Amazon’s crackdown on aggregators puts an end to a billion-dollar bubble


Aggregators are companies that raise capital, usually debt, to buy successful small businesses that operate only on Amazon’s platform. They aim to leverage their data-driven approach and economies of scale to turn these businesses into thriving global brands. Some of the aggregators claim to be the next “Procter & Gamble” or “Unilever” of the e-commerce era.

The aggregator market emerged in the last four years and exploded during the Covid-19 pandemic, as online shopping surged and investors looked for new opportunities. According to Marketplace Pulse, a research firm that tracks e-commerce trends, there are currently 93 aggregators, of which 55 have announced fundraising rounds, and of which 31 have raised at least $100 million. Some of the most prominent aggregators include Thrasio, Perch, Heyday, Elevate Brands, and SellerX.

Amazon’s crackdown on aggregators puts an end to a billion-dollar bubble
Amazon’s crackdown on aggregators puts an end to a billion-dollar bubble

How did Amazon burst the bubble?

Amazon, however, is not a passive platform that allows aggregators to exploit its ecosystem. The e-commerce giant is a fierce competitor that constantly monitors the performance and behavior of its sellers and partners. Amazon has the power to suspend or terminate accounts, change policies, launch competing products, or acquire promising businesses.

Recently, Amazon has been cracking down on aggregators for violating its terms of service, such as manipulating reviews, engaging in unauthorized communications with customers, or using multiple seller accounts. One of the most prominent victims of Amazon’s enforcement actions was Benitago, an aggregator that raised $325 million in 2021 and declared bankruptcy in September 2023. Benitago’s downfall was a wake-up call for many other aggregators who realized that their business model was not sustainable or scalable without Amazon’s approval.

What are the implications and challenges for aggregators?

The end of the aggregator bubble does not mean that the aggregator market will disappear. There are still opportunities for aggregators to create value by acquiring and growing niche brands that cater to specific customer segments or needs. However, aggregators will have to face several challenges and adapt to a new reality.

First, aggregators will have to comply with Amazon’s rules and regulations, which may change at any time and without notice. They will have to invest more in quality control, customer service, and ethical practices to avoid penalties or bans from Amazon. They will also have to deal with increased competition from Amazon itself, which may launch its own private-label products or acquire successful sellers.

Second, aggregators will have to diversify their revenue streams and reduce their dependence on Amazon. They will have to explore other channels and platforms, such as Shopify, Walmart, or Target, or create their own websites and apps. They will also have to build their own brands and customer loyalty, rather than relying on Amazon’s traffic and trust.

Third, aggregators will have to justify their valuations and returns to their investors and lenders. They will have to demonstrate that they can generate consistent cash flow and profitability from their portfolio of brands. They will also have to show that they can exit their investments at attractive multiples or go public through traditional IPOs or SPACs.


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