Ecommerce Rollups

February 23, 2021

by a searcher from New York University - Leonard N. Stern School of Business in New York, NY, USA

Anyone executing an ecommerce / amazon roll-up? Similar to Thrasio, Boosted Commerce, Perch, Heroes? Looking to make a similar play with much smaller tickets where the skills and capital gap of the entrepreneurs is much more acute.

Would love to trade notes. Thanks!

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Reply by a searcher
from Massachusetts Institute of Technology in Miami Beach, FL, USA

I’ve looked at a few on the small side and I thought smallness was the inherent problem. FBA in particular is extraordinarily competitive and fickle. These companies sell at low multiples because there’s a huge likelihood rankings fall off the map, competition enters once sufficient size is reached, Amazon makes its own product, and paid marketing channels (eg affiliate, Instagram ads, etc) become too expensive. I bet the impression that the FBA roll-up companies (Perch, Boosted, etc). focus on relatively larger acquisitions because there’s more clarity on the value of the brand and I’d assume a longer track record.

I don’t like to say “Don’t do it! It’s a terrible industry!” because I could be wrong. A few ways it could work: buyer-friendly earnings to deride the purchase, hyper-niche products that won’t grow much but also won’t attract attention of competitors, or what I’d call a “positive expected value” strategy like venture capital (eg 70% of your acquisitions go to zero but the 30% that continue operating more than make up for the losses). But competition in FBA is frequently a company-killing race to the bottom in price; whatever you do, have real reasoning why you will survive!

Reply by an intermediary
from University of Western Australia in London, UK

I agree, smaller acquisitions have so many more variables and greater risks. There is a reason the professionals (like the companies you've mentioned - Thrasio, Perch, Boosted, Heroes etc) focus on larger deals. This is not to say it can't be done: along with the greater risk comes even greater opportunity - usually even more variables to optimise than in a larger acquisition. And diversifying in a kind of portfolio strategy like Charles describes above is a good way to reduce risk. But I would be concerned that each small acquisition could potentially take as much of your time (to grow the business post-acquisition) as a larger one, leaving you investing more resources (your time / employees') for lower returns.

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