Aggregator in E-commerce
Elevating Brands On and Off Amazon in 2022
The aggregator model, the Amazon space, and how entrepreneurs can exit profitably
TJ Hyland is the Director of Global Partnerships at Elevate Brands, a company dedicated to acquiring consumer-leading Amazon brands and elevating them to their full potential. The acquisition space has been all sorts of active recently, and TJ’s insight into the details is a refreshing sip of knowledge.
TJ joins E-Commerce with Coffee?! to speak with host Nate Svoboda about what the aggregator model is, how it works, the importance of omnichannel, and how entrepreneurs can plan for a successful exit. But first, of course, the caffeine.
As always, Nate starts things off by asking TJ for his coffee of choice, and TJ is not a hot beverage kind of guy! Iced coffee, cold brew, they both hit the same, but TJ takes his coffee black. As both TJ and Nate say, it’s both an acquired taste and a bit of a personal strength.
Nate promises to give TJ some pointers on the powers of cold brew before jumping right into the questions.
The aggregator model
Nate starts off by asking TJ about the aggregator model and Elevate’s approach. As TJ explains, the aggregator is both fairly simple to understand and nothing new. Especially when it comes to growing businesses, brands are certainly capable of being successful and profitable on their own.
Limitations to scaling always exist, and often come in the form of running into problems with limited resources and capital. A way through this barrier? Consolidation. Four or five brands can be doing fine on their own, but if an aggregator acquires these four or five businesses, the shared resources and streamlined efficiency can elevate each brand higher than each could have pulled off individually — and more quickly.
Additionally, this model provides entrepreneurs with the opportunity for a life-changing payout. While building a successful business is certainly a praiseworthy accomplishment, a lot of people’s concept of success doesn’t exactly include having to run a business in perpetuity for as long as it’s profitable.
The aggregator model allows for these entrepreneurs to exit their businesses in a way that can be immensely profitable for them without putting the business and employees at risk — quite the opposite, in fact. TJ explains that the novelty here isn’t the model in and of itself, rather its arrival to the Amazon space, allowing for Amazon entrepreneurs to have these exit payouts as well.
Elevate’s angle is precisely this novel approach to Amazon business, truly an Amazon aggregator built by Amazon sellers for Amazon sellers. The founders were put through the wringer themselves when the space was just opening up, so they know the ins and outs intimately.
What to look for in an acquisition
The aggregator model isn’t just some abstract structure that brands can join, it’s a business in and of itself. Businesses like Elevate make their own profits this way, which means that determining which brands are acquired is a careful decision.
Nate asks TJ about what Elevate looks for when looking to acquire a brand, and the answer is simple: margins. TJ explains that an acquisition is ultimately going to be made when a brand is still valuable.
While it isn’t a hard rule, a brand that has reached the peak of its growth and performance likely won’t be very attractive, unless the tools unlocked via the consolidation also unlock an extra potential for growth.
It’s a careful game, TJ explains, but a lot of entrepreneurs have adopted a “build to exit” strategy, where an owner grows a brand to the point of a profitable exit in order to invest in a second brand and continue the cycle. Exiting the brand when it’s at about 70% of its expected growth seems to be the sweet spot.
The importance of Amazon, even off the platform
Finally, TJ talks to Nate about the importance of having a strong presence on Amazon, even if brands aren’t looking to sell on Amazon primarily.
The truth is that Amazon has become the standard for customer expectations as well as the path to purchase. Things like shipping times are one example. Since Amazon’s infrastructure has become the standard, customers aren’t going to be happy if their order takes any longer than a couple of days.
Maybe even more important is that the majority of users are going to search for your product on Amazon before anywhere else, including your site. If your products aren’t listed on Amazon, and if those listings aren’t optimized for the platform, you’re probably missing out on sales.
On the other side of things, TJ warns that going all-in on Amazon isn’t the way to go, either — and it’s a story a lot of us have heard. While having a strong presence on Amazon is vital, brands on Amazon have been known to be shut down or frozen overnight for seemingly no reason. If this happens to you and your only channel is Amazon, you’re in serious trouble. This is why omnichannel has been such an important buzzword recently.
Listen to or watch the full interview to learn more from TJ’s expertise in the aggregator model and the Amazon space, as well as so many bits of wisdom that are thrown around in the conversation!