Ecommerce aggregators play a vital role in nurturing the small-business ecosystem. Despite the current challenges they face, there is optimism for a turnaround.
Recent events such as Thrasio, an Amazon aggregator, filing for bankruptcy, and Win Brands Group, a Shopify aggregator, downsizing its workforce by 50%, highlight the turbulence in this space.
The Big Boom of Ecommerce Aggregators
These aggregators surged in popularity in 2020 and 2021, driven by the boom in ecommerce during the pandemic and favorable interest rates. Their fundamental strategy was solid: acquiring promising small ecommerce brands and leveraging shared resources to fuel growth, akin to private equity roll-ups.
This approach benefited small-business owners by providing them with an attractive exit route. For entrepreneurs who had built successful mini-brands but lacked the resources or energy to scale further, these aggregators offered a straightforward buyout process with upfront cash. This enabled entrepreneurs to cash out and pursue new ventures, inspiring more to enter the market.
What Went Down?
An example is Win Brands Group, initially a Shopify design agency that transitioned to acquiring Shopify businesses generating $5M-$30M in revenue. They expanded these brands across multiple channels, such as Amazon and traditional retail.
This strategy worked really well due to zero interest rate policies and pandemic-induced market fluctuations. The influx of approximately $16 billion into the top 100 aggregators during the ecommerce boom led to rapid expansion. For instance, Thrasio was acquiring 1.5 businesses per week at its peak.
But, when ecommerce growth slowed in 2022 and interest rates rose, these aggregators encountered revenue declines in their portfolio businesses and higher debt repayment costs.
What’s Next?
Despite these setbacks, the core business model of ecommerce aggregators remains viable and here to stay. While some prominent names like Thrasio may fade, others like OpenStore are expected to persist and flourish. Noteworthy developments include Perch, an Amazon aggregator recently acquired by Razor Group, focusing on enhancing supply chain automation and accelerating product innovation cycles to revitalize its operations.
As someone deeply engaged in the small-business ecommerce ecosystem through Ordoro, I will be watching the evolution of these aggregators and their continued impact on entrepreneurship and online commerce.
Sources and Relevant Links
- Top Amazon aggregator Thrasio files for bankruptcy by Annie Palmer
- Win Brands Group had its third round of layoffs in 12 months by Anna Hensel and Cale Guthrie Weissman
- Thrasio, the Amazon aggregator, raises $1B in fresh funding at a valuation of up to $10 billion by Ingrid Lunden
- Razor Group Acquires Perch, Consolidating Two Online Brand Aggregators by PYMNTS
- OpenStore reviews: 4 founders who sold their Shopify stores by Adrian Alfieri
About the Author
Jagath Narayan is the CEO and co-founder of Ordoro, the #1 ecommerce platform for retailers growing from 10 to 10,000 orders/day. Follow him on LinkedIn to learn more about entrepreneurship and ecommerce.
