A better business model than yesterday’s hype around picking up Amazon-based businesses?
Seeing the FBA-based merchant market heating up strongly in 2021 up to capital raised of nearly $9 billion, no one would have expected the business model to conflict. As so often, after a massive boom follows a bust, and Amazon-based aggregators find themselves exposed to macroeconomic problems such as inflation and rising interest rates but even more to the issues of adjusting M&A strategies and the need to focus on the integration of the brands.
A new Era of Aggregators
In this context, a new Era of aggregators found its niche building Shopify-based storefronts mainly enhancing the advantage in volume of data that one can get. While Amazon provides product and order data, they also ultimately own the relationship with the customer. Shopify-based aggregators underline the strength of the Insights they get into the fundamentals of who their customers really are – and that makes the difference. Being able to precisely know the customer, it is much more likely to correctly evaluate the business and even help to improve operations. Since Amazon already provides great support with supply chain and logistics, Shopify-based aggregators can help the business improve their operations. Moreover, Shopify businesses exist independently of third-party marketplaces where plenty of buyers see the potential. The weaknesses that DTC businesses trading via Shopify have, are considered as potentials for the aggregators. This includes the not ideal use of services and platforms in sectors like marketing or inventory, that leave a lot of space for Buyers to create value. These “new” incarnations of aggregators underline even more the necessity on relying on technology to solve structural issues while making strong use of client data and software.
To exploit the full potential
Independently if you find yourself on the seller or buyer side you might want to consider looking across platforms and exploit the full potential by either achieving a higher exit multiple or getting the much more lucrative reward from operating a true DTC brand. Finally, the rise of Shopify represents an opportunity for both seller and buyer.