Amazon aggregators are laying off employees, what is the future of brand acquisitions?

As a cross-border person, when talking about the Amazon platform, we often talk about the group of Amazon aggregators. Aggregators, as brand acquirers in the e-commerce market, play an important role in the development of many brands.

After Amazon aggregators acquire brands from third-party sellers, they help the brands grow by injecting capital and providing logistics and supply chain support, often creating Amazon best sellers or even globally renowned brands.

At present, the total financing of Amazon brand aggregators has exceeded 15 billion US dollars. Among the 98 active aggregators, 32 have raised more than 100 million US dollars. Among them, the leading aggregator Thrasio has jumped into the top five Amazon sellers worldwide in just two years. However, there has been news of layoffs at Thrasio recently.

Aggregator giant Thrasio lays off employees, encounters difficulties again on its bumpy road

According to a recent report by TechCrunch, Thrasio, a large startup focused on acquiring and integrating third-party Amazon sellers, will lay off some employees.

At the same time, its management will also change. Greg Greeley, former president of Airbnb and Amazon executive, will join Thrasio's board of directors in August this year, replacing one of its co-founders, Carlos Cashman, as CEO, who will continue to serve as a director of Thrasio's board of directors.

Thrasio's valuation last year was between $5 billion and $10 billion, but this did not affect its layoffs. In fact, the ups and downs that Thrasio has experienced in the past six months, including layoffs and CEO changes, reflect from the side that the acquisition and integration of Amazon's third-party seller business does face considerable challenges.

The following are some of the most important events that happened in Thrasio in the past year:

–   In April 2021, Thrasio announced that it had raised $100 million .   Silberstein ( who was CEO of the company with Cashman at the time ) said Thrasio was considering going public through an IPO or SPAC to raise more funds for expansion; a new chief financial officer was also appointed for this purpose .

– Thrasio was valued at about $10 billion in the summer of 2021 and was expected to go public through a SPAC . However, its new CFO left the company three months after joining it , and Silberstein also left in September ; in early October , the SPAC listing plan was postponed, reportedly due to problems during the financial audit.

– At the end of October , Thrasio announced another deal with Silver   Lake led a private equity financing of up to $1 billion , with a valuation of $ 50-100 billion at the time.

– At the end of April 2022, an internal email suggested that Thrasio’s valuation had fallen to $2.7 billion and that it was looking for investment.

Although Thrasio did not comment on the content of the email, it now seems that its layoffs are a foregone conclusion. According to TechCrunch, Thrasio has decided to reduce the size of the team, but has not yet confirmed how many employees will be affected. The last working day for the laid-off employees is May 13.

Thrasio profit model and aggregator overview

Thrasio was founded by Cashman and Silberstein in 2018. Its operating model is similar to that of companies such as Amazon and Procter & Gamble. It integrates some brands on the platform together, and then invests in these brands in funds and technology to enable these brands to produce and market more efficiently, ultimately achieving the effect of 1+1>2 .

Thrasio, for its part, has raised nearly $3.4 billion to expand its business and acquire hundreds of brands, with investors including Silver   Lake, Advent   International, Oaktree, Upper90 and Harlan, etc. In October 2021 , when Thrasio raised $1 billion in financing, its acquisition frequency reached 1.5 times a week.

Following Thrasio, there are dozens of aggregators doing similar business. According to Thrasio’s estimates, about 150 aggregators have raised a total of about $15 billion in funding, and Thrasio has become one of the top five sellers on Amazon.

Behind Thrasio’s layoffs, what’s the future of brand acquisitions?

The massive layoffs and executive changes at brand aggregator giant Thrasio indicate that Amazon's brand aggregation business is facing considerable challenges. Thrasio President Danny Boockvar wrote that in order for Thrasio to maintain its development trajectory, the company needs to make certain "strategic and operational changes."

In a letter to employees, Thrasio also hinted at the problem of too fast growth in its current development process. Thrasio said: "As we evaluate our future development strategy, we find that we need to take the time to properly absorb and develop our current acquisitions, ensure that there are strict and regulated processes, and then seek to re-expand our team in new growth areas."

Thrasio revealed that future development strategies include improving the M&A team so that it can better handle acquisitions and integrate them into the company's processes. In addition, Thrasio also plans to transform in the face of difficulties such as global epidemics, wars, continued inflation, supply chain disruptions, and changing consumer behavior.

Thrasio has been working to build an aggregation business across different consumer categories, geographies and demographics. Typically, aggregators prioritize using their own technology to solve these problems, but in reality, this continuous integration business can also be expensive and difficult, and they have to rely on third-party tools to help optimize search engines and complete order delivery .

Thrasio is not the only company that is struggling to grow . Other aggregators are also facing similar problems. Marketplace Pulse once mentioned in a report: "The industry is currently undergoing adjustments due to rising seller valuations, supply chain disruptions, and difficulty in growing acquired brands. A few Amazon aggregators have suspended their acquisition business."

The core business of Amazon brand aggregators is to acquire multiple Amazon stores for capitalization operations in order to achieve brand aggregation effect and rapid profit growth. In the past two years, with the tightening of Amazon policies and the continuous increase in store operating costs, more and more Amazon sellers have chosen to exit the market, which has also provided an opportunity for the development of Amazon brand aggregators.

However, the acquisition market cannot be separated from the strong capital support, and the funding problem is becoming one of the important reasons for the development of aggregators. Aggregators usually raise funds through venture capital, but with rising interest rates and slowing e-commerce growth, some insiders said that aggregators are now struggling to raise the funds needed to buy brands.

In addition to insufficient funds, store operations are also affecting the development of brand aggregators. Supply chain shortages, Amazon's tightening policies, rising platform fees, inflation ... Amazon's business operation model is too complicated, and for aggregators with multiple brands, operating these brands has become a more difficult problem.

Thrasio founder Silberstein once said in an interview that search engine optimization, product marketing and supply chain management are all challenges faced in operating acquired brand stores. When the business scale grows from $1 million to $10 million, the profit margin and return rate will decline.

Industry insiders said that the cooling of brand acquisition business was expected. However, there are still many positive development factors in this field. For example, when the brand acquisition boom just started, brand aggregators poached a large number of industry talents with attractive salaries. These people are looking for new growth opportunities. Aggregators now only need to sort out their current business and wait for the opportunity to develop.

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Brand Aggregator

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