Historically Amazon and eBay sellers were born out of bootstrapping. Same happened in the supporting market. But increasingly so we started to notice venture-backed businesses make moves in the market. Both as sellers, and as solution providers to other sellers.
Historically Amazon and eBay sellers were born out of bootstrapping. Existing brick-and-mortar stores would start selling on marketplaces, grow sales over time, and eventually become sizable marketplace sellers. Some started off by listing products they bought in closeout sales, grew sales and hired people, finally turning it into a standalone business.
Same happened in the supporting market. Software products were released after sellers have perfected them for themselves, consulting and management companies were launched after sellers had done it for long enough. It is hard to find any company in this market which does not have an ex-seller as part of it, some even have active sellers.
But increasingly so we started to notice venture-backed businesses make moves in the market. Both as sellers, and as solution providers to other sellers.
This is especially changing the way sellers grow. Most retailers are cashflow-bound, and are only able to grow as fast as profit allows, thus often not being able to grow beyond linear growth. This is why every marketplace, and external providers, have grown working capital funds - if managed properly they allow sellers to grow beyond their own capital.
But the new breed of sellers are not limited by this, and often have the resources to skip years of bootstrapping. It is not uncommon to see a seller achieve $10 million in yearly sales in less than a year. These sellers often have experience/access to supply chains which include technology, exclusive deals, international importing, own factories outside of US (China for example), etc.
Many things are different when operational experience, and capital is combined. A seller making private label products which also happens to own a factory in China, have deals with logistics companies, and capital to try a container’s worth of produces every month is not the same as one browsing alibaba.com for ideas. Some of those sellers do not have experience in retail altogether, and are much more technology companies than anything else.
This is not something we can measure as the origin story of each seller is often unknown, as are funding sources. But we’ve been listening to many conversations in the industry, and this topic has become more common. It is especially interesting to see VC-size firms start to actively look for ways to enter the market of marketplaces, as they become aware of the opportunity.
Even the market for seller acquisitions is heating up. While most sellers are likely not viable acquisition targets, many top private labelers are, as are other differentiated, and strong sellers. Leading marketplaces for selling, and buying businesses like Flippa, and Empire Flippers have both been active listing many Amazon businesses.
CEO of WPP, world’s largest ad agency holding company, Martin Sorrell was asked “What worries you when you go to bed at night and wake up in the morning?”. He answered with one word: Amazon. Then just a few months later they acquired consultancy Marketplace Ignition, founded by ex-Amazon Eric Heller. Two months later it was joined with Possible, a performance marketing agency WPP also owns, to “offer clients a shared service combining media and e-commerce across the entire Amazon ecosystem.”
We think there is going to be a lot more of these big plays in the market. Sellers, brands, software firms, consultancies, are all likely targets for both starting with sizable capital backing, but also as acquisition and/or merger targets.
For a market which has over the years largely been ignored by the outside world, this is changing for the better.