exit strategy that takes into account current market conditions can make the difference between a successful exit and utter failure.

In this article, we discuss:

• The meteoric rise of Amazon aggregators (and what went wrong)
• What it takes to successfully sell your Amazon business in the post-aggregator boom
• Who is buying Amazon businesses now
• Four things you need to know to navigate a successful Amazon exit

Related Articles:
Hiring an Amazon Business Broker to Sell Your Business
How to Negotiate with FBA Roll-Up Firms and Sell Your Amazon Business for Top Dollar

The Meteoric Rise of Amazon Aggregators (& What Went Wrong)

Aggregator firms had a significant impact on the market for Amazon businesses in a short period of time. The speed and degree of their rise were only matched by their rapid decline. Understanding these trends is helpful in knowing the current market for selling your Amazon business. 

Aggregators’ meteoric rise

An Amazon aggregator firm is a business that focuses on buying large numbers of Amazon businesses. Their goal is to take advantage of economies of scale and large infusions of cash to rapidly grow new acquisitions.

Amazon aggregators came on the scene several years before the pandemic. However, their growth accelerated sharply during the height of COVID. Specifically, 2021 saw a major boom in the amount of money invested in aggregator firms. Funding to aggregators increased from $804 million in 2020 to over $6 billion in 2021.

There are several key reasons for this. While the disruption of the pandemic caused mayhem around the world, certain changes did bode well for ecommerce businesses. 

As societies locked down and social distancing became the norm, shoppers avoided brick-and-mortar stores. Naturally, they turned to online shopping to meet their consumption needs. At the same time, the economy as a whole gained steam during the post-2020 resurgence. 

Amazon businesses boomed during this time. Sensing an opportunity, investors went on a buying spree, purchasing Amazon businesses left and right. Amazon aggregators were well-positioned to take advantage of the situation. Buoyed by recent large infusions of investor money, Amazon aggregator firms led the charge, buying small Amazon businesses at unprecedented rates. 

For a seller, the increased business revenues and the large pool of hungry buyers were a dream come true. Valuations soared, offers poured in, and deals often progressed quicker than was the previous norm. As a result, 2021 was an unprecedented year for Amazon business owners looking to sell their businesses. 

What went wrong for Amazon aggregators

The conditions that created a booming Amazon industry and gave rise to Amazon aggregators did not prove durable, however. As societies reopened more fully in 2022, consumer behavior shifted again. Shoppers returned to brick-and-mortar stores, and ecommerce business receded slightly. Despite the shift towards in-person shopping, however, the ecommerce industry maintained higher demand than pre-pandemic levels. 

These changing patterns created ripple effects throughout the Amazon industry. Falling revenues reduced profitability across the board. At the same time, new entrants into the Amazon space created heightened competition. This drove up the cost of marketing, further reducing profitability. Additionally, Amazon seller fees increased by more than 30 percent since 2020, increasing costs and dropping profits even more. 

This confluence of strong headwinds led to business profits falling below expectations for aggregator firms. In order to stay afloat, many firms chose to lay off large numbers of employees to reduce costs. Aggregator mergers have also taken place in order to consolidate assets and reduce costs. 

Given the sharp decline in aggregator profitability, investors have stayed away. Aggregator investments totaled $728 million in 2022, compared with the 2021 high of over $6 billion. This trend has continued in 2023, with only $68 million invested through the end of May. 

As aggregator firms have felt the pinch, they have dramatically scaled back the number of Amazon businesses they buy. Their retreat has naturally caused ripples throughout the Amazon industry. 

What You Need to Know to Successfully Sell Your Amazon Business in the Post-Amazon Aggregator Boom

The rise and fall of Amazon aggregator firms over the last several years has caused far-reaching changes in the market for Amazon businesses. As a seller, it is crucial to understand the implications this carries for your planned exit. 

Amazon business valuation in 2023

Consumer and market trends have led to falling valuations for Amazon businesses in 2023 compared to 2021 and early 2022. At the same time, the retreat of Amazon aggregator firms has removed a key player in the buying space, reducing demand for Amazon businesses. This reduced demand puts further downward pressure on business valuations. 

