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Thrasio-like companies have become the darlings of ecommerce.��

With at least and more than $10 billion in capital raised since April 2020, FBA acquirers represent a bright, lucrative future for haggard Amazon sellers who have their eyes set on an exit opportunity in the years to come.

It usually happens like this: an aggregator comes knocking on a seller’s door with a loaded wallet and dreams of flipping the business beyond his or her wildest dreams. The seller, in turn, is presented a fat check or an earnout consisting of multiple years’ worth of profit after a sale.

But, as the saying goes, some things are too good to be true. Not every aggregator is destined to make it to the promised land. Here’s why.��

3 Reasons Why FBA Acquirers Fail at Scaling Businesses��

1. They Can’t Fill the Shoes of the Previous Owner

Truth be told, no one knows a business better than the founder. While aggregators may be equipped with a playbook of business optimization strategies, none have poured their own blood, sweat, and tears into building the business from the ground up. They lack the insight and intangibles that the previous owner brought to the table, including first-hand knowledge of what went into making a product work and/or creating demand.��

Because aggregators only come in at the peak of a brand’s success—hawking for items that already enjoy best-seller status—they’re only left with charts, sales numbers, and shallow insight into the inner-workings of a brand once the owner is out of the picture.��

2. They Only Know How to Speak One Language: Amazon

Aggregators and their acquired businesses aren’t exempt from the risks of selling on Amazon. Like any other FBA business, their businesses are at the mercy of Amazon, who holds the keys to the kingdom.��

As seen in the case of , the ecommerce titan also won’t bat an eye if a multimillion dollar business issues a complaint or is booted from its marketplace. PopSockets, for one, attested to being “strong-armed” into lowering its prices at the threat of being replaced by “gray market” alternatives.

“One of the strangest relationships I’ve had with a retailer is with Amazon,” said PopSockets CEO David Barnett in an antitrust hearing. “The agreement appears to be negotiated in good faith, but what happens is there are phone calls where we get bullying with a smile.”

To make matters worse, most acquirers aren’t positioned to diversify (successfully) to other sales channels. They have their futures intertwined with Amazon and are almost entirely focused on professionalizing that one marketplace. The bubble can burst at any minute, and aggregators aren’t any more protected than the average FBA brand.��

3. They Throw Bodies at Their Problems

In some cases, aggregators are taking steps to build up their forces to handle new sales channels, in addition to the growing number of accounts in their portfolio. However, these teams are typically organized by marketplace. Multiple account managers handle one brand, leading to a lack of coordination between Amazon and Walmart teams (as an example) as well as an enormous cash investment when onboarding to a new channel.��

Overhiring and overspending become persistent issues. While headcount grows, so do the inefficiencies in their operations. Team members struggle to communicate and work synchronously with each other on their shared accounts, ultimately hurting EBITDA growth and the potential earnout for expectant sellers.��

How Amazon Aggregators Can Ensure Future Success

With the above in mind, we consulted a few experts on our team on how aggregators can better secure their success. Here’s what they had to say.��

Think Beyond Amazon��

“To make it in the long run, aggregators need to look beyond a world that’s strictly defined by Amazon,” says Michael Goldmeier, director of sales at ����ý. “They need to start investing into channels that—albeit, are small compared to Amazon—but pave the way to new audiences, new branding opportunities, and new growth vehicles that a single channel simply can’t offer.”��

Anker, Mohawk Group, and Pharmapacks together represent the most recent examples of Amazon-natives-gone-public (which prior to recent years, was unheard of). In each of these cases, the brand expanded well beyond Amazon to marketplaces like Walmart, Best Buy, eBay, and even Facebook—gambling on longevity over immediate riches, according to Goldmeier.

“It’s time to prioritize longevity,” says Goldmeier, “and that’s not something that Amazon can ever promise.”

Another perk for aggregators: as Amazon’s top sellers receive bids from a growing pool of potential investors, the ability to scale brands to new channels can serve as a differentiator. Few FBA sellers have the experience or capital security to test an aggressive multichannel strategy, but an acquirer can provide the leverage to expand success to new corners of the internet.

Stop Overhiring—Leverage Proven Multichannel Solutions��

However, as diversification becomes more and more of a strategic play, aggregators should avoid piecemealing a team together, warns ����ý CEO Daniel Sugarman. It’s not uncommon for such businesses to become bloated with a large headcount, but struggle to keep up with the changing tide of ecommerce or move fast enough to be effective.

Marketplaces are changing all the time—sometimes overnight, as is often the case with Amazon and its sweeping changes to listing (or other) requirements. It’s impossible to learn all the ins and out of marketplaces sporadically; rather, to succeed, you need lots of hands-on experience managing each channel and a keen understanding of their unique quirks.

Read Also: Why Amazon Sellers Fail on Walmart, eBay and Other Marketplaces

The fastest way to achieve this is by implementing multichannel software, which can centralize a business’s catalog, dedupe efforts, increase data accuracy and provide a more scalable solution for achieving the fastest time to value.����

“And if you find yourself saying, ‘I can't even think about implementing software right now. We're going to need to hire more people to be able to handle that,’” says Sugarman, “Well, the reality is, the more people there are, the more that’ll slow down the software procurement and installment later down the line.”

“At the end of the day,” he adds, “You keep hiring but still have a huge knowledge and operational gap in your business—that’s pretty much what we're seeing 100% of the time.”

The ideal setup for a multichannel-minded aggregator: have a single brand manager (not separate teams) oversee the sales channels and activities of a brand, with the help of software that simplifies the job.��

Outsource Automation��

These days, some aggregators will even attempt to frankenstein their own automation platform together. The problem with this approach is that these businesses are often ill-prepared for the complexities and surprises that multichannel ecommerce entails.

Not only are ranking algorithms different from channel to channel, but the backend functionality, taxonomy, channel maturity, and actual audience on each marketplace can vary drastically.��

“Tons of businesses fail at automating multichannel,” says Goldmeier. “Multichannel is an entirely different beast from FBA or Amazon—and if you’re not able to innovate constantly on your software or work hand-in-hand with the channels you’re trying to integrate into, then you’re throwing money down the toilet.”��

Another reason why multichannel systems fail: they aren’t able to achieve speed without compromising quality. While a software may be able to get a product listed across multiple sales channels, a lot of data can get lost in translation. Delivering high-quality, high-ranking listings everywhere requires data translation and machine learning.��

����ý, for one, uses its own AI-powered solution to decode new marketplaces and match them up with a seller’s catalog. Dubbed “SMART Types,” this solution understands that a marketplace like Newegg has more than 1,600 product categories and 20,000 unique attributes for a seller to choose from. Without a system to automatically map the seller’s data to the right category and attributes, then he or she could spend hours tediously mapping each listing and getting the bare minimum product details up.

“Aggregators would benefit more by devoting their engineering resources to things that are more unique to their businesses,” Goldmeier says. “If there's a proven solution out there for other things, take advantage of it. And then tap your engineering team for help customizing that solution to your own unique needs or building something that’s a true differentiator for your company.”��

The Bottom Line

Despite their most valiant efforts, some FBA acquirers aren’t currently built to withstand the demanding nature of Amazon or the channels outside of it. Some will inevitably fail while others will adapt and rise to the occasion. In a few years’ time, it’ll be clear who the winners are and who should have pivoted long before.��