Several of the assigned articles describe Amazon’s practice of offering private label products for sale directly in competition with very similar products being offered by third party vendors that con

New firms are raising billion s of dollars to buy up popular Amazon listings, minting millionaires along

the way. Here’s how it works.

By John Herrman , Published March 17, 2021 Updated Oct. 28, 2021

_________

Eco - Baby, TrailBuddy, Quility and TapeKing aren’t exactly household names, but they’re working on

it. Their products are among the most popular in their categories on Amazon , accounting for millions of

dollars in yearly sales.

They’re also owned and operated by a single company called Thrasio, which recently raised $750

million in financing. It’s just one among dozens of firms snapping up successful Amazon brands for

millions of dollars.

Several of the largest firms, includ ing Perch, Branded and SellerX, aspire to become, loosely speaking,

the Unilevers and Procter & Gambles of Amazon’s third - party seller economy.

For them — and for Amazon — 2020 was an undeniable boom year.

These companies are already reshaping Amazon in wa ys both visible and invisible to its customers, few

of whom have heard their names but plenty of whom have ordered their products. They’ve given

Amazon sellers a way to cas h out of their businesses and helped create a new class of listing flippers .

It’s an Amazon brand bonanza. How far will it go?

Building a Better Car Booster Seat for Dogs

A product can end up on Amazon in a few different ways. Much like a brick - and - mortar store, the

company maintains relationships with vendors, whose products it stocks and sells. Amazon also operates

dozens of private - label brands of its own , including Amazon Basics.

In recent years, though, most sales on Amazon have come through Amazon Marketplace, where millions

of outside sellers compete to find c ustomers. Many pay Amazon to store and ship their goods, making

them eligible for Prime shipping, through an arrangement known as Fulfillment by Amazon, or FBA.

These sellers gain valuable access to Amazon’s customers and logistics infrastructure, but they do most

of the work on their own: market research, making and sourcing products and taking individual fi nancial

risks, all to sell products that, as far as most customers are concerned, were purchased from Amazon.

Robb Green started selling on Amazon Marketplace in 2015, after years of working in dropshipping as a

“side hustle” to a job in sales. (“It’s 90 p ercent marketing and 10 percent customer care,” Mr. Green, 45,

said of dropshipping, a form of e - commerce in which sellers neither manufacture nor stock products,

rather shipping them to customers, on - demand, from suppliers.) Discouraged by the razor - thin margins and lack of control in dropshipping , Mr. Green started looking

into selling his own products. He took an online course — a “101 - level private - labeling education,

maybe 102” he said — and started trawling Amazon for product ideas.

He made a list and st arted reaching out to suppliers overseas; within months, he and a few friends had

made plans to attend the China Import and Export Fair in Guangzhou, a long - running trade show also

known as the Canton Fair, to meet with suppliers and research Amazon produc t ideas. (“Imagine three

football stadiums, but on multiple levels, all full,” he said.)

Mr. Green had zeroed in on a few product categories beforehand. “The beauty of Amazon is that you

know there’s demand,” he said. He focused early on pet products. Car booster seats for small dogs were

selling well, he’d learned, but the most popular versions on Amazon were, according to reviews, flimsy

and only suitable for very small dogs. At the trade show, Mr. Green met with a supplier who could make

something sturdi er. He visited a nearby factory and left confident that he had a shot at dominating this

subcategory of a subcategory on Amazon.

The first few months of the business were “brutal,” Mr. Green said, and the learning curve steep. Once

his item started selling well, however, things got even harder.

“When you have an inventory - based business, most people think only about the first order,” Mr. Green

said. With long lead times from the factory in China, he was almost immediately trying to figure out

how big his se cond and third orders should be. Underestimating would hurt not just sales but the overall

status of his Amazon listing; overestimating would drain him of cash upfront, and he would incur further

charges from Amazon for storing excess inventory in its ware houses.

Growing pains aside, Mr. Green was encouraged. His plan, to the extent he had one, had worked; based

on sales of a few dozen dog car seats a day, his listing was reliably generating $5,000 in monthly income

for him.

“If I can do this with a smaller - demand product, I can do more,” he remembered thinking. He started

branching out almost immediately, quitting his job and scouring for more promising Amazon

subcategories in kitchenware, supplements and coffee gear. He believed he had a playbook, maybe a

knack. What he needed next, however, was capital. Investing more in Amazon, he began to realize,

would first require finding an exit.

