The Amazon marketplace has become increasingly competitive, with profit margins shrinking and challenges mounting for cross-border e-commerce sellers. Beyond conventional conservative strategies, how can sellers find new growth opportunities? Those focusing on vertical categories may discover better alternatives.
Cashing Out: A $4 Million Strategic Pivot
Tom, an established Amazon seller in beauty and health categories, successfully sold his brand to an aggregator in late 2020 for over $4 million. Rather than exiting e-commerce completely, Tom used this capital as seed money to build a true DTC brand, reducing reliance on Amazon's platform while creating more sustainable brand value.
This case reflects a growing trend where Amazon sellers strategically divest portions of their business to generate liquidity for developing other promising brands or projects—a calculated transformation rather than simple exit.
The Cash Crunch: Small Sellers Struggle
In May, Amazon announced increased FBA fulfillment fees across European markets (UK, Germany, France, Italy, Spain) by 4.3% to offset fuel and inflation costs, with U.S. rates rising $0.10 per item. This exacerbated existing pressures on sellers.
Many sellers report generating millions in revenue while lacking basic working capital—a paradox stemming from pandemic-era demand surges giving way to persistently high costs for materials, shipping, and advertising. With limited pricing power and intensified price wars from new entrants, net profits continue eroding.
Even Major Sellers Face Losses: Q1 Earnings Sound Alarm
Preceding the May holiday, multiple large cross-border e-commerce sellers released disappointing Q1 2023 earnings, most showing revenue growth without corresponding profit gains—or outright losses. For instance, publicly traded Jame Technology reported a net loss of $1.3 million, plunging 165.71% year-over-year.
If major sellers face such difficulties, smaller operators endure even greater pressures—from broken cash flows to inventory pileups and declining margins. Consequently, more sellers are engaging with brand aggregators that entered the market recently, selling partial brand portfolios to reallocate resources toward higher-potential assets.
Brand Acquisitions: Relieving Pressure Through Strategic Divestment
Unlike cash-strapped sellers, brand aggregators command substantial capital. Marketplace Pulse data shows Amazon aggregators have raised nearly $15 billion collectively, with leading firms securing up to $3.4 billion individually.
However, transactions aren't always smooth. Sellers often hesitate to part with brands they've built, sometimes perceiving valuations as undervalued. Common reservations include:
- "If it's a quality brand, why not continue operating it?"
- "The offered price fell short, and current growth remains strong—why sell?"
- "After years of effort, abandoning the brand feels unjust."
While understandable, brand sales may represent prudent strategy for some sellers, particularly those managing multiple brands, offering three key benefits:
- Liquidity injection: Immediate cash relief supports other business development.
- Portfolio optimization: Concentrating resources on higher-potential brands accelerates growth.
- Risk mitigation: Reducing brand count lowers exposure to marketplace uncertainties like account suspensions or economic downturns.
Moreover, many sellers lack resources to fully develop their brands—precisely where aggregators contribute capital and operational expertise to unlock greater potential.
Aggregator Advantages: Capital Meets Operational Expertise
The influx of brand aggregators includes China-focused firms like markai, which specializes in acquiring small-to-medium Amazon brands. Having secured millions in seed funding, markai recently completed another acquisition in Shenzhen.
Distinctively, markai's leadership combines U.S. and Asian expertise—co-founder Ren Chenyu brings strategic consulting experience while Tim Spencer specializes in cross-border M&A. With offices across China, markai emphasizes localized decision-making and operational efficiency.
The firm typically offers 3-5 times a brand's annual gross profit, plus 1-2 years of profit-sharing if growth continues post-acquisition. Sellers providing ongoing consulting receive additional compensation. Data security concerns are addressed through confidentiality agreements and strict access controls.
Conclusion: Diversified Strategies for Challenging Times
Cross-border e-commerce undergoes profound transformation. Amid intensifying competition and rising costs, Amazon sellers must explore new approaches. While brand sales aren't universally applicable, they offer certain sellers strategic opportunities to alleviate pressures, optimize assets, and pivot effectively. In this challenging environment, diversified strategies become essential for sustainable success.