From Riches to Rags: Amazon Aggregators Teeter on Failure

Amazon has been a lucrative platform for many third-party sellers, with more than 2.5 million active sellers on its marketplace. However, the rise of Amazon Aggregators – companies that acquire and operate multiple Amazon sellers – has turned out to be a risky business. Many aggregators have recently come under scrutiny for their business practices, and some are even on the brink of collapse.

According to Marketplace Pulse, Amazon Aggregators have raised over $16 billion in funding since 2017. These companies acquire smaller Amazon businesses and consolidate them into larger portfolios, often promising better sales, increased efficiency, and enhanced brand recognition. Aggregators typically operate under the radar, and it’s not uncommon for sellers to receive a cold email or call from an aggregator offering to buy their business.

While many sellers see this as a great opportunity to cash in on their Amazon store, some aggregators have been accused of aggressive tactics, like low-balling offers or threatening sellers with suspension if they don’t agree to the deal. Additionally, once the aggregators take over the businesses, sellers lose control over their stores, and their branding and products are often assimilated into the aggregator’s portfolio, losing their uniqueness.

The risks associated with Amazon aggregators have recently come to light. For example, Washington-based company Thrasio, one of the largest Amazon aggregators, has been accused of violating seller agreements, infringing on intellectual property rights, and engaging in anti-competitive practices. In April 2021, former employees at Thrasio launched a website accusing the company of “toxic behavior and unethical practices.”

Another aggregator, Perch, recently laid off 20% of its workforce, and Elevate Brands, another major player, has reportedly experienced a sharp drop in sales. The collapse of some of these companies could leave thousands of small Amazon sellers without a platform to sell their products and potentially bankrupt.

So, what’s causing the downfall of Amazon aggregators? For starters, the marketplace is getting more competitive. As more businesses move online, Amazon is attracting new sellers, making it harder for aggregators to acquire and grow their portfolios. Additionally, Amazon’s own brand is becoming more dominant, with the company launching a slew of private-label brands that compete with the products sold by the aggregators. The pandemic has also accelerated e-commerce, with more retailers setting up online shops, putting even more pressure on Amazon sellers.

The scrutiny that Amazon aggregators are facing is not just limited to their business practices. Some experts warn that aggregators may not have the expertise or resources to handle the supply chain and logistical challenges of running multiple businesses. Additionally, sellers who were once happy to take the aggregator’s cash are now realizing that they could have achieved greater long-term success by running their businesses themselves or selling to a strategic partner.

As the risks associated with Amazon aggregators become more apparent, some sellers are taking matters into their own hands. Many are opting to sell their businesses to private equity firms or holding out for better offers from more established companies. Others are taking a more entrepreneurial approach, launching their own brands and building their own e-commerce platforms.

In conclusion, Amazon aggregators were once hailed as the future of e-commerce. Still, their recent struggles suggest that their business model may be unsustainable. As the competition on Amazon intensifies, and the risks of selling to aggregators become more apparent, it’s clear that some sellers are better off striking out on their own. Ultimately, the downfall of Amazon aggregators could provide an opportunity for more creative and entrepreneurial sellers to thrive.