The rise of FBA Aggregators is undeniably shaking the Amazon ecosystem. Their existence, and success, is shaping the way Amazon FBA Sellers operate. Thras.io is a hyper-successful example — in July 2020 they raised $260M awarding them Unicorn Status With a valuation that totalled $1B. But Thras.io is not the only successful Aggregator. In the past few years we’ve seen around 40 different FBA-acquirers start to operate globally.
The Aggregator industry is obviously one that holds a lot of potential, but why? Largely, it comes down to increased competition in the Amazon Marketplace — Sellers need help navigating their competitors and superseding their success-metrics. But aggregators also stand to make significant returns simply by helping strong brands continue their growth and eventually list on public markets.
Sensibly, just as Sellers’ competition increases, so too do the Aggregators. To be a successful ‘acquisition entrepreneur’ you need to go above and beyond — you must differentiate yourself from your competitors so that you can attract and effectively vet the right Sellers. That way, you have the competitive advantage and so do your Sellers. Here, we are going to explain how to do just that.
Tip #1: Know your ecosystem
The sheer expanse and reach of the Amazon ecosystem boasts immense potential retailer success. But, this comes with its own downfalls — there is too much data to really know the ecosystem. This data, however, holds the potential to tell you two critical things:
- Where the opportunities are for your existing network of FBA Sellers.
- The Sellers that have the greatest acquisition potential.
Amazon recognises the great potential all this information holds, and does make it readily available to both Aggregators and Sellers. But, the data is simply indigestible.
Strategies to help:
- Reviews: From product reviews, is it clear that the business is a leader in their field?
- Ratings: Do the ratings reflect the quality of their product?
- Rankings: Does the company rank organically on high keyword volume?
The challenge is really sorting through the available data. Understanding the performance of potential Seller acquisitions is highly complex, there are countless variables each with extensive data points that manually would take an age to sort through. Not to mention the time-sensitive consideration — all of this data is only useful when it is utilised in real-time, and it is near impossible to effectively sort, analyse and take action from this amount of data before it becomes outdated.
In order to efficiently reap the benefits of Amazon’s data-cornucopia, you need to adopt a 3rd party analytics platform that can undertake all data analytics processes that you require. Beyond this, it needs to be capable of collating and presenting this data in a way that shows you accessible, contextualised information.
Tip #2: Know your audience
Relying on Thras.io’s success tips alone, is not an all encompassing solution. As the most successful Aggregator out there, they have much more resources to burn than everyone else, so it would not be fruitful to try and compete with them on their terms exclusively. You need to find other ways to succeed — namely, intricate and effective data analysis of your customers' behaviour.
First, you need to intricately know your FBA Sellers, and potential FBA Sellers to acquire — although sourcing viable FBA Sellers for acquisition is a nightmare in and of itself. Second, in order to drive growth and profitability within your aggregated Sellers, you need to know their customers, or at least help them better understand their customers. The specific variables that ‘knowing your audience’ contains can be anything and everything from:
- Customer purchasing behaviour
- Customer lifetime value
- Repeat purchase analysis
- FBA Seller evaluations
Once again, FBA Aggregators are faced with the problem of having endless information about their Sellers and their Seller’s customers, but they cannot easily use it. In reality, if you spend time manually trying to navigate this data in its raw form — by the time you’ve made your first piece of progress, the data will be outdated and redundant.
Strategies to help:
It's important to access the analytics and reporting functions Amazon has to offer. That means being brand registered yourself, and selling something on amazon. You can then use your Seller's ABA accounts to better understand them. However, the challenge with this strategy is two fold:
- Everyone else is using it.
- The reporting in ABA is siloed and manual, limiting its potential.
Better results can be obtained using analytics tools that collate data from across the amazon reporting ecosystem (including data from sources like Amazon MWS). These same tools can provide advanced auditing capabilities to deep dive into the specifics of prospective Sellers — helping consolidate, review and use information to best effect. What’s more, you can use the same technologies to identify other high growth Sellers for acquisition and reach out to them before they become big enough to acquire, building the relationship early.
Getting to understand your customers’ behaviour through sophisticated analytics platforms can uncover crucial insights and answers to questions such as —
- When do people purchase your product(s)? Morning? Evening?
- Where are your customers located?
- Do people who use promotions return to buy from you again?
