MGR eCommerce Edge Weekly | November 18, 2020
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Amazon Warehouse - MGR Blog

Amazon Selling is Heating Up, Investors Flooding In 

VC’s aren’t just throwing money at DTC brands, they’re now diving into the world of Amazon sellers too.

These VC’s are investing in what essentially acquisition vehicles, companies that look for products and brands on Amazon that are doing well but could be improved, and acquiring them in an effort to build a wide portfolio. The acquisitions are typically in the high six-figure to low millions range, and many investors are jumping in after the model proved successful for Thrasio, who started in 2018.

The pandemic has only helped push this business model even further. With customers now buying goods significantly more online, Amazon has picked up a huge chunk of that new eCommerce revenue.

There of course is risk for these acquisition companies. Amazon is an unpredictable marketplace both in terms of what Amazon itself may or may not do, and the endless list of competitors. Most of these Amazon businesses are being acquired for 3-5x net profits. Meaning the acquirers are expecting them to hold their current revenue and grow for many years to come, which for anyone who’s sold on Amazon knows that that’s anything but a guarantee.

The real question is what this will do to the broader Amazon landscape. Amazon can often be a race to the bottom, and those with the largest volume who are willing to reduce their margins win.

Other Notable Links:

1. Shopify’s quest for cultural domination begins now – HERO

2. 5 DTC brands to watch – RETAIL DIVE

3. How BMW, Porsche, and other car makers and collabing with fashion brands to drive sales – WWD