Wen | Pan Xiaoyu
Editor| Peng Xiaoqiu
Recently, Amazon store aggregation platform BBG (Berlin Brands Group) announced that it will withdraw from the Chinese market. 36Kr learned from insiders that the withdrawal from the Chinese market was due to the poor management of its German headquarters.
In the emerging track of Amazon Aggregator, BBG is not small. Of the 89 active Amazon store acquirers, 46 have announced financing, 29 of which have raised more than $100 million, according to Marketplace Pulse data. So far, BBG has received a total of $1.3 billion in financing, rushing into the top five in the industry.
The first hints of Amazon's store aggregation model began in 2018, especially with the rise of Thrasio. Today, this track has attracted hundreds of billions of yuan inflow in three years, and has run out of two unicorn companies.
Since the epidemic, with the popularity of domestic cross-border e-commerce, a large number of overseas store aggregators have poured into the Chinese market in early 2021. According to FBAFlipper, as many as 32 Chinese stores were successfully acquired last year.
In such a rapid influx of capital, BBG is more special. Founded in 2005, BBG was already a seller before doing this business, and owns four major brands: KLARSTEIN (kitchen appliances), auna (household appliances and sound equipment), CAPITAL SPORTS (sports and fitness) and Blumfeldt (gardening supplies).
BBG's warehouse
If the ultimate form of Amazon's store aggregation model is seen as building an online Unilever or Procter & Gamble, then BBG was once regarded as the most likely one to achieve. Unlike other teams with financial backgrounds, BBG has been an e-commerce seller for more than a decade before becoming a store aggregator.
However, BBG's withdrawal from the Chinese market this time has long been traced.
Part 1: Risks
An insider close to BBG told 36Kr that since entering the Chinese market in April 2021, BBG has not successfully acquired stores in China. The reason why it is difficult to achieve the transaction is that on the one hand, foreign sellers do not have a high understanding of China's cross-border e-commerce; on the other hand, there are not many domestic cross-border e-commerce games.
Under great risk, even the most tempting cake needs to be handled with caution. The risk of store aggregators first comes from the acquired target - Amazon stores.
This has to be analyzed from the business model of this track, the business model of Amazon store aggregation is actually very simple, by acquiring an Amazon store after acquiring an Amazon store for independent operation at a price of 3 to 5 times the net profit of the seller last year. At the same time, aggregators also have to take over the resources, supply chains, etc. in the hands of sellers, but do not take over the original team.
Store aggregators expand their total assets by constantly acquiring stores. The value of this is that it can raise cheaper debt with larger assets. This also explains why hundreds of billions of yuan have been attracted in just three years, because most of the financing is bond financing.
Since the financing is debt, the payment method is also different from the ordinary financing process. According to industry insiders, the bond financing obtained by store aggregators will only hit the account when a decision is made to acquire stores. That is, for each store acquired, the investment institution lends out the debt at the corresponding price.
Store aggregation my acquisition process j
This also means that for store aggregators, every asset purchase needs to be careful. If the acquired store is at risk, then millions or even tens of millions of yuan invested in it may be lost. The latter round of financing also often depends on the performance of the previous acquired stores. Therefore, especially for newly established store owners, once the store has problems, it will face a huge risk of cash flow disruption.
It is precisely because of the huge risk that store aggregators usually make sufficient efforts in the due diligence process. Usually, due diligence will include several dimensions such as store data, financial data, and market conditions, and the time is generally around January to February.
Interestingly, though, most of the store aggregators are in the BD team in China, while the team responsible for due diligence, operations and final decision-making is still overseas. A seller once said that due diligence calls often come late at night, and sometimes only one call a week, the speed of advancement is slower, resulting in due diligence time is more than 2 months.
In the acquisition process, the due diligence team is overseas, and although the data is open, it is still difficult to control the potential risks. A person in charge of the China region of an aggregator once revealed that there was a store acquired by an aggregator that had a product provided by a supplier that was not the same as the seller's narrative.
In addition, the final decision-making power is overseas, and it is bound to face the situation of water and soil dissatisfaction. A broker (intermediary) told 36Kr that it is difficult for foreign sellers to understand the logic of domestic operations, so even if they pass the due diligence link, there will be transaction failures in the end.
And BBG is a typical representative of water and soil dissatisfaction.
Part 2: Retreat
Whether BBG's exit from the Chinese market will impact the cooling of the Chinese market is still unknown. But one thing is for sure, this year's acquisition will undoubtedly be more difficult than before.
The first is the category selected by the aggregator, and the subdivision category that is mainly concentrated in the categories of pets, personal care, home and other categories will be found by splitting the targets of several aggregators. In order to maintain natural growth, aggregators buy stores that are usually in the top positions below Amazon's category rankings. With the rapid influx of store aggregators last year, most of the stores in the market that can be sold have been acquired.
And even today, according to 36Kr observation, the store aggregators pouring into the Chinese market are still endless. Therefore, the imbalance of players becoming more and less expensive will become more and more obvious, and it will be difficult for the market to roll up or not.
Amazon Store Aggregator
Secondly, store aggregators rely on the purchase of Amazon stores to expand assets, then they will inevitably rely on the entire Amazon e-commerce environment.
