Amazon store acquisition is popular! But are there hidden pitfalls behind it?

Amazon store deals are booming!

Amazon store transactions have entered a relatively active period since the beginning of 2021. According to incomplete statistics, there are more than 60 brand accelerator companies in the market whose main business is to acquire Amazon stores, of which nearly 10 have set up offices in China or recruited Chinese agents. There is also a list of 1,000 target stores circulating in the market, which are regarded as ideal brand acquisition targets.

(Photo source: Yibang Power Network)

More and more sellers have received emails from buyers or agents, and there are many reports that sellers have made a lot of money by selling their stores. Some sellers who have already sold their stores even exclaimed after learning about the current market conditions, "It's too cheap!"

Why is the store trading market booming? It can be roughly attributed to the following reasons:

1. The account blocking trend continues, and business risks increase

Since May this year , a large number of stores have been closed, involving many well-known top sellers in South China. According to statistics from the Shenzhen Cross-border E-commerce Association, in the past two months, more than 50,000 Chinese sellers have been closed on the Amazon platform , causing an estimated loss of more than 100 billion yuan to the industry. Amazon's policy of closing accounts has, to a certain extent, hit the confidence of some sellers to continue operating, and they have chosen to sell their brands and cash out.

2. Logistics costs soared, and operating costs soared

The recent increase in ocean freight rates is indeed huge, and space is really tight, making it difficult to book. As freight rates rise, shipping companies are also charging peak season surcharges, which undoubtedly further increases sellers' costs. Maersk has been charging peak season surcharges since August 16, and other shipping companies will also start charging peak season surcharges at the end of this month.

In addition, the impact of the epidemic has also caused shipping delays, which has also posed certain challenges to sellers' stocking and operational capabilities. At this time, some sellers may simply choose not to stock up in large quantities in the second half of the year and prepare to sell their brands.

In addition, some buyers have made great efforts to develop the Chinese market, and many intermediary agencies or individuals have appeared on the market to match transactions, which has directly promoted the prosperity of the Amazon store trading market.

Are there these "pitfalls" hidden in the hot trading market ?

Stimulated by the above factors, the store transaction market is very hot. The Ciheng team needs to communicate with more than 50 sellers within a week. However, under the current frenzy, the number of stores that successfully complete transactions is not as large as expected. Some transactions even appear to be slow and repeated. Based on actual cases, the Ciheng team summarized the "pitfalls" behind store transactions:

1. There are so many agents and buyers in the world, who should you trust?

As mentioned above, many people have flocked to this industry, trying to match people around them to shop transactions. However, the quality of intermediaries varies greatly, and even some non-professional individuals have joined this industry.

In order to facilitate transactions, some unprofessional agents even publicize the seller's information all over the world, which may lead to information leakage and attract the attention of competitors; some agents, after completing the initial matchmaking, are not clear about the follow-up procedures or blindly promote the process from the buyer's perspective. The above situations increase the trust cost of the seller, so that the seller dare not rashly promote the store transaction.

2. How to choose between different offers?

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

3. Why is the due diligence progress repeatedly delayed?

Not all buyers can match a due diligence team that responds quickly, especially since most buyers' due diligence teams are still overseas. Different buyers have different acquisition logics. Some focus on supply chain sorting, some are more concerned about product selection strategies, and some are more concerned about product advertising strategies. Different buyers have different due diligence focuses. If the two parties do not communicate well, the due diligence deadline will also be delayed.

4. How to understand the complex arrangement of phased payments?

Currently, almost no store transaction can be done in one-time payment. Some buyers even only pay 50% of the first payment. But is the higher the first payment ratio, the better? When the original seller is no longer responsible for the operation, is it reasonable to still link the subsequent payment to the net profit growth rate? The design of these professional terms may also trouble sellers and hinder the smooth progress of transactions to a certain extent.

5. Is it really possible to complete the store transfer without risk?

This is a more important issue for sellers. 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, but further irreversible damage to the store itself is a big deal.

Buyers in the market are almost always very secretive about this issue. Some experienced buyers will simply tell sellers they are dealing with for the first time that they have official communication channels and that changes have been made in all previous cases. However, according to our understanding, the facts may be more complicated. In some cases, Amazon officials directly inquired during the transaction process, which affected the transaction.

Avoid the pitfalls of store transactions and rely on a professional team

We are Ciheng Consulting, 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 partnerships with nearly 60 acquirers on the market . As a professional service agency, we promise to provide the following services to high-quality Amazon sellers:

Our Services

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 to maximize your interests 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 your store and respond to your questions or concerns at any time.

Choose us as your store selling agent, we will help you avoid various "pitfalls" in store transactions and assist you to complete Amazon store transactions efficiently, safely and smoothly. You provide a high-quality store, and we will escort your store transaction throughout the process!

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