Flipping the Billion - Dollar Amazon Brand

Through Empire Flippers, a firm that connects Amazon sellers with potential buyers for their businesses,

Mr. Green so ld the dog seat business for “low six figures” to an individual investor interested in using it

as a steady stream of income. In the years since his trip to Guangzhou, he has assembled a small team

with the goal of building, and then flipping, more FBA bus inesses.

“FBA businesses aren’t great for cash flow, particularly in the early days or during a period of rapid

growth,” said Justin Cooke, one of the founders of Empire Flippers . “Many entrepre neurs find

themselves recycling profits into inventory and product creation and they don’t get an opportunity to

realize the value they’ve created.” FBA deals listed on Empire Flippers, Mr. Cooke said, have nearly doubled in average size since 2018.

The company handled $15.7 million in FBA sales in 2018, $28 million in 2019 and $55.5 million in

202 0.

“By the middle of 2020 we were working with dozens of private equity - backed roll - up companies

looking to follow the Thrasio and Perch examples and capitalize on the trend,” Mr. Cooke said.

Aggressive bids from newly flush aggregators, including Thrasio, have driven up prices, as has a broad

increase in sales across Amazon Marketplace during the coronavirus pandemic.

Juozas Kaziukenas, the chief executive of Marketplace Pulse, an e - commerce research firm, estimates

that Marketplace sellers moved more than $300 billion of product in 2020 — a figure that would make

Amazon Marketplace, in his words, “the 42nd largest economy in the world by GDP. ” (As of 2021,

Marketplace accounts for more than half of products sold on Amazon.com and is growing at a faster ra te

than Amazon’s own retail business, according to the company.)

Thrasio’s internal estimates, based on the number of distinct households to which is has shipped

products, place its products in 1 in 10 American homes.

“Everything we buy is a solution to a problem of some kind,” said Joshua Silberstein, a founder of

Thrasio. Much of what he looks for in acquisitions is obvious: a good product, differentiation, a solid,

scalable supply chain. Other factors are more specific to Amazon. Good reviews and high search

placement are extremely valuable and take time to acquire. Products th at need to be frequently changed

or refreshed are more challenging, for related reasons. “We wouldn't do something like drones,” Mr.

Silberstein said. “No matter how good a drone is, someone else will come up with a better one.”

Not so for a pet deodorizer like Angry Orange, an acquisition which Thrasio frequently points to as a

success story ($30 million in revenue last year, from a $1.4 million purchase in 2018), or TrailBuddy, its

brand of hiking poles, or for its extensive listings in bedding, crafting supplies, coolers and thermoses.

These priorities give Thrasio’s portfolio a peculiar and distinctly Amazonian quality: a little bit Bed

Bath & Beyond, a little bit QVC, a little bit Home Depot, a little bit Dick’s Sporting Goods, with a dash

of randomized chaos. (Air filters; door stoppers; an electric brush for car wheels, as seen on “Shark

Tank.”)

Mr. Silberstein believes there are plenty more healthy Amazon businesses to acquire and owners ready

to sell. “When you’re really successful on Amazon, it migh t make up 95 percent of your net worth,” he

said. “You’re in a place where it’s kind of hard to diversify, and then what if something goes wrong?”

Thrasio’s pitch is, basically, a payday and a promise that the business is in good hands. Many of its 700 -

plu s employees have experience in Amazon’s often unpredictable and unforgiving Marketplace, which

is an advantage the company maintains will set it apart from some newer competitors, especially private

equity firms excited about what they understand to be a n ew asset class: Amazon listings.

There are, already, a few extraordinary Amazon seller success stories, perhaps most notable among them

Anker, the electronics brand that made its name selling batteries; it is now traded publicly on a Chinese

stock exchange and its products are carried in Apple retail stores. Still, Anker is at its core an Amazon -

native brand — one with more than $1 billion in sales last year. Like individual sellers, Thrasio’s business is still deeply intertwined with Amazon’s, and its continued

success is to some degree dependent on Amazon’s desires and whims.

“The way we think about Amazon is very simple,” Mr. Silberstein said. “Our interests are aligned.”

