I’m Jesse Pujji and this is Business Breakdowns. Today we are doing a different kind of breakdown. We are covering an entire category, Amazon Aggregators. These are the companies that are buying up hundreds of Amazon’s third-party sellers. The concept of Amazon Aggregators is relatively new, tracing back to 2018 with the founding of Thrasio, but the ecosystem is already huge and growing. Most recent numbers peg it at around $300bn dollars in revenue and growing faster than Amazon itself. These aggregators have unique moats and high-quality entrepreneurs.
To help break down the marketplace and business of acquiring Amazon storefronts, I’m joined by Ali Hamed, a partner of CoVenture, who is also a popular guest on Invest Like the Best. In our conversation, we discuss the three superpowers Amazon sellers have, why there’s only $8bn in funding for a market doing $50bn in EBITDA, and we go into detail on how Amazon Aggregators are structured and operate. Please enjoy this unique breakdown on Amazon Aggregators.
For the full show notes, transcript, and links to the best content to learn more, check out the episode page here.
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Show Notes
[00:03:23] - [First question] - What is an Amazon aggregator, and who sells through Amazon?
[00:05:26] - The scale and size of the aggregator market in general
[00:06:43] - The history of third-party sellers and the utility they offer Amazon
[00:08:20] - When they started inviting third parties to join their network and their market share
[00:09:47] - Amazon’s 40% take-rate and overview of the economic structure
[00:10:24] - How many individual storefronts exist and what they look like
[00:13:19] - Who is starting Amazon stores and an overview of a seller writ large
[00:14:43] - The initial insight that led to incorporating third-party aggregators
[00:21:17] - How many aggregators exist in the space today
[00:24:41] - Why vertical integration isn’t such a primary focus for aggregators
[00:26:53] - Ways aggregators find businesses and how they tend to acquire them
[00:31:29] - What the top 10 aggregators look like and their acquisition frequency
[00:32:25] - The common value add aggregators deliver post-acquisition
[00:36:47] - Deal pipelines and other sales and marketing functions
[00:40:22] - Interesting things in the space given how unique of a marketplace it is
[00:43:57] - New innovations and secondary ecosystems emerging as a result of aggregators
[00:45:13] - How an aggregator should think about Amazon and risks to their business
[00:48:29] - Why Amazon won’t use their data and customer ownership to own the market
[00:50:10] - Macro and system risks that would threaten the success of this business model
[00:52:35] - What keeps Amazon up at night and potential worries about aggregators
[00:53:54] - Reasons why they would pass on an acquisition opportunity
[00:55:32] - Contributing factors to explosive growth that exceeded expectations
[00:58:10] - Biggest takeaways for builders and investors from 3rd party aggregators
[01:01:04] - Where to learn more about Amazon’s third-party aggregators
