The clients at this exclusive Las Vegas party come from a different world than you might expect. They're third-party merchants who sell on Amazon.
And the companies wooing them, aggregators, have rapidly become one of the hottest segments of the start-up world. More than 60 Amazon aggregators
have popped up in the last couple years, raising billions in big funding rounds to buy up small and medium businesses that sell on Amazon. Usually
aggregators take a brand over, buying out the entrepreneur who started it, sometimes for millions. Then they use large-scale software and marketing
solutions to try to boost the brand's sales. In July, aggregators flocked to the sixth annual Prosper Show in Las Vegas, looking to entice new
acquisitions at the popular conference for Amazon sellers.
People giving away a Tesla, just a lot of talk on the commissions if you're able to bring in a deal. To be honest, it's like the talk of the town.
I think if I graduated from college today and had to pick, should I go to Amazon or an aggregator, it would be maybe more likely to go to an
aggregator just because they have, they're doing all the things that you did at Amazon to be able to grow these sellers really quickly.
We went to the show floor to ask aggregators, sellers and former Amazon insiders, what's behind all this hype? Why now and whether the fad will
last?
By day, the Westgate Las Vegas filled up with thousands of Amazon sellers listening to presentations on how to succeed on the crowded marketplace.
Everything you do to grow your business.
By night, aggregators threw exclusive after parties. One sent cigar boxes to sellers' hotel rooms with secret keys to hidden bars. Another served
lobster, oysters and caviar. Another sent employees to wander the floor and hand out flyers advertising a free Tesla Model Y to anyone who refers a
seller it ends up buying. This is a big change from the last in-person prosper show in 2019, when the Amazon aggregator market was in its infancy.
Attendance this year was up 10% from 2019 and several of the biggest aggregators, Thrasio, Heyday and Perch, paid to have exhibitor space at the
show.
What's happening with the marketplace right now is very much about similar to that transition that went from brick and mortar to direct-to-consumer
brands. So it's where consumers are.
Amazon says its store has nearly 2 million small and medium-sized sellers generating more than $25 billion in profits in 2020 and accounting for more
than half the products sold. Amazon says third-party sales are growing faster than its own retail sales. So it's no surprise the number of
aggregators is booming too. There are now at least 69 Amazon aggregation companies based in at least a dozen countries, with a collective $7 billion
in capital raised just since April last year. Melissa Burdick spent 10 years at Amazon before starting an e-commerce advertising software
business, which is now used by some aggregators.
It's all about how do I move the flywheel as fast as possible and grow these brands? Question is, out of all 60 of these, like can they all
survive?
Micro brands have been taking share for a long time and I think it's getting to this tipping point where it's it's as a whole very big, but it's
amazing to me how Procter and Gamble, Unilever these big companies with lots of dollars to spend are losing share to these small entrepreneurs.
Aggregators give venture capitalists a foothold in the mom-and-pop world of Amazon sellers. In exchange, the sellers get to cash out and their brands
get access to far more resources. It's not unlike the age-old model of giants like Procter and Gamble gobbling up smaller companies, then using
financial prowess to dominate prime space on grocery shelves and TV ad slots. Perch and Thrasio are two of the biggest Amazon aggregators.
Having scale gives you better access to capital, technology, talent, different marketplaces, different channels and geographies.
We are sometimes taking brands that you know, maybe don't have that good of images or that good of product packaging or, you know, we're able to
improve product quality so slightly so that we can improve our review rating.
Aggregators tend to keep the original brand name and the loyal customers that come with it, growing that customer base and profits using their
larger marketing and data power.
We're not the next General Mills are Johnson and Johnson or Procter and Gamble. We don't believe that the brands we own need to be brought to you
by Heyday. These are brands that have stood on their own for a long time. They've generated very loyal customers, repeat rates. They've done a
fantastic job getting from zero to one and it's our job to get them from one to five, or 10, or whatever the number is.
To do this, aggregators develop software to streamline the intricacies of juggling dozens or even hundreds of brands.
A big part of how entrepreneurs hustle and how they go about their path to success is they monitor their listings hourly and they're constantly
watching competitors. And we can do all of that with technology. And a lot of times this technology doesn't make sense for a solo entrepreneur to
build, but it could make sense for us to build. It does make sense for us to build because we can deploy it across hundreds of brands.
In a statement, Amazon told CNBC the aggregator trend is an exciting opportunity for sellers that want liquidity and to exit the business for a
new adventure.
Post-sale with me, since selling, I fish more for sure, hang out with my wife more.
Some of the aggregators are buying talent and Amazon knowledge and giving them jobs etc. Some of them are holding them on. Others are just buying it
outright, giving them a big check and saying enjoy your time on the beach for the next six months.
Even relatively smaller players are raising big bucks, like Acquco, which raised more than $165 million, enough to commit to giving away $10 million
worth of Teslas for referrals. Meanwhile, Thrasio and Perch have reached unicorn status. But all this hype is very new.
When I first went out to fundraise for Perch, it was a difficult idea to fundraise for. A lot of investors were worried about the Amazon channel
risks. A lot of investors pushed me to go make a software solution instead of actually buying the brands,
Former Wayfair executive Chris Bell founded Perch in 2019. Now it's raised $900 million, and has more than 70 brands under its umbrella. So why did
the trend take off now?
So I think there's a confluence of Amazon's marketplace becoming more mature and kind of hardening, if you will, around the edges to make it more
trusted. And then the pandemic, and I think just a lot of people noticing that this was possible and coming after it.