Companies like Thrasio, he suggested, are professionalizing Amazon Marketplace, moving more

product and providing a more reliable experience to customers. “At the end of the day, what they want

and what we want are very very similar. I worry about everything, but at the same time, we’re built on

the right values. The underlying business model makes a ton of sense. It doesn’t hurt that we have a

billion dollars in cash.” (“Whether they are n ew entrepreneurs just getting started or larger companies

with families of brands, we welcome the opportunity to work with all sellers who share our commitment

to delighting customers with great product selection, prices, and convenience,” said Joel Sider, an

Amazon spokesman.)

That billion dollars raises other prospects, however. “Once you raise this level of capital, the only

acceptable outcome is some sort of exit,” said Mr. Kaziukenas, of Marketplace Pulse. Indeed, Mr.

Silberstein said, attempting to ta ke the company public is, at this point, “an inevitability.” Competition is

fierce. Prices for some listings are crossing into speculative territory and raising concerns about

something of a mini - bubble for Amazon listings.

“It’s not peaking yet,” said Mr. Kaziukenas. “I think the peak is going to be when some of these

aggregators start to fail.”

Losing Sleep Over Snuggle - Pedic

In 2014, Rick Swartzburg was struggling to keep Relief - Mart afloat. It sold pillows, mattresses and

therapeutic products. The relea se of the Air - Pedic, a long - delayed foam mattress design, barely kept the

company out of bankruptcy.

Mr. Swartzburg soon had a new problem, however, at the California factory where his mattresses were

manufactured. “We were selling a whole lot of mattresse s,” he said, “but we had a lot of leftover foam.

It was a huge buildup, just bay fulls of this stuff,” he said.

“Meanwhile, I’m hearing people are doing really well on Amazon,” he said. He had listed products

before, with underwhelming results — but this time decided to commit.

Mr. Swartzburg created a new brand, Snuggle - Pedic, under which he would sell ther apeutic foam

pillows made from the extra material. They would be priced lower than his company’s other pillows but

higher than many competitors on Amazon, at around $80. It was, effectively, a new division of his

business — new name, different sales channe l, similar product.

After tweaking the product based on customer feedback and accumulating a critical mass of positive

reviews the pillows started selling briskly. It wasn’t the first time Mr. Swartzburg had marketed a new

product online, but the experienc e of doing so on Amazon was jarring.

“The intricacies of running an Amazon business are a whole world of difference,” Mr. Swartzburg said.

Among the constant worries: potential sabotage from competitors; bad reviews; mysterious fluctuations

in your placeme nt on Amazon’s algorithmically generated search and product listing pages. Using FBA

makes it easier to scale a business, which is of course good, but a flood of sales creates an enormous amount of customer service work. “Even though it’s essentially their customers, they’re making you

responsible for the customer experience,” Mr. Swartzburg said.

He felt the loss of control acutely. “You build your pallets up, you ship them to Amazon, and then from

there they turn into FBA. Suddenly, he said, “trying to ke ep Amazon happy was more than a full - time

job in itself.”

Mr. Swartzburg had seen his plan through to success, but was now looking for an exit. “I had heard of

Thrasio and researched them in particular,” he said. He approached the company, and eventually T hrasio

acquired Snuggle - Pedic, which by then sold mattresses as well, in a deal that, according to Thrasio, will

total “over $10 million” — a number, however, that’s substantially contingent on the future performance

of the brand.

“I’m obviously still helping them,” Mr. Swartzburg said, including with manufacturing, but the sale

gave him the “break that I ne ed.” Much of the money he and his partners made from the sale, he said, is

being reinvested in new products, payroll and rent for his brick - and - mortar locations.

Mr. Green, of the dog booster seats, is currently in the process of selling another Amazon lis ting — a

coffee gadget. He has spent recent weeks reconsidering his strategy, however. He knows that investors

and aggregators who might buy his listings believe they can increase their value. He knows that money

is flooding into the category. He believes that one thing separating him from them is access to the capital

needed to go after bigger product categories, take bigger risks and make bigger orders — he’s the one

who knows how Amazon really works, in other words, not them.

“I could raise money, launch new brands, acquire more brands and keep going,” he said. And then what?

“The goal would be to go public in two years,” he said, with a prospector’s confidence. “Maybe via a

SPAC .