FBA acquisitions are the new gold rush. Investors are pouring money into aggregators like Thrasio, who have acquired FBA businesses at an astonishing rate. These aggregators are diving headfirst into the market, bringing ample funding with them to acquire FBA brands and accelerate their growth.
It’s easy to see why so many investors are jumping on this bandwagon. With the growth of Amazon FBA businesses and the aggregators who acquire them, there is an opportunity for incredible gains. With such growth in the industry in just a short time, there is high demand for experienced talent.
This article will explore the demand for talent, how it is impacting the market, who’s leading the way, and what this looks like for the future of the FBA space.
What Is An Amazon FBA Business & Why the Goldrush?
E-commerce is on an undeniably upward trajectory, thanks in part to the COVID-19 pandemic. In the second quarter of 2021, eCommerce sales totaled $211.7 billion—an increase over the second quarter of 2020, when eCommerce sales reached an unprecedented $200 billion at the height of the pandemic. With the pandemic continuing to rage on and shoppers becoming ever more accustomed to the convenience of online shopping, this number is expected to continue to grow.
An Amazon FBA business is an e-commerce company that uses Amazon’s fulfillment services to sell its products. These FBA businesses are typically small, ranging from a sole entrepreneur to a 5 person business, on average. Despite their size, however, third-party sellers are making a huge impact on the market.
For the savvy small business owner, selling a successful store to an aggregator can prove even more lucrative than running one. Take, for example, the aggregator start-up Thrasio which disrupted the eCommerce space when they opened their doors in 2018.
The high quantity of Amazon FBA businesses available to be purchased at attractive multiples with high-profit margins has spiked the rise of Amazon Aggregators. There is a lot of money to be made for savvy investors, who have complete control over growing the business from day one. It’s more predictable, resulting in an influx of capital with huge growth potential. Aggregators like this kind of predictability, and typically get a much higher ROI than other more traditional investments. Co-founded by Carlos Cashman and Josh Silberstein, Thrasio is now the largest e-commerce aggregator globally. Touting “over $600M paid for more than 150 acquisitions,” they are leading the space as the fastest-growing acquirer of FBA businesses. The startup now has $3.4B of funding as of the most recent Oct 2021 fundraising round
Over the past two years alone, dozens of aggregators have raised billions to acquire eCommerce businesses. Noteworthy aggregators include SellerX, Perch, Unybrands, and Heyday, all of whom have raised hundreds of millions of dollars in capital each.
So what does this mean for the exploding eCommerce industry?
Aggregates from around the globe are acquiring third-party businesses constantly, and this is a game-changer for the demand for talent in and around the eCommerce space. The rocket-ship growth of eCommerce, together with easy access to low-cost capital, is giving a significant push to the industry, creating an enormous demand for talent to sustain such massive operations.
The Growing Demand for Talent
Aggregators aren’t just buying and maintaining operations of these FBA businesses. Aggregators have high amounts of capital to take a brand and grow it exponentially. There are often low-hanging opportunities to grow the business through supply chain cost improvements, channel expansion, product optimizations, and more.
With an ever-increasing number of sellers in the eCommerce space, the talent behind the business is ever-more important. Acquired brands have to maintain or increase market share and this requires experienced operators, consultants, and service providers; to bring their marketing, customer service, and brand management skills to the table.
One of the early players in the service provider industry for FBA aggregators is Erick Rodriguez, a business executive and serial eCommerce entrepreneur who has been with Thrasio since its founding. As Carlos Cashman, CEO of Thrasio stated: “We credit Erick with introducing us to selling on Amazon.com in the very early days and with training members of our original senior team as we developed the business model, formed the team and fueled the growth. Erick was instrumental in that time period with knowledge and introductions in the Amazon ecosystem. He then went on to build our amazing Philippines operation into one of the best-reviewed employers with over 250 great people working there. He’s a rock star, period.”
As a long-time e-commerce operator, Erick knew that there would be a distinct opportunity to provide services to the booming e-commerce industry. In essence, selling pickaxes and shovels to the gold-miners.
Erick has been running his own eCommerce stores for 12 years now until he decided to found Virtuous Graphics a conversion optimization agency in 2015 which was eventually bought by Alpha Rock Capital in 2019. Erick would subsequently found Amz-AllStars in March of 2019, positioning itself as a best-in-class service provider to the needs of Thrasio, offering services across customer service, brand management, and finance for Thrasio.
A thought leader and early player in the FBA acquisition space, Rodriguez recruited leaders from companies like Accenture and Google to create an industry-leading brand. Based in the Philippines, Amz-Allstars has grown to a 270+ person company in just over 2.5 years. The award-winning start-up was also accredited as a Great Place to Work in the Philippines.
As Erick Rodriguez demonstrates, the demand for service providers, consultants, and agencies in the FBA space has never been stronger. For entrepreneurs who want to use their talent to drive growth for third-party sellers and aggregators, the sky seems to be the limit.
When asked about the key to rapidly build a quality company like Amz-AllStars at scale, Erick believes it’s all about the team you choose. “It’s all about selecting early hires with
good track records, laying out a foundation to support quality at scale, and investing in our people empowering them to think and act like leaders vs employees,” he said.
This demand will continue as e-commerce continues on this upward trend, with more eCommerce sellers seeking out their “pay-day” by selling their company to consolidators.
Looking forward: How Long Can the Gold Rush Last?
Historically, gold rushes in any industry are typically short-lived. That begs the question: is it too late for new players entering the market to get in the game?
Probably not any time soon, by all indications. Although the number of buyers is increasing, so is the number of sellers. Nearly 300,000 new sellers have joined Amazon’s vast ecosystem in 2021 alone. That leaves plenty of potential for aggregates who are serious about expanding their investment portfolios with third-party Amazon companies.
Even when a business has plateaued in the hands of a previous owner, savvy operators can drive further growth through supply chain cost improvements, channel expansion, product supplementation, product optimizations, and more. In sum, behind this industry will remain an ever-increasing need for talent to sustain, and expand business growth.
Given current trends and future projections, it remains a great time for investors, third-party sellers, and the service industries that fuel growth to enter into the market.