Amazon sellers sell their accounts and exit the market, and store transactions are full of hidden pitfalls...

Amazon Aggregator and an active trading market

Since the beginning of 2021, Amazon store transactions have entered a relatively active period. From 2020 to the present, according to incomplete statistics, there are already sixty or seventy Amazon Aggregators (Amazon brand accelerator companies) in the market whose main business is to acquire Amazon stores. Among them, nearly 10 have set up offices in China or recruited Chinese agents. There is a list of 1,000 target stores circulating in the market. These 1,000 stores are regarded as ideal targets for brand acquisition. Many sellers may have received more or less emails or other communication requests from some buyers or even agencies in the recent period. Many seller friends may have heard that a seller friend around them made a lot of money by selling a store. Some seller friends who have completed the sale of the store even further lamented that "it was sold at a low price" after learning about the current market conditions. The emergence of such a prosperous scene can be roughly attributed to the following reasons:

1. Sellers’ account suspension increases business risks. Since May this year, a large number of big-selling brand stores have been suspended, involving many well-known top sellers in South China. Amazon’s account suspension policy has, to a certain extent, undermined the confidence of some sellers to continue operating, and they have chosen to sell their brands and cash out.

2. The logistics costs have soared, increasing the operating costs. The recent price increase for sea freight is indeed very large. Prices have risen with the market, and the space is really tight and difficult to book, especially since many sellers are preparing for the peak season. At the same time as the freight rates have risen, the peak season surcharges of shipping companies have also come, which undoubtedly further increases the costs of sellers. In addition, the impact of the epidemic and the resulting sea freight delays have also posed certain challenges to the sellers' stocking and operational capabilities. At such a time, some sellers may directly choose not to stock up in large quantities in the second half of the year and prepare to sell their brands.

3. Brand accelerator companies are aggressively entering China. As mentioned above, some buyers have made great efforts to expand into the Chinese market, hiring Chinese staff for Chinese sellers, and even some buyers have directly provided universal policies, offering a reward of 50,000 to 100,000 US dollars as long as the recommended store successfully completes the transaction. Under such incentives, many intermediary agencies or individuals have emerged in the market to match transactions, which has directly promoted the prosperity of the Amazon store transaction market.

Store transaction price

At present, the general price of store acquisition is calculated as follows:

Project valuation = total gross profit in the last 12 months × valuation multiple.

The valuation multiples are between 3-5 times, and the main reference factors include: revenue and gross profit growth rate, product life cycle and product fortress, and brand fan base.

Illustration of a store for sale

Generally speaking, acquirers prefer stores with the following characteristics:

The pitfalls behind the frenzy

Stimulated by the above factors, the store transaction market has also shown considerable activity. During the peak period, the Ciheng team needs to communicate with more than 50 sellers in a week. However, under the current frenzy, the number of stores that have successfully completed transactions is not as large as expected. Some transactions have even been slow and repeated. Store transactions are not simply buying and selling. Transactions involve the cross-border flow of funds and assets. The Ciheng team summarized the "pitfalls" behind store transactions based on actual cases:

1. With so many intermediaries and buyers around the world, who should we trust? As mentioned above, driven by the buyer's commission, everyone has flocked into this industry, trying to match people around them for store transactions. However, the quality of intermediaries varies greatly, and even some non-professional individuals have joined this industry. For sellers, facing unfamiliar buyers or incompetent intermediaries, they cannot fully trust them. In particular, some non-professional intermediaries may publicize sellers' information all over the world in order to match transactions, which may lead to information leakage and attract the attention of competitors. After completing the initial matchmaking, they are not clear about the follow-up procedures or blindly promote the process from the buyer's perspective. The above situations undoubtedly increase the trust cost of sellers, so they dare not rashly promote store transactions.

2. How to choose between different offers? After successfully contacting real buyers, a high-quality store may attract the interest of multiple buyers. Faced with multiple offers, how should buyers choose? In addition to comparing valuations and transaction conditions, how should they analyze? More importantly, what is the buyer's background and whether he has the ability to pay for the subsequent funds?