Since the epidemic, cross-border e-commerce has ushered in a wave of dividends for online consumption, until last year's Amazon banned, cross-border e-commerce was driving in the fast lane of rapid development. Therefore, under the continuous rise of the cross-border market, each family has made a lot of money in it. Then the aggregators who entered the market last year must have obtained a high store price. After all, according to the previous year's profit to calculate the valuation, no matter how you look at it, the valuation is on the high side.
But again, the rapid growth of the epidemic is not the norm, and as overseas offline consumption gradually returns to normal, the total demand of the market will still return to the normal curve. Therefore, when supply and demand return to the normal point, compared with the previous two years, whether the seller's performance can be maintained at the highest point is still unknown.
On the one hand, the demand for e-commerce in overseas markets is no longer hot, on the other hand, the stockpiling since last year, as well as the goods that are still floating at sea, are still backlogged. For cross-border e-commerce, basically most of the cash flow is pressed on the goods. Therefore, the pressure to clear inventory will inevitably lead to low-price dumping.
The enthusiasm of the market will also be transmitted to the new entrants, once the market is cold, the new entrants are discouraged. Then the cross-border plate is also difficult to maintain the continuous surge in the past.
If the seller's performance does not reach the level of valuation, it means that the store aggregator needs more time to return the capital, and the test at this time is the patience of capital to accompany the run.
Third, the rise of store aggregators is inseparable from the release of water from the global central bank. So when the macro-economy changes, store aggregators will face the most immediate risk – when there are fewer banknotes in the market and capital is no longer fanatical, how much patience can there be for the capital game of store aggregators?
However, when cross-border business begins to become more difficult to do, and it is easy to sell shops in exchange for wealth freedom, it has indeed become a heartwarming exit path. Correspondingly, the test for store aggregators returns to the risk assessment level.
A consensus within the cross-border e-commerce industry is that it is difficult to do Amazon without brushing a single. So even if the number of sellers who want to exit increases, the potential risks for Chinese sellers are still there. Then the risk consideration for the account rises to amazon's algorithm mechanism, how much can it accommodate.
Part 3: Annexation
Amazon's store aggregation model has grown barbarically overseas, first of all, because of the boost of capital. If you look closely, you will find that in addition to Nebula Brands, an aggregator that Jingwei China has invested in China, most of the aggregators such as Thrasio, SellerX, and BBG are overseas institutions.
The fundamental reason is that relying on the model of store aggregation to do e-commerce is indeed feasible overseas. On the one hand, the overseas digital asset transaction process is relatively mature, "The store on Amazon as an electronic asset, when mortgaged overseas, banks and institutions will be more willing to borrow money." An aggregator head said.
Accumulated financing amount
On the other hand, overseas operations and due diligence links are closer to sellers, and relatively speaking, the degree of risk control is also higher. Even if the data performance of the purchased store is not good, the probability of a large loss caused by being banned is relatively low.
So is there really no chance in the Chinese market? Nor is the answer.
One possible conjecture is that there is an acquisition between aggregators. When a store aggregator acquires a certain store in China, it sells to a larger aggregator. The benefit of this is equivalent to two layers of risk filtering for the same Amazon store. If you put it on the sale of the overall assets, even if one of the stores has a problem, the loss to the acquirer will be reduced accordingly.
Moreover, at this stage, there is still a long way to go from the brand story shouted out by the store aggregators. For the institutions behind it, in addition to listing and realizing, the exit path is not a possibility in the acquisition and exit between each other.
Another acquisition model that may be suitable in the domestic market is the real synergy effect, that is, through the acquisition and investment of enterprises in the upstream and downstream of their own industrial chains, to achieve the synergy of the supply chain such as research and development and production. One example that is often taken up is: Anker Innovation.
Looking at the investment map of Anker Innovation, it is not difficult to find that most of the brands or stores it has acquired revolve around its own business and the upstream and downstream of the industrial chain. For example, the home furnishing sale that has been invested since 2018, the smart home Zhiyan Technology, which invested 40 million yuan in April last year, as well as zhirong technology in the field of 3C electronic accessories, the shared charging network company instpower, and the intelligent robot brand Youfei Intelligence.
Anker Innovation Part of the Outbound Investment Chart (Source Tianyancha)
For the consumer electronics category, in order to maintain a high level, it is indispensable to continue to innovate. Therefore, through investment or acquisition, to improve their own product line, is the fastest path visible to the naked eye. Moreover, the categories of invested enterprises can be grafted on the supply chain and manufacturing system of Anker Innovation, so as to shorten the research and development cycle, improve manufacturing, supply chain management, etc.
Such an investment path is, in fact, not uncommon, and the most typical representative is the Xiaomi ecological chain. With cross-border e-commerce also coming to the inflection point of the industry, traditional big sales such as Tongtuo, Aoji, etc., are also making up for the shortcomings of their own research and development iteration cycle through acquisitions, investments and other means.
If you look at it from the perspective of storytelling, supply chain collaboration is also the main banner of BBG's entry into the Chinese market. After all, starting from the seller and setting up a supply chain team in Hong Kong, being able to invest in the layout around its four major product lines is also the advantage of expanding the market scale.
Therefore, when the Amazon store in the Chinese market has undergone a screening and the market has become relatively centralized. For BBG, re-entering the Chinese market to acquire store aggregators may be a better option. But as for whether the BBG itself plays this calculation, it needs to let the bullet fly a little longer.