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Divide and conquer, or unite and build? If you have been in the ecommerce or startup space for a while, you might have heard of a few ways businesses can secure funding and resources to achieve scale. In this article, we discuss the Ecommerce Aggregator model, and explore whether it might be time for your brand to consider an acquisition.
What is an Ecommerce Aggregator?
The pandemic brought a slew of new entrants online in pursuit of surging demand. With nothing left to lose, many entrepreneurs took advantage of the uncertain times to test out business ideas and address new market gaps. However, as businesses are now reaching the limits of what they were able to achieve on their own, brands are finding themselves faced with the question, “What’s next?”.
Industry consolidation is no foreign concept — we have seen it in industries like Oil & Gas, and even in Fast Moving Consumer Goods (FMCG), where large conglomerates like Unilever and P&G house a plethora of established brands. The aggregator model is built upon similar foundations, where it focuses on the acquisition, operation and scaling of brands to enable economies of scale and supercharge their growth.
A common source of confusion is that the term “aggregator” has been used fairly loosely to describe any business that brings other products and services together to enable consumers to make purchases from a single parent brand and source. Below are some examples of models commonly associated with the term:
Category A (Marketplaces) — Marketplaces like Amazon, Shopee, Lazada, and Tokopedia are often mistakenly referred to as aggregators as their platforms serve as a single point of contact for consumers to browse and make purchases. However, unlike typical aggregators, the brands on these marketplaces are owned and operated as individual businesses, and have little affiliation to the Amazon/Shopee brand. While the marketplace may provide services related to account management, its expertise is limited to its capacity as a middleman for transactions.
Category B (General Aggregator) — Another related aggregation model is that of Airbnb and Grab (Transport), which brings disparate, unbranded business providers together under a single service provider and primary brand. In contrast to Category A, these General Aggregators unite a portfolio of small businesses or individuals selling various products or services under a common name, where branding and business development is only done for the primary business. In this case, the primary business acts as a partner rather than a middleman to list these nameless businesses on their platform — the business providers rely on the primary business’ brand equity to bring in demand, and the primary business relies on providers in its portfolio to do the legwork.
Category C (Ecommerce Aggregator) — This category refers to the model that we see with Una Brands and other Ecommerce Aggregators like Thrasio or Berlin Brands Group. Unlike General Aggregators and Marketplaces, Ecommerce Aggregators operate on the basis of majority stake acquisitions (51%-100%). In this case, while acquired brands retain their original brand identity, the parent entity takes over operations, and in most cases, brand management. To draw an analogy, these Ecommerce Aggregators can be described as “aspiring digital Unilevers”, where the desired end state is for the parent entity to house multiple ecommerce brands with shared infrastructure and technology to achieve economies of scale.
Now that we have established what defines an Ecommerce Aggregator (Category C), let’s dive deeper into what this model entails.
Who do Ecommerce Aggregators work with?
As seen above, Ecommerce Aggregators operate on the basis of a 100% acquisition, where acquired brands gain access to a wealth of knowledge and resources. Post-acquisition, brands are assimilated into a broader portfolio of category-leading brands to lower costs and improve efficiency through economies of scale, and leverage cross-selling opportunities. Brand owners also benefit from the upside of this transaction, where they not only receive a lump sum cash payout upon closing, but also enjoy profit-sharing options as Ecommerce Aggregators do all the heavy-lifting.
While some aggregators (e.g. Rainforest, Hypefast) focus on acquiring niche brands, the vast majority are category-agnostic. If you own a private label with a strong following, and are looking for ways to unlock the next stage of growth, working with an Ecommerce Aggregator like Una Brands might be right for you!
For more details on investment criteria, check out our previous blog post.
What happens to me and my team?
One common question raised by brand owners in the early stages of an acquisition is, “Why should I sell my brand and give up everything I have built?”. Here at Una Brands, we understand the power of great brands, and we respect how much it takes to get a brand off the ground. That’s why we always take extra care to provide brand owners and their teams with the option to stay involved and benefit post-acquisition as Consultants or Brand Managers.
How do I know if an Ecommerce Aggregator is right for me?
In all honesty, there is no foolproof way of knowing if your brand might be ready for an acquisition with an Ecommerce Aggregator. Regardless of whether or not your brand has reached the stage of looking for an exit, we understand that for most brand owners, there will always be that big “what if?”.
That said, if your “what if” includes wondering how you can bring your business to the next level by minimising risks, improving efficiency, and tapping on industry best practices, we might just be able to help.
Chat with us to find out how Una Brands can help supercharge your brand’s growth across different channels and markets, and receive a free valuation. We only need 30 minutes.
Enjoyed this piece? Check out our earlier pieces on our acquisition process at the links below:
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