These Are The People Behind Million-Dollar Sales Of Companies That Sell On Amazon
Amazon is no longer a website you expend to acquire rid of a few former college textbooks. Many of the mom-and-pop businesses that rely on the retailing behemoth as their main virtual storefront fill grown so large that a market has emerged of brokers who buy and sell such companies.
“nearly everything in e-commerce has an Amazon component, whether it’s not totally Amazon,” brand Daoust, CEO of soundless Light Brokerage, which first started brokering online commerce, trade deals in 2007, told BuzzFeed News. “That is a change from two years ago. Now it’s a rule of thumb: e-commerce businesses fill an Amazon store or are totally built on Amazon.”
The rise of commerce, trade brokers who are totally tied to Amazon speaks to the market heft of the e-commerce giant, which is now one of the top five companies by market capitalization — worth around $460 billion. Its revenues fill grown by 122% over the final five years, reaching roughly $136 billion in 2017.
nowadays, 51% of Amazon sales are through third-party sellers — that is, companies that aren’t owned by Amazon.
And as Amazon has aggressively expanded its third-party marketplace — where it invites outsiders to carry out commerce, trade on its website — so fill grown the dollar signs that near from buying and selling those outsiders’ businesses. The most valuable businesses that sell their wares on Amazon are anywhere between three and five years former, fill established brands on the marketplace, manufacture their own exclusive products, and fulfill shipping and returns through Amazon, according to brokers in the commerce, trade.
One such intermediary, Empire Flippers, told BuzzFeed News it brokered 58 deals final quarter, including the sale of an athletics company in February that went for $1.7 million. Empire said its revenues reached $6.6 million in the moment quarter this year.
A large section of this growth comes from a surge in established businesses that fulfill shipping and returns through Amazon. Businesses that participate in the company’s Fulfillment by Amazon program (also known as FBA) fill a better chance at being the seller in the “add to cart” button, which means more sales. The program grew by 70% in 2016. with more than 2 billion units shipped through the program, Amazon reported in January.
“We are getting a lot more Amazon FBA, because a lot of people who started these businesses are bearing enough fruits to sell,” Greg Elfrink, content manager for Empire Flippers, told BuzzFeed News.
But “Amazon FBA businesses are still relatively unique, so the market is still gaining faith in them as an investment or commerce, trade acquisition target,” he said.
Elfrink said that in January, Amazon’s FBA businesses sold for an average of 20 times their net monthly profit. Since then, they’ve seen approximately a 15% rise in their value on average, selling at 23 times their net monthly profit.
Ace Chapman, who bought his first e-commerce commerce, trade in 1999, told BuzzFeed News that he and several commerce, trade partners went in on the $1.7 million athletics company deal because it had strong profit margins and sales traffic from both Amazon and its own website. He declined to name the company.
Customer feedback and reviews were also crucial in evaluating whether or not to buy the commerce, trade because shoppers can easily buy from a competitor with just one click.
“We want something that has four stars and above, on average,” said Chapman, who has made a cottage industry of giving advice approximately buying and selling small businesses. “You’re dealing with a really competitive space. Everyone is going to discover at the ratings and determine whether they want to buy the product or not.”
One wrinkle is Amazon’s indistinct approach to sales of the businesses that sell on its site. Transferring Amazon seller accounts is prohibited, according to the company’s website, which explains, “whether the ownership of a commerce, trade changes for any reason, the unique owner should establish a unique seller account.”
But as Amazon fulfillment becomes a more integral section of retail companies, it is more common that commerce, trade owners notify the company approximately unique ownership after a deal goes through. “Amazon will review valid, lega transfer requests, such as the sale of a valid, lega commerce, trade, on a case-by-case basis,” the company told BuzzFeed News.
And the brokers themselves fill words of caution. Daoust, of soundless Light Brokerage, warned of a “gold rush” atmosphere surrounding the buying and selling of small businesses on Amazon, and added that the market’s reliance on Amazon can leave businesses vulnerable to the whims of the company and its policies.