3. Why is the progress of due diligence repeatedly delayed? Compared with the initial exploration of the store transaction process, the efficiency of the current due diligence process has been greatly improved. However, compared with the expectation of many sellers to complete the sale before the peak season in the second half of the year, not all buyers can match the due diligence team that responds quickly, especially most buyers' due diligence teams are still overseas. Different buyers have different acquisition logics. Some focus on the supply chain, some are more concerned about product selection strategies, and some are more concerned about product advertising strategies. Different buyers have different focuses on due diligence. If the communication between the two parties is not smooth, it will also lead to the delay of the due diligence period.

4. How to understand the complex arrangement of phased payment? Currently, there are almost no stores in the market that can make a one-time payment. Some buyers even only pay 50% of the first payment. But is the higher the first payment ratio, the better? Is it reasonable to arrange the subsequent payment to be linked to the net profit growth rate when the original seller is no longer responsible for the operation? The design of these professional terms may also trouble sellers and hinder the smooth progress of transactions to a certain extent.

5. Can the store transfer be completed without risk? This is a more important question for sellers. The smooth transfer of the store and the successful completion of the transaction are the most perfect outcomes. However, Amazon does not explicitly allow the direct change of the store backend entity. Sellers are even more worried that unauthorized changes to the backend store entity may trigger KYC review. The failure to complete the transaction is a small matter, and further irreversible damage to the store itself is a big matter. Buyers on the market almost all take a secretive attitude towards this issue. Some experienced buyers will simply tell sellers who are in contact for the first time that they have official communication channels and that the changes have been completed in historical cases. However, according to our understanding, the facts may be more complicated. In some cases, Amazon officials directly inquired during the transaction, which affected the transaction.

Ciheng Team

How to choose a high-quality transaction intermediary ? Based on the above, we believe that in the current market situation where the buyer's advantage is more obvious, the existence of seller intermediaries is quite necessary. High-quality intermediaries play a vital role in improving transaction prices and efficiency. We believe that an excellent intermediary team has the following characteristics:

1. Have successful transaction cases and have successfully completed store transactions in history.

2. We have abundant buyer resources, are familiar with the financial strength and preferences of each buyer, and can accurately match them.

3. Have a professional team, equipped with professional lawyers, accountants and other personnel with cross-border experience.

4. Have rich industry experience, understand the industry characteristics of cross-border e-commerce, and be able to quickly and accurately judge the quality of stores.

We are Ciheng Consulting ( WeChat ID: CICHENG-GZ ), a professional consulting firm under Anci Capital that focuses on cross-border e-commerce capital services. Anci Capital and the Ciheng team have led the investment or M&A listing projects of many well-known cross-border e-commerce related companies such as Paton, Tongtuo, Santai, Yibai Network, Starlink, and Feishu Shennuo. The Ciheng team is providing professional services for many small and medium-sized Amazon sellers to sell their stores.

We are currently handling transactions for multiple stores and maintaining close cooperative relationships with more than 60 or 70 acquirers on the market. As a professional service organization, we promise to provide the following services to high-quality Amazon sellers:

1. What we do is not just information matching. We always stand on the seller 's side and are determined to find the most suitable buyers for high-quality sellers;

2. Assist in collecting and judging offers and assessing buyer strength;

3. Efficiently promote and control the due diligence process;

4. Assist in drafting transaction documents and negotiate with the acquirer on your behalf, so as to strive for the best interests for you and control transaction risks;

5. Assist in isolating potential risks of store transfer from the perspective of transaction terms and transaction arrangements;

6. Assist you with other issues related to the sale of the store and respond to your questions or concerns at any time .

Choose us as your agent to sell your store. We will help you avoid various "pitfalls" in store transactions and assist you in completing Amazon store transactions efficiently, safely and smoothly.

You provide a high-quality store, and we will escort your store transactions throughout the entire process.

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