“While valuations and demand have decreased, it is still possible to achieve a successful exit for your Amazon business.”

The Amazon business boom of 2021 naturally led to new business formation within the industry. As competition increased, PPC advertising costs rose. This was captured by rising ACoS and TACoS, as we cover in some of our other recent articles. Rising advertising costs squeezed profits, lowering valuations across the board. 

While valuations and demand have decreased, it is still possible to achieve a successful and profitable exit for your Amazon business.

Who Is Buying Amazon Businesses in 2023?

You may be wondering who you can sell your Amazon brand to now that aggregators have declined to such a large degree. However, even at the height of the aggregator boom, they only represented about 30 percent of the buying market. While this represents a significant portion of buying demand, there are still a number of potential buyers available. These include:

• Individuals and partnerships
• Private equity groups
• Other businesses

“Even at the height of the aggregator boom, they only represented about 30 percent of the buying market.”

Individuals and partnerships

Regardless of recent market corrections, selling on Amazon can still be a highly profitable endeavor. There are many individuals or partnerships who are looking to own and run Amazon brands for a number of reasons. These could include:

• Creating a side income
• Replacing a primary income
• Growing and selling for a large payout
• More work and life freedom

Many of these individuals prefer to skip the work associated with starting an Amazon brand from scratch by buying an established company. Often, these buyers are only looking to purchase a single business. Some individuals or partners, however, aim to purchase a number of businesses as part of an investment portfolio. 

While these deals usually fall below the $2.5 million range, they can be up to $5 million. 

Private equity groups

Private equity groups often function as smaller aggregator firms. They mobilize private money in order to buy, grow, and sell businesses as an investment strategy. Compared to individuals, private equity groups tend to look for larger businesses, ranging anywhere from $2.5 million to $10 million or more. 

Private equity firms often look for deals where the seller maintains some equity in the business after the sale while maintaining involvement in operations. The experience and knowledge of the seller help the business continue to grow into the future. As a seller, you must decide whether this is something that appeals to you or not. 

Strategic buyers and other businesses

Many buyers buy Amazon businesses with the goal of realizing a strong ROI (return on investment). They view the purchase as an investment. However, some buyers make purchases for strategic reasons. 

For example, a business in an adjacent or complementary market may want to expand into the market that you occupy. Instead of starting their own product lines in that market, they may be interested in simply purchasing your business and folding it into their company. This creates a whole pool of buyers who may be interested in your business for strategic purposes.

Four Things You Need to Know to Navigate a Successful Amazon Exit

External market conditions clearly play a role when it comes to selling your Amazon business. However, it is important to distinguish between what you can and can’t control and focus on the things you do have power over. 

Now is still a great time to sell

While 2021 may have been an unprecedented time to sell an Amazon business, now is still a great time to sell. Valuations and multiples have decreased from their 2021 highs, but they remain on par with historic standards.

The confluence of factors necessary to create the highs of 2021 are not likely to return anytime soon, if ever. Waiting for them to return before selling your business is a losing game. Instead, time your sale in accordance with your own professional and personal needs. 

There is always a market for strong businesses

Strong and profitable businesses will always find interested buyers. Instead of waiting for external conditions to magically go back to where they were several years ago, focus on what you can control within your own business. Drive growth, clean up your documentation, minimize risk, and increase your transferability in order to increase the value of your business prior to selling. 

Know how to position your business correctly

In this competitive market, it is important for you to help your business stand out from others on the market in order to attract interested buyers. Identify opportunities for future improvement, and communicate those opportunities to interested parties. Growth-minded buyers will take note and recognize the value your business brings to the table. 

Find an experienced Advisor and get a valuation

Selling your Amazon business can be a challenging experience. Many owners decide to work with a qualified business Advisor in order to successfully navigate the process. 

The right Advisor will provide you with an accurate valuation of your business and help you learn how to adequately prepare your company before listing it. When it does come time to sell, they can help you navigate the selling process, from listing and negotiating with buyers to closing the deal and transferring assets.