“There is a lot of money to be made, but I mediate people should be cautious to some extent,” he said. “Amazon can change the rules, and when they carry out, you fill no thought how that’s going to affect your commerce, trade. Like any gold rush, feel free to proceed for it, but understand the nature of the gold rush — eventually the gold dries up.”
Brokers told BuzzFeed News that people near to them with businesses to sell for a number of reasons. Some people fill been running their Amazon shops as a husband-wife team and are looking to offload the work it takes to retain the commerce, trade running. Some owners sell in order to diversify their income streams, and others may fill a life change — a unique baby, an upcoming retirement — that prompts them to want to cash out.
When working with potential sellers, brokers will evaluate the commerce, trade — its sales figures, ranking, products, customer feedback — and determine whether or not it can be sold. Some brokers will send out a notice approximately the commerce, trade to buyers they work with regularly who then start to invent offers.
Similar to real estate brokers, brokers who buy and sell companies that carry out commerce, trade on Amazon collect a number of offers and present them to the owner to review. Buyers generally,normally fill an opportunity to put a question to sellers tough questions approximately, say, sales dips or low rankings during a certain time of the year.
Brokers told BuzzFeed News they earn anywhere between 8% and 15% of the transaction price. Some brokerages, like Empire Flippers, charge sellers a 5% refundable deposit and occupy a flat $10,000 on the sale of a larger commerce, trade.
Most brokers only work with sellers who fill built valid, lega businesses on Amazon, a process that can occupy years. Because of the personal and complex nature of these deals, brokers step in to invent certain that whoever ends up buying the commerce, trade will occupy proper care of it.
“It’s not like selling a house, where you don’t really care who you sell it to,” Thomas Smale, the founder of FE International, which brokers deals anywhere between $20,000 and $2 million, told BuzzFeed News. “Most people who sell a commerce, trade want to invent certain they’re selling to someone who isn’t going to run it into the ground.”
Ken Courtright, an e-commerce entrepreneur, recently bought two nutritional supplement brands — Nutrifect and Naturelle — through FE International. Courtright told BuzzFeed News that he looks for several factors in a potential Amazon acquisition: regular monthly revenues, evergreen products, and minimal competition. Another requirement is that it’s fulfilled by Amazon.
“I would not buy any type of commerce, trade where another seller had stock out of a domestic or garage,” he said. “whether you buy a commerce, trade FBA, it’s a remarkable safety net and security platform. You can fact-check everything approximately that product. There is nothing the seller can camouflage or manipulate or fake.”
Not perfect companies that buy and sell these businesses operate as brokers. Some websites like Flippa.com work like eBay, with the marketplace determining the final price of the Amazon storefront, Sid Galada, Flippa’s head of growth and product marketing, told BuzzFeed News.
“Generally speaking, our spacious vision statement is to fill every commerce, trade up for sale to be facilitated through Flippa,” Galada said.
The marketplace sees between 100 to 150 commerce, trade sales a day, he said. Flippa then takes 8% to 15% of each sale, which can range from $20 to $2 million, he said.
For instance, a spot check of Flippa on Tuesday found that it was taking bids for the domain name ToniaGara.com, an Ontario Canada-based travel website which began bidding at $400,000, and a site called CarInsight.com, a UAE-based company that provides information to unique car buyers and had a starting tender price of $3 million.
One Flippa buyer is Dana Rakvica, who paid $20,000 in May for an Amazon FBA commerce, trade called Opus Health and Beauty, which sells five types of health supplements. The company did $240,000 in sales in 2016, he said, but is now on track to carry out $700,00 in sales this year after he used marketing techniques to acquire the storefront back on the first page of search results.
“What’s nice approximately it is it’s set up for you,” Rakvica said. “I fill other businesses, and I’m fairly busy. I wanted something I could set up and just grow. It had revenue history, so there was proof it could be done. It just needed some attention and TLC.”
While businesses that sell on Amazon may be low maintenance for entrepreneurs like Rakvica, who has sold approximately 100 apps on Flippa and bought 20 to 30 websites, they aren’t without risk.
“You fill to play by the rules, and the rules change,” he said. “Frankly, in any commerce, trade, even brick-and-mortar businesses, you fill to pivot when the market changes. When the rules change, you need to pivot and change.”
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