When you can master in-depth customer analysis, you can have a successful acquisition strategy that doesn’t rely solely on emulating Thras.io — which would likely involve competing directly with them. Perhaps approaching acquisitions like this will help you target brands with a view to grow them. Often brands with a high customer LTV (lifetime value) will be undervalued, recognising this through analysis of customer behaviours means that you can avoid paying the market acquisition rate of 3-5x EBITDA. This in turn means that there’s more profit to be made with them, and at a lower acquisition cost to you!
Suggested reading: To understand further how you can quantify and evaluate your customers, check out our ebook on Amazon Brand Analytics — Learn How To Master Amazon Brand Analytics
Tip #3: Optimise your inventory
Inventory management on Amazon is paramount. Ensuring that your Sellers understand market demand and optimise their pricing, management and listings is critical. While this is about prioritising successful products, it’s also about recognising products that are simply not performing well enough.
You need to have an intricate understanding of how your inventory is performing. That is, you need to consider the performance of Sellers inventory’s collectively, and then break down their inventories and inspect them at ASIN-level. Without an overview of performance in this way, you cannot begin to optimise your inventory in an informed way. Then, you can use this understanding to influence your decision making and boost your ROI.
Strategies to help:
You need the ability to categorise, sort and analyse inventory data across all of your Sellers, and supply those Sellers with insights that will let them make optimised choices. Critical things to consider are:
- Profit evaluation: Calculate the profit margin of your product, at a granular ASIN level.
- Value recognition: Pinpoint products that will generate higher value product sales.
- Bundle optimisation: Recognise bundling opportunities and create unique product combinations that can drive up AOV (average order value) and help you win the Buy Box.
- Market basket analysis: This is seeing which products customers are comparing your products to — using ASIN targeting in PPC to see which they actually purchase and so be able to delineate your true competitors.
- Lead times: If your manufacturing lead time is 6 months, it is unworkable in the Amazon ecosystem. You need to consider how to optimise manufacturing so you can increase your product churn and reduce delivery time.
- Be aware of the IPI score: This score is the Inventory Performance Index, it gauges how well your inventory is performing over time. The IPI dashboard presents you with a sliding-X bar that denotes your IPI score — if your score correlates to dark green, then excellent! If not then there’s something wrong. Paying attention to this metric ensures your inventory is only stocking profitable products. (note, Amazon have not released specifically how they calculate this score)
Remember, quality analytics software will help you achieve these outcomes without overwhelming teams with manual tasks.
Tip #4: Optimise your PPC
You need to optimise your advertising strategy as well as your inventory management. To be the most effective and efficient FBA Aggregator you cannot afford to waste money on ads that are not gaining traction, and conversely underspending on ads that have high revenue potential. There are certain considerations that will carry a lot of weight when optimising your ads, such as:
- ROAS/ACoS: Return on Ad Spend — this tells you how much money you earn for every dollar you spend on advertising.
- Target ACoS: This is a target, not an active measurement — against this you can compare your actual ROAS.
- TACoS: Will provide you with insights into how the actions you're taking are influencing your overall business goals. TACoS requires that you divide your total advertising spend by your total sales revenue and then multiply by 100.
- Break-even ROAS/ACoS: Both of these tell you if your advertising campaign is actually turning a profit because it takes into account your pre-advertising profit margins.
So, now you know what values you are looking for, and looking to determine — but, you cannot actually tackle this task unless you have an extensive understanding of your data-ecosystem.
Suggested reading: For further information on ROAS vs ACoS, check out our blog — RoAS vs ACoS: Does Amazon’s Embrace Of Roas Make Acos Obsolete?
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Strategies to help:
Search engine optimization:
First and foremost, maximising your capacity to undertake SEO best practices is a brilliant, surefire way to optimise your PPC spend. Your Amazon PPC ads are charged on a CPC (cost-per-click) and CVR (conversion rate) basis, so while they can bring in a lot of traffic, without monitoring and optimising their performance, they can be a huge drain on your total profit margin. Your search terms need to be low-cost and high-converting — this combination seems rare, but is more common than you’d think. Your PPC campaign needs to use search terms that are tailored, and procure buyer-traffic and, obviously, conversions.
