Author | Liu Yujie
Edit | Shi Yaqiong, Wang and Tong
In May 2021, under a flat thunder from Amazon, the entire cross-border e-commerce industry struggled to brake and fell into a brief silence.
Cross-border e-commerce SaaS, as the hottest sector in the enterprise service market, has changed from a steady rise to a bet. In the crisis of Amazon's suspension and the removal of explosive models, the existing brand assets are waiting to be sold, coinciding with the idea of capital "freezing point entry".
The prosperity of the merger and acquisition service market often indicates that the growth bottleneck of a long-tail market in an industry is becoming more and more significant, the momentum of head players is strong, and there is still sufficient value for new players, but the path of scale expansion and upward impact has gradually solidified, and the power from the primary market has cooled back.
The capital and services industry is trying to reawaken e-commerce's inclusiveness towards up-and-coming stars. Under all the thinking and exploration of new models, the "Procter & Gamble model", which has not been formed for a long time due to the good profit margin momentum of independent e-commerce sellers, has once again been put on the agenda of the retail market.
This category of entrants is known as Amazon Aggregator, and Marketplace Pulse data shows that Amazon aggregators with "acquisition + operation" as their main business model have raised more than $13 billion globally.
This number is put into any early track and will look the same.
36 Kr mapping
A guide to self-help for small and medium-sized sellers under battle royale
In the era of mobile Internet, there is a type of survival game called iO, and one of the representative works is ball and ball combat. The biggest feature of iO games is "aggregation" and winner-take-all, new players move the fastest, can get more resources, and because they do not yet have the qualifications to "join the battle", it is easy to grow into medium players. After reaching a certain scale, how to develop in the "escape" has become an extremely testing operation ability.
The growth ideas of e-commerce sellers are extremely similar.
First of all, the epidemic has brought a decade-old wave of industry to e-commerce. Statistic data shows that in the third quarter of 2021, amazon third-party sellers accounted for 56% of the transaction volume. U.S. e-commerce penetration soared from 14.3% before the epidemic to 21.3%, while China's cross-border e-commerce, as the leading industry in going overseas, accounted for 70% of Amazon's new 290,000 new sellers in the first half of 2021.
For Chinese cross-border sellers, the double days of ice and fire in just one year are not only fueled by Amazon's platform policy, but also an inevitable trend after the end of the stage of barbaric growth of the e-commerce industry.
The temptations and dangers of the global market can be seen from the age of great navigation. Taking Chinese e-commerce sellers as an example, often after occupying a certain share of the local market segment, in order to break through the growth bottleneck, using the advantages of supply chain and logistics, with a certain amount of capital and experience accumulation, the new growth curve is aimed at cross-border business. But under the temptation of high market penetration, the cake is not endlessly divided. Large e-commerce brands such as Anker escaped the wisdom pig game with faster jumping speed, and as a small and medium-sized cross-border seller, facing the next growth crisis is only a matter of time and volume.
Crises are caused by many reasons. One of the most important reasons is not the obstacles set by Amazon, but the more complex consumer needs and localized and refined operational needs have exceeded the capabilities of most small and medium-sized sellers. Amazon's complex security rules and advertising mechanisms are certainly confusing for most cross-border merchants, but even if they flee Amazon and choose multi-platform delivery, private domain traffic, DTC (Direct To Customer) and other methods to save themselves, they will only have higher requirements for operational capabilities.
Under the current production and distribution system, this kind of constraint from funds and professional teams, e-commerce SaaS services are not enough to completely solve. Even if everyone in the stock era has understood the importance of "cost reduction and efficiency increase" and "data-driven", in a fierce competitive environment, expansion means greater input risk, while stagnation is equivalent to a gradual decline in profit margins.
It is precisely under the vision of sellers' self-help needs and brand breakthroughs that Amazon Aggregators bring "Bibel" from professional teams and investors to provide e-commerce sellers with a series of experiences, resources and solutions from market expansion, localization operation, inventory management, logistics and transportation to advertising strategies after completing the evaluation, negotiation and acquisition stages, which can greatly improve the viability and development potential of e-commerce brands.
