Amazon FBA Acquirers : The State of Art in Consumer Goods

Amazon FBA Acquirers : The State of Art in Consumer Goods

Lately, Amazon FBA acquirers have grown like bamboos investing almost $3 billion to buy up Amazon third-party sellers in the hopes of becoming the next Procter & Gamble or Unilever.

What is an FBA business?

For short, fulfilment by Amazon, or FBA, is an Amazon program that allows third-party sellers to offload most of their warehouse operations to Amazon for an extra fee. One estimate puts the number of third-party sellers on Amazon at around 5 million, with nearly all sellers using FBA (92%). This number appears to be growing exponentially at the moment, with more than 1 million sellers joining the platform the previous year. Achieving more than $200 bn in sales last year, FBA businesses are now responsible for more than half of Amazon’s total sales - as shown below - and have drawn a lot of attention from investors known as FBA Acquirers.

Amazon's percentage of sales from third-party sellers

Who are the FBA Acquirers?

FBA acquirers are digital consumer goods companies that acquire, develop and operate FBA businesses. With already 50 confirmed intuitional private equity acquirers, investors have poured almost $1 billion into buying up small merchants on Amazon last year. One of those institutions is Thrasio, founded in 2018 in Walpole, Massachusetts. Since then, Thrasio has been growing exponentially, becoming one of the largest FBA acquirers. In a matter of only two years, Thrasio has received a total of $1.6 billion in funding, hired 700 employees, and bought up to a hundred brands in its portfolio. The company is used to moving fast. On an average of 35 days, Thrasio can contact lucrative brands, exert a fair valuation based on value metrics, and offer between two to four times net profits plus salary (inventory to be determined) to purchase a brand.

FBA acquirers
FBA acquirers part 2
FBA Acquirers part 3

Why buy FBA Businesses?

FBA acquirers are growing incredibly fast, aspiring to revolutionize the consumer goods industry. While the brick-and-mortar multinationals, such as P&G or L’Oréal, undergo massive digital transformations, underdogs companies, such as Thrasio or  Heyday, chose to purchase FBA businesses. Their strategy is to develop a portfolio of small digitally native third-party private-label sellers destined to become eCommerce successes. According to industry experts, thirty thousand small FBA businesses, with revenue of more than $1 million a year, could be potentially purchased, so roughly a total addressable market of at least $30 billons. After the sale, FBA acquirers deploy considerable resources, technologies, and expertise in order to quickly scale the brand that would otherwise have most likely failed to do so alone.

What's next?

While the amounts invested into FBA businesses are colossal, almost $3 Billion, it is still relatively small compared to the potential market size. Therefore, we predict that there is room for growth and other FBA businesses' acquirers to enter the market.

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Hugo & Tarik
April 10, 2024
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