The Resurgence of Aggregators and Multi-Brand Conglomerates – How is this wave different and how do these businesses successfully scale?

If you follow investment announcements and business headlines, you have probably heard about the wave of amazon brand aggregators and how they have raised over $2.3B in the last year. While brand aggregators seem to be new news, brand conglomerates have been around for decades but have operated in a different way from this new wave. One of the earliest examples of this was in 1987 when Louis Vuitton became part of the LVMH conglomerate. Following Louis Vuitton, Givenchy, Berluti, Kenzo, Marc Jacobs, Sephora, Gucci, and 70+ other brands would soon follow and join the greater LVMH umbrella.

How and why are these recent brand aggregators, like Thrasio, Heyday, Perch, and Anker Innovations different? Why are we seeing so many of these aggregators pop up now? How will this impact consumer experience and entrepreneurs who are launching new product-based businesses? What do these aggregators need to successfully operate such complex and large business swaths?

The TRULY ENDLESS AISLE and autonomous consumer shopping:

As our world’s population has grown exponentially and economies around the globe have grown more advanced, the concept of “the endless aisle” has changed. Endless aisle used to be a term leveraged by POS (point of sale) software companies to explain how a consumer can order an item while in a physical store that may be out of stock or not sold in store. It was a means for a consumer to not walk out of the door without making a purchase. Today, the term endless aisle has changed. Imagine an infinitely long grocery store aisle, where no matter how long you spend in the store, you will never be able to view all the products – this is today’s endless aisle. The earliest brand conglomerates bought up the top brands and had essentially a monopoly on certain categories, while this new wave of conglomerates is vying for a piece of the endless aisle.

Further analyzing the concept of the endless aisle, did you know that in 2019, Amazon had more than 12,000,000 product listings and this number has more than doubled since then? Additionally, there are over 150M amazon prime members which are close to half the entire US population. As impressive as these statistics are, there are so many more eCommerce marketplaces around the globe like Jet, Newegg, Bol, etc which are scaling quickly like Amazon. These statistics tell us that literally, everyone is buying online, and each consumer is met with a seemingly endless assortment of products and ads for products that are curated based on your browsing history and internet engagement. 

COVID has been a huge influencer in transforming consumer buying experiences from in-store to almost solely online. The rise and improvement in technology have also played a role. In 2020, US eCommerce revenues grew by more than 44% and this number has accelerated at a faster pace so far in 2021.

My team at Suuchi helps hundreds of B2C brands manage their business and supply chain operations on our platform, the GRID. As a fun exercise, I asked each member of the team to open their Instagram accounts, spend one hour documenting which brands they saw pop-up advertising, and target them in prospecting campaigns. I was amazed to find that across eight team members, we amassed a list of over 450 unique B2C brands advertising in just a few hours. What we learned is that you can spend almost infinite time on Instagram scrolling and you will always find new products and ads targeted to your unique demographic. While sometimes you will see the same advertisement (for me it is Free Fly apparel because somehow they know that their ad gets me every time), you will always discover new products. 

Amazon and these other marketplaces are no different from Instagram in terms of its infinite product and brand listings and these platforms go beyond just advertising brands to consumers. Amazon practically conducts autonomous consumer shopping on your behalf by recommending exact products based on your purchases. The other day, I was buying a fishing net, and somehow Amazon knew my location in South Carolina and recommended an assortment of redfish lures. Obviously…I was hooked and bought the lures too. Whole Foods and Amazon fresh leverage similar technology to order my groceries automatically each week and somehow they always recommend extra compatible products that I end up purchasing to complete meals.  

As infinite products now exist online, the consumer’s buying behaviors have changed in a few ways. 

1)     Price shopping – consumers will always check a brand’s website, Amazon, eBay, and at least another marketplace before buying. Consumers will also lookup similar products and brands as there are so many products today that you likely can find a very similar product for a lower price. Consumers consider not just price but also shipping timeframe and the ratings of the seller.

2)     Fraud detection – too many people have fallen victim to a fake seller or buy a product that literally takes 7 months to ship to them. Sometimes if I am nervous about buying a product, I will literally look the company up on LinkedIn and make sure they are a legit business.

3)     Condition to spend – as so many great products are so easily purchased with a few clicks, consumers sometimes don’t even realize how much they are spending. The average amazon prime member spends $1,400/yr on amazon prime alone (not including Whole Foods and Amazon Fresh).

Tech forward product launches:

With seemingly infinite products out there, how can entrepreneurs ensure that their brands and products are seen? Companies used to be able to go viral with cool products and catchy marketing videos, but now it is very much a pay-to-play schema where even with the best ads and products, you must literally buy your customers. If you have ever managed Instagram, google, or Facebook ad campaigns, you know what I am talking about. You choose your audience segment, how much you want to spend to bid on ad space, allocate a total budget, and measure your CPCs, RPCs, etc. If you are targeting a saturated market segment with a product category that is crowded, your ad spend is astronomical and there are big players out there like established brands…and now brand aggregators. Brands now need to choose, do I focus on a website and marketplaces, do I pick just one marketplace channel, do I cast a wide net across many marketplaces, etc. I feel like just last year, launching an online Shopify business was a fairly low barrier to entry and high margin business. The endless digital aisle is raising the bar very quickly and as soon as a new product category is discovered, dozens of copycats emerge overnight. 

As the b2c online space is getting more competitive, brands are realizing that partnering with (or in most cases selling to) aggregators is the best bet at an earlier stage in order for their product to thrive and then they can move on to create a new product to flip.    

How can you manage a business planning to grow from 1 brand to dozens (or hundreds) in a year or less?

Aside from impacts to consumer experience and entrepreneurs launching businesses, I find it interesting how these brand aggregators can manage their businesses amidst such rapid growth through acquisition. While each brand aggregator has a different investment thesis, most aggregators are purchasing 1-2+ brands per month and each brand could range from 100s of thousands to tens of millions in annual revenue. Each brand has its own legacy systems, infrastructure, and teams in place and needs to be integrated into the core aggregator’s tech stack. Aggregators need tools to run and report on each brand under management and each brand likely has unique processes and products, so it is challenging to standardize. 

Supply chain process management is a crucial process area to address with technology as brand inventories are the top expenses for the business. Product design, costing, purchasing, production, and planning tools are all important areas to address for aggregators. 

Aggregators also need to be able to efficiently consolidate legacy systems onto a standardized platform given the velocity and volume of their acquisitions. If a strong standardized backbone is not in place early on for aggregators, then lots of unnecessary headcounts is added. 

About the GRID

The GRID is a lightweight rapidly deployed platform where you can have a brand up and running in a matter of a few weeks rather than a few months. The GRID can operate as a standalone horizontal system. For more mature aggregators and brands that have an ERP in place, the GRID works seamlessly in conjunction with the ERP by managing products’ critical path and leveraging productized integrations. 

Bobby Hamill is the VP of Sales at Suuchi Inc. With over five years experience at Netsuite, Bobby leads the Suuchi team to help hundreds of businesses take the first step to a digital future for their supply chains. Learn more about Bobby.

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