The industry's most classic case comes from aggregation platform giant Thrasio, which generated $30 million in revenue last year after pet deodorant brand Angry Orange was acquired by Thrasio for $1.4 million.
Capital acquisition + brand operation, the golden island after the ebb tide in the first half
If the ups and downs of cross-border e-commerce are by far the largest survival game in the digital age, what Thrasio is doing is fully extracting the value of "brand" from the long intermission.
Three important reasons contributed to the rapid rise of Amazon's aggregation model:
Amazon's large number of suspensions and removals have led to development bottlenecks for Chinese cross-border sellers with the most growth potential on the platform;
Founded in 2018, Thrasio has been valued at $7.5 billion in just three years, with a single round of financing of more than $1 billion, becoming the well-deserved "giant shoulder" of Amazon's aggregation track;
Anker went public, unveiling the golden age of Amazon's third-party brands.
The re-dismantling and integration of "global cross-border" and the division by regional market is one of the operational ideas of brand aggregators. At present, the core market of Amazon aggregators is still in the United States, and a certain business scale and ecology have been formed in Germany, India, the United Kingdom, Mexico and other regions.
In the domestic market, the first Amazon aggregator Nebula Brands completed a $50 million Series B round of financing in December, led by L Catterton, a globally renowned organization focused on the consumer industry, and the amount of financing was used to continue to acquire Chinese brands on Amazon.
It is worth mentioning that Amazon aggregators in China are still in the incubation stage, but there are not a few aggregators who use Chinese sellers as the main customer group. For example, Thrasio entered the Chinese market with a high profile in the first half of this year, clearly targeting Amazon Chinese sellers with high growth potential. For example, Markai, an aggregator focused on acquiring Chinese cross-border e-commerce brands, has also completed a $10 million seed round in November this year, and the founding team is set across the two markets of China and the United States. In the first half of 2022, it is foreseeable that the outlet for the acquisition of Chinese e-commerce sellers will flow back from overseas to the domestic market, and the leading manufacturers in the service industry represented by cross-border ERP may also carry out transformation and strategic investment, forming a new business model with a more comprehensive service chain.
The nature of the "aggregation effect"
Just like playing Tetris, the logic of resource integration is tightly seamless, but the process and direction are flexible and highly personalized. The dimension of brand acquisition aggregation comes from the team long board of each acquirer, and the main differentiating directions are:
Aggregation of target markets. As mentioned above, for Amazon aggregators, the establishment of headquarters and offices represents the recognition of the potential of Amazon e-commerce sellers in the region and the ambition of the team, and the regional operation ability is undoubtedly the most important value lever at present.
Aggregation of brand volume. According to Fortia Group, about half of aggregators currently spend $2-5 million on individual brand acquisitions, 24% of aggregators have an average transaction value of less than $1 million, and 5% of aggregators currently spend more than $5 million per transaction. With the passage of time and the maturity of the industry, the proportion of transactions with a single expenditure of less than $1 million will gradually decrease, and medium-sized sellers with a valuation of more than $5 million will be favored. In terms of acquisition size, according to the survey, 25% of Amazon aggregators said that they expect to complete more than 40 transactions in 2022. 20% of aggregators expect to close around 20 deals, and only 10% expect to have less than 5 deals in the full year.
Aggregation of target areas. From the perspective of product categories, there are already some e-commerce vertical categories that have been more widely favored by acquirers. According to the Fortia Group, 72% of aggregators tend to acquire e-commerce brands in the direction of home care, 69% are optimistic about sports and fitness, and 66% of aggregators are looking at outdoor scenes. The surprising conclusion is that Amazon aggregators are moving away from the well-known brand categories of clothing, food, electronics, and so on. This means that, unlike service industries such as e-commerce SaaS, Amazon aggregators are more willing to invest in high-margin products that generate long-term returns, and try to avoid products with short life cycles. According to the Fortunet survey, 52% of aggregators do not consider buying a clothing brand at all.
