Why Amazon aggregators are acquiring brands with brick and mortar partnerships
Amazon aggregators are obsessing over brick and mortar retail.
Two major players in the space, Thrasio and Boosted Commerce, have acqui-hired businesses in recent weeks to gain partnerships with big box, DIY and healthcare retailers. Thrasio in December announced that it had snapped up the security briefcase and storage solutions brand IdeaStream. The Cleveland-based company sells its products at Walmart, Walgreens, Lowe’s and Rite Aid. While Boosted in January acqui-hired a haircare brand called Foxy Bae whose products are stocked at TJ Maxx, Marshalls, Target and CVS.
After sprouting out of an aggregator space focused on supercharging e-commerce brands, both companies are now looking at growing their physical retail presences. By onboarding brands and personnel from companies with established brick and mortar relationships, they are hoping to bring even more of their portfolio to traditional retailers. It helps that everyone from big boxes to pharmacies to department stores have spent the pandemic looking for new and emerging DTC brands to remain relevant and boost their merchandising.
Experts claim the trend marks the latest phase of growth for aggregators as they seek to turn their best products into full-fledged brands — a move that could see them behave more like behemoths like P&G. But, they warn it will also come with added costs as a result of completing large volumes of orders outside of Amazon’s logistics network.
“As we see with large CPG companies, the goal is to have less concentration with one specific vendor,” Rob Salmon, head of research at the e-commerce investment bank Global Wired Advisors, explained. “Though they are still targeting successful brands on Amazon, they are looking for that hero SKU to expand into other channels.”
Thrasio said that brick and mortar retail is a key part of its strategy. In less than four years, the Boston-based consumer goods company has become the biggest aggregator in a crowded field in terms of capital raised, with $3.4 billion in funding to date. The company owns 200 brands including pet deodorizers, hiking products and toys. Some of those products are already stocked by retailers like Target, Best Buy and Victoria’s Secret. Its Ideastream acquisition is designed to scale its physical retail showing, according to Thrasio President Danny Boockvar.
“That was not a standard acquisition for us,” he said