Amazon “roll up” companies are raking in billions of investment

Hundreds of Amazon marketplace brands are being swooped up by UK ecommerce companies despite the slowdown in ecommerce growth.

By the end of 2020, Massachusetts-based Thrasio raised over $1 billion to acquire Amazon’s most successful independent merchants on its marketplace.

Fast forward nine months and now dozens of Amazon “roll-up” companies have raised over $8 billion to date between them, according to the Financial Times.

Analysts believe that out of all the independent merchants that make up Amazon’s marketplace, tens of thousands will have revenues of more than $1 million annually.

Earlier this week, three Amazon-focused companies in Europe announced they had raised a combined total of $1 billion in a single day.

New York-based investment firm Upper90’s chief executive Billy Libby believes that there will be massive consolidation of online companies similar to that which has been seen on the high street.

“We think that same phenomenon will take place in the digital world, I don’t think people realise how big this will be,” he said.

According to figures from Marketplace Pulse, the Amazon marketplace generated $300 billion in sales last year, with shops selling everything from cooking appliances to toys.

READ MORE: Etsy is now the 2nd most popular marketplace after Amazon

While there is a scramble to consolidate these marketplace brands after the raging success of ecommerce during the early stages of the pandemic, growth in the sector has slowed as physical retail reopened.

Fable Data, which looks at credit card transactions in the UK, has said that the online retail spend is around 40 per cent down since non-essential shops opened back up at the beginning of April.

Merger and acquisition consultancy director Taliesen Hollywood believes that this has actually helped investors acquire Amazon marketplace brands.

“At the start of the year, everyone had had their best year ever, now, people are not shopping online quite as much and the growth is nowhere near as strong,”

According to Hollywood, this has helped to stabilise the prices that acquirers are paying for sellers despite a huge influx of cash being pumped into the market.

After being “desperate for deal flow” at the beginning of 2021, the aggregators are “becoming more selective and saying no to a lot more deals.”

As a result of the interest in acquiring marketplace brands, there has been a large increase in specialist brokers that have emerged over the past 12 months to help merchants find a buyer.

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