Customer lifetime value:
Your breakeven ROAS/ACoS is a crucial metric for PPC optimisation, but it can be adjusted to reflect your CLV. That is, if it costs more to acquire new customers than it does to retain existing ones, your ad spend should reflect this — ads that are intended for retention purposes should be awarded more of the ad-budget. Calculating, understanding and cross-referencing these metrics, however, is an insurmountable task without access to a sophisticated analytics tool.
Tailored ad types:
Third, it is always easy to talk about using different ad types for the right reasons.
Goal aligned ad-spend:
This seems fairly intuitive, but it's worth stressing all the same. If your business goal is to expand into different audiences, you may want to adjust your ad spend so it reflects this — for example, omnichannel paid advertising would account for a variety of different audiences to interact with your ads. In another case, if your business goals are to attract new customers in lieu of a new product line launch — to align your ad-spend with that goal, you will need to spend more on CTAs that target new customers, for example.
Utilise other platforms for PPC:
More recently, Amazon has been increasing their CPC (cost per click), meaning that the cost of running a PPC campaign through Amazon is increasing, and your ROI will decrease. To avoid this, you can deploy PPC campaigns from other platforms. For example, you could run a campaign through Instagram that links directly to your Amazon listings, all tracked via an Amazon attribution tool — and at a fraction of the cost!
How do you do all this?
In order to undertake these four PPC optimisations it is absolutely essential that you have access to an analytics tool that is capable of delineating between data points and pulling insights that can inform your optimised PPC strategy. This tool needs to be capable of collecting and understanding the relevant data, formulating commercially-driven action plans that help you meet your goals, and finally presenting this information in an accessible dashboard.
Suggested reading: For more information on how to run a successful PPC campaign on Amazon, check out Nozzle’s ad optimisation offerings here — Deliver Amazon PPC and Display Campaigns
Tip #5: Offer your Sellers more…
We know you’re already very busy providing your aggregated Sellers with a whole range of services, such as:
- General Seller support: Before, during and post-acquisition.
- Specialised advice and consulting: eCommerce specific expertise.
- Capital: To allow for reinvestment and scaling.
- Competitive strategy: Working with Sellers to understand their competitive market, and continually come out on top.
However, their performance will be limited by their analytics capabilities — as we’ve already discussed, the key to optimised performance comes from informed decision making. If your individual Sellers are lacking access to sophisticated data analytics capabilities, your overall Aggregator success will be limited by the performance of your Sellers.
Strategies to help:
Fundamentally, analytics tools are a great differentiator on Amazon — and can help you access data in ways otherwise not possible. Having analytics capabilities within your portfolio that you can offer to Sellers will help differentiate your value, and enable your Sellers to generate more profit.
Our expertise on the potential of analytics is rooted in the fact that we've built some of the most powerful analytics tools on the market. At Nozzle, our platform is all about helping Aggregators and Sellers better understand the market and their customers. You would gain access to critical services such as —
- Audit: This is for brands that want to gain a granular understanding of potential Sellers pre-acquisition.
- Customer analysis: This feeds into CLV — the analytics tool can help you to understand the intricacies of your Sellers’ customers as they relate to customer acquisition, retention and profit margins.
- Product analysis: The analytics tool can help you to understand the intricacies of customer behaviours as they interact with your Sellers’ products.
Use Nozzle to audit potential Sellers, and then provide them with access to the 3rd party analytics platform that you choose to adopt. This way you can consolidate your Amazon data documenting your operational performance, and consolidate the Amazon data that informs your Sellers’ performance. Providing them with access to the same platform you use has added benefits as it ensures synchronicity across your Aggregator portfolio. This provides a competitive edge to your Sellers as they can utilise the same analytics platform as you to optimise their performance too. Additionally, it means all your insights can be presented through a singular dashboard — giving you omniscient, extensive and exhaustive access to everything data-wise under one umbrella.
Data is the key to success on Amazon.
What's critical is having a clear understanding of your data -- and how your customers and products intersect with each other. Analytics tools are the best way to achieve this. Amazon providers the data, but the platform will provide the understanding. There are lots out there, but Nozzle specialises stringently in Amazon data analytics and so you can trust them to provide accurate, specialised insights into your network. Knowing this, you’ll be confident your data-recommended optimisations are tailored not only to you and your individual needs, but within the context of Amazon as a platform specifically.
But don’t just take our word for it, get a free audit today!