Shrinking by 20%, how is Amazon's store acquisition business doing this year?

Although the growth of the e-commerce industry has begun to slow down this year , Amazon 's store acquisition business has not declined significantly compared to 2021. This year, the addition of many new acquirers has enabled Amazon's store acquisition business to remain stable .

According to data provided by investment bankers, brokers and aggregators , acquisition volume in 2022 will be around 10%-20% lower than in 2021 .

However, many acquisitions this year have lower valuations than in 2021. Amazon sellers are typically acquired for several times their store's discretionary earnings (SDE), which is roughly calculated annual net profit, including the increase or decrease of certain expenses . A business with $ 1 million in revenue and $250,000 in SDE profit typically receives a guaranteed offer of more than $1 million (4 times SDE).

While some Amazon aggregators have paused acquisitions this year , such as Thrasio and Perch, and may have made few or no acquisitions this year, others have done the opposite , and a number of new acquirers have also entered the market.

Many of the new acquirers now don’t call themselves “ aggregators . ” They include strategic investors , such as holding companies and category- focused firms for online brands , and private equity funds investing in online-native brands, including those that got their start on Amazon .

This year, the acquisition process is taking longer because acquirers have become more cautious. In addition, their research methods have become more sophisticated. However, sometimes there are still empty baskets because aggregators fail to expand the businesses they acquired .

As a result, some Amazon sellers help aggregators monitor their inventory management and advertising campaigns after acquisition to achieve expected performance .

In addition, unlike previous years, the funding boom for Amazon aggregators has disappeared this year. In 2022, aggregators raised only $2.7 billion, compared to $ 12.3 billion in 2021.

Aggregator consolidation cases are rare this year , and some aggregators are on the verge of bankruptcy. As a result , some small aggregators are actively seeking acquisitions, while some large aggregators are considering acquiring smaller peers . Consolidation between aggregators makes sense because it brings economies of scale and can lead to better financing conditions.

“We expect the number of acquisitions completed in 2023 to be at least as high as in 2022,” said Fortune CEO Michal Baumwald-Olen. She added that acquisition valuations for Amazon stores have normalized and are expected to remain the same in the future until macroeconomic indicators improve.

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