From the perspective of acquisition logic, the most important purpose of brand aggregators is not to make a profit, but to focus on incubating high-quality brands into "large enterprises" with multiple returns on investment, so that they can develop DTC businesses with high value density in different markets outside of Amazon. Therefore, in terms of the current e-commerce environment, Amazon's perfect ecosystem and huge international customer base can provide a solid foundation for aggregators to expand on a large scale.
In addition, brand aggregators tend to pursue reliable net profits and profit margins, sellers' FBA (Amazon fulfillment) status, etc., the data shows that 200,000 annual net profits and 10-15% profit margins will be the main target of Amazon aggregators at the moment.
According to the amount of financing, Amazon aggregators can currently be roughly divided into the following three gradients:
Operations are king, looking for winners in the bubble
On top of the new outlet, the mixture of fish and dragons will often become the norm in the industry. E-commerce sellers are starting to pay attention to the traffic value of different platforms, brand buyers "won't put eggs in the same basket", and capital is doing the same thing.
Although in terms of brand acquisition efficiency, business expansion speed and financing frequency, the current active aggregators in the market have given positive answers.
In the past six months, there have been dozens of disclosed financing incidents in the Amazon aggregator track. According to Marketplace Pulse, of the 89 currently active Amazon aggregators, 46 have announced funding, with 29 raising more than $100 million.
But whether the strong confidence of tens of billions of dollars really points to a bright future is still impossible to effectively judge at this moment. In the early stage of industry development, short-sighted harvesters and chaotic ecology coexisted under the pattern and light of "one super and many new", and most practitioners were "mediocre". While Thrasio has managed to create a growth miracle for the brands it acquires, most aggregators don't yet have the resources and talent pools mature enough to improve profit margins at the rate they promise to investors and brands.
When creating core barriers, emerging Amazon aggregators emphasize more of the advantages of this business model and the background of the core team. In the future, the catalyst of market education will lead to rapid mergers between acquirers. On the other hand, although the vast majority of aggregators also attach equal importance to the underlying technology and data capabilities, in the early stage of industry development, the weak barriers formed by technology are far less attractive to capital than the identity of regional "pioneers" and effective assessment methods.
However, from the perspective of long-term value, the vision of acquisition is only the first link, and even in the next two years, there may be a seller's market trend such as an e-commerce brand being competed by multiple aggregators, and more segmented matching platforms and intermediaries appear. Under this premise, continuous operational capabilities are the key factors for aggregators to stand out.
The short-term risks and long-term hidden dangers of e-commerce sellers' excessive dependence on large platforms such as Amazon have been highlighted in this year's "double days of ice and fire" in the field of cross-border services. Now, tens of billions of dollars are being re-injected into the new battlefield, and the timely rescue of Amazon aggregators has taken advantage of the time and place in front of the wide road explored by Thrasio, but also hidden mysteries.
On the one hand, the acquisition of the brand does not mean that it has landed on Noah's Ark. Under the diversified operational decision, if some e-commerce aggregators do not complete the complex challenges from international business, many potential brands will face death because they mistakenly chose the acquirer. Under the probabilistic value of this "double choice" between brands and aggregators, perhaps there are still many detours to be taken by capital, and the new e-commerce service business model will also be eager to try.
On the other hand, the current stage of the e-commerce aggregation platform is only a temporary phenomenon under the cold and "exit tide" of cross-border e-commerce, which represents the needs and pain points of e-commerce sellers in an era cycle, but from the perspective of long-term development, capital can only create gods, not create market demand out of thin air.
At present, the ceiling of this track is completely entrusted to the hands of small and medium-sized e-commerce sellers, only if the e-commerce industry maintains sufficient vitality, and a steady stream of small and medium-sized sellers can maintain high growth in the early stage of development, we can witness the real outbreak of "Thrasio" in the next three to five years.