Among the startups that have raised a significant amount of VC investment in 2021 are FBA aggregators (Thrasio, Perch, Unybrands, etc.), with it not uncommon for them to exceed $100M despite being in the early stage.
As the impact of the pandemic continues and changes in the international political situation lead to the collapse of supply chains, Amazon's FCs enable decentralized stocking close to consumers, minimizing stockouts and delivery delays.
Amazon has shifted from traditional 1P (retail) to Amazon 3P (third-party seller), and FBA (Fulfillment by Amazon) has grown to the point where 80% of sellers use it, resulting in an increase in sellers transforming from traditional wholesalers to retailers.
As Google has become the go-to site for searches about things and Amazon the go-to site for searches about objects, ads similar to those on Google occupy the top positions in Amazon's product search results, and the CPC for Amazon's sponsored ads has soared to $1.33 (a 43% increase in one year).
Amazon's advertising revenue and net profit are growing at the same level (both just under $8B in Q2 2021), meaning that without its nearly cost-free advertising revenue, Amazon would have no profits.
FBA aggregators have a unique financing structure among startups, as they are expected to grow in the early stages, allowing VCs to invest in equity, and as they are already profitable, PEs can also invest in debt.
There are two exit opportunities: the e-commerce brand's investment can be recovered through M&A with the FBA aggregator, and the FBA aggregator's investment can be recovered through an IPO.
E-commerce brands can capitalize on the growing trend of M&A, as FBA aggregators can expand their Amazon sponsored ads budgets with deep investor funding.
For Amazon, eliminating malicious sellers is a major goal, and due diligence during M&A has a highly purifying effect.
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