Why write at all?

As I co-write my draft book on the Amazon aggregation industry, I periodically stop to contemplate and digest the experiences I had over 18-months, the public material available about the industry, and the stories I have heard from others. There is a wealth of stories and amusing characters in any industry that attracts investment this fast and then implodes this publicly. I think its the humor that attracts people to the story; everyone likes a good laugh and everyone likes to read about the high and mighty falling flat on their face. I suspect this is why the Greek myths have endured in popularity for thousands of years – at their heart many of the myths are stories about the mighty Olympian gods obsessing over pointless things and fairly often missing the mark in amusing ways.

In every amusing story, there are lessons that can be learned. The humor attracts you to invest the time reading, and a good writer simultaneously weaves useful (perhaps more serious) lessons into the humor that tickles your mind to think a bit more deeply after the smile of amusement passes. That is my intention as I draft "Up in Smoke" about the Amazon aggregation industry. I began this writing project rooted in my own experience at unybrands and it has since grown into something larger as I read more and more public material and have more personal conversations with others.

Amazon Aggregators

Firms acquiring successful brands on Amazon have attracted over $16 billion in capital raised. They are known as Amazon seller aggregators. The market had a breakout year in 2020 because of three factors: the pandemic accelerating spending on Amazon, Thrasio raising hundreds of millions of dollars, and Anker, an Amazon-native brand, going public.

Marketplace PulseMarketplace Pulse

I want to amuse everyone who reads what we are writing, but I also want to share important lessons about why the industry imploded. The amusing stories explain how the implosion happened, the lessons explain why the implosion happened. In December 2022 I planted the very first seeds of what I think are some of those lessons in three (3) posts that first appeared in LinkedIn: 1, 2, and 3. At the time I believed the Amazon aggregation industry would implode and I wanted to capture that in writing so that I could point to having predicted it. I then set aside my attention of the industry until 2024 when the wave of bankruptcies, forced mergers and other shenanigans rippled through the industry like a tsunami...

E-commerce acquirer Benitago files for bankruptcy | TechCrunch

The move comes after the New York-based company raised $380 million in equity and debt in the past two years.

TechCrunchChristine Hall

Top Amazon aggregator Thrasio files for bankruptcy

Aggregators like Thrasio raised billions of dollars from investors looking to cash in on the third-party seller rollup craze.

CNBCAnnie Palmer

BlackRock to Auction Amazon Seller Once Valued at $1 Billion

(Bloomberg) -- BlackRock Inc. has initiated an auction for German startup SellerX, taking the unusually aggressive step after a loan granted to the Amazon aggregator soured.Most Read from BloombergHow Air Conditioning Took Over the American OfficeA Guide to Urban Swimming in Europe, Beyond the SeineAn advertisement published Friday in the Börsen-Zeitung newspaper stated that the auction for the L Catterton-backed firm has been scheduled for Sept. 17 at a Berlin hotel. In Germany, such auctions c

Yahoo FinanceSpencer Soper and Libby Cherry

Win Brands Group had its third round of layoffs in 12 months

Shopify brand aggregator Win Brands Group has had three rounds of layoffs over the last year.

Modern RetailAnna Hensel, Cale Guthrie Weissman

...and it became obvious to everyone the industry was a dead man walking:

The Amazon Aggregator is Dead

The original class of Amazon Aggregators now span from bankruptcies to success to pivots. None call themselves aggregators anymore.

Marketplace PulseJuozas Kaziukėnas

So although there are many humorous anecdotes we can tell about the Amazon aggregation industry such as an e-commerce company listing Customer Service openings under 'No Department' – a telling website "fail" in my opinion about why the Amazon aggregation industry is imploding – we also want to weave into "Up in Smoke" serious lessons that future entrepreneurs may find useful.

The Why

I think these are the core reasons the Amazon aggregation industry imploded:

1. Hire the wrong leaders – mostly finance (e.g., Wall Street, Goldman Sachs)
2. Get the wrong investors – mostly finance (e.g., Wall Street, Blackrock)
3. Focus on the wrong things – spreadsheet numbers versus customers & product
4. Buy the wrong things – "me too" junk with no differentiation (but that look good on a spreadsheet)
5. Lack operational excellence – too much focus on financial engineering instead of running the business
6. No continuous improvement – rush ahead without learning
7. No patience – rush ahead with too many acquisitions
8. Too much headcount – it turns out buying lots of small companies doesn't create economies of scale (it actually does the reverse)
9. Too much debt – no money to invest in talent and product
10. Too much hubris – value uninformed opinion over hands-on experience

I would argue [1] and [2] are ultimately the root cause from which the other eight (8) flow from. As the saying goes, "fish rot from the head down". So, as we draft "Up in Smoke" to tell amusing "how" stories we also try our best to weave the "why" into those stories.

And you don't have to take just my opinion on the root causes; the Internet has plenty of material (including public court cases) and voices who came to similar conclusions – slower than I did because they didn't have the "in industry" experience. For example, I highly recommend Adam Heist's 17-min video on the bankruptcies that swept the industry.

The comments in Adam's video have one I will highlight:

@Burnenwhysee1 year ago (edited)

I worked in a senior role at an aggregator and I wont mince words, I spent more time doing useless corporate nonsense than actually helping triage business issues. Also there were a lot of leaders with little or no discrete amazon experience. The issues largely stemmed from that.

You can also find threads on Reddit that demonstrate the issues with the Amazon aggregators were noticeable for much longer than the investor base noticed:

bottledfan•1y ago•

I was interviewed by an aggregator a couple of years ago and I only had like 6 months Amazon experience at the time. The people who interviewed me both had insane Fortune 500 experience, Harvard MBAs, etc. I had to explain to them the most basic Amazon stuff to the point where I was basically leading the interview. It was surreal.

Took another job. Place didn’t last another few months and all they had been doing was hiring talent and buying dumb brands at their peak.

Epilogue

There is so much public information and so many possible stories to tell that it sometimes feels like an overwhelming task to write about this industry. When things feel overwhelming I try to fall back on three key things: 1) focus, 2) commitment, and 3) willpower.

I also listen to music. For this brief post, I listened to that lyrical terrorist Eminem. Adversity is a gift. There is no gain without the sweet pain of discomfort.