Founded in 2018, Thrasio was an even earlier leader in the space. By 2021, CNBC ranked Thrasio 22nd on its Disruptor 50 list and it's now raised $1.75
billion.
Whenever a new asset class is born and someone reaches a unicorn status of a billion dollars, there's a flood into that market.
Even now I still think that there's a lot of growth and change in how the Amazon ecosystem works on the seller side.
Casey Gauss joined Thrasio in April 2020 as the 126th employee. Now it's got at least 930 employees just in the U.S.
The brands that we're acquiring, they don't have experts in literally, you know, every kind of field that we're able to, from SEO to copywriting and
creative. And so we're able to put all of these brands through this checklist and make sure that we're optimizing them far better than the
average seller can.
Thrasio runs each brand it acquires through a 503-point migration process to figure out needs like better keywords, images or influencer marketing.
One success story is a pet odor eliminator named Angry Orange.
We were able to completely revamp the branding behind Angry Orange. We had Snoop Dogg you know, do some some cameos for whatever. But the brand is
absolutely killing it.
Angry Orange is the fastest growing pet product on Amazon.
When Thrasio bought Angry Orange for $1.4 million in 2018, the four-year-old brand was making more than $2 million in annual revenue.
Thrasio says that's now up eight times to $16.5 million. Thrasio;s now acquired 125 brands.
I think it's hard to like get a home run on all 120 and that's probably their theory. Which is: out of 120, even if we get 80% or 60% it's okay.
It's really a kind of a numbers game.
Another aggregator strategy is to keep the number of acquisitions small. Heyday has acquired 16 brands, far fewer than Thrasio's 125 and Perch's 70.
Heyday's raised more than $250 million.
Simply because you have a lot of reviews doesn't necessarily, at least in our mind, mean you're going to be around for a very long time.
Chas Woodward, who joined Heyday after several years as an investment banker, says each seller acquisition had revenue over $1 million and the
potential to grow 10 times larger.
We're not looking to acquire 100 brands. We're looking to take our brands and 10x them. We think an attractive statistic is ability to identify,
underwrite, acquire, and then truly drive growth and improvement to the brands that already exists.
Do you have the eyeballs and the expertise to really grow those brands organically over time? Or do they start to fall off?
Some sellers like Stacey Renfro are trying out the model on an even smaller scale. Her brand mDesign did more than $250 million in sales last year
primarily on Amazon. It recently acquired its first seller, Wild Birds of Joy.
We do a lot in plastics and bins, and their company was primarily focused on bird feeders and hummingbird feeders and things like that. So for us, it
was a great way to start expanding our assortment more into the outdoors.
Renfro says mDesign is also the target of bigger aggregators that keep trying to acquire her brand.
There's so much happening in this space that I think to be conservative to say that once a week someone reaches out to us is probably being very
modest.
Aggregators, even those going for a big number of acquisitions, admit that selling on Amazon is tricky.
Having the technology and the process and the people to enable us to do 1,000 and 10,000 and 100,000 of these really, really well is big and it's
hard. This is not an easy business to run as all these sellers know.
One of the notoriously difficult things about the seller business is that Amazon constantly changes its rules, fees and protocols, something that
aggregators say they can help navigate.
Most of these brands are run by a solopreneur, one entrepreneur, and there's a lot of components to selling on Amazon. And as Amazon has
continued to grow and competition has become more sophisticated, the sheer number of things that you need to do in order to survive, let alone thrive
and be successful as an Amazon seller, continues to increase and become rather difficult.
Amazon's a behemoth, so to say that we're on speed dial with them would be overstating the case. But as you have scale, as you are doing more business
on the platform, I do think Amazon will lean in and understand that they can make the life easier for folks like us.
Amazon charges merchants between 8% - 15% per sale, plus a variety of other fees that have gone up significantly during the pandemic. In June,
Fulfilled by Amazon fees went up an average of 4.4% and cost-per-click ad sales are up 50% year-over-year. With the rise of aggregators who have far
deeper pockets and individual sellers, the cost of doing business on Amazon is likely to rise even more.
If you're a longtime amazon seller and you're doing a million dollars a year and you've been working really hard for a long time, you have an
opportunity now for a real exit. So on that side, it's good. My other concern from the seller side community is: are the costs of Amazon going to
rise even more? Because there's nearly 40 Amazon aggregators that have raised $100 million or more. And I think, sadly, the the answer to that is
probably yes.
Amazon told CNBC that it spent more than $18 billion last year on ways to help sellers grow, including logistics, programs, people, and 225 new tools
and services geared toward sellers.
There's so many negative things that everybody wants to say about the big bad Amazon, but you know, something that is really nice about them is they
do embrace the smaller third-party seller and the amount and the volume that continues to come from the smaller sellers continues to grow.
As for whether the aggregator boom will last, Amazon told CNBC in a statement, "We expect the majority of sellers and brands will remain
independent and continue to use our store for its scale and reach." But for now, as the trend continues, it's changing the fabric of what it means to
sell on the world's biggest e-commerce site and beyond.
There have been rumors that Thrasio is going to go public this year. And so I think there's going to be a handful of public companies called
aggregators and they were born buying up and aggregating these great sellers and these great brands.
Whether the VC continues to attract to it, that's a question because it's still such a new market that it needs to pay off.
I think we can be a multi-billion dollar revenue company and a publicly traded company that has a bunch of household names that people know and
trust that are everywhere you want to buy. And not just online, not just on Amazon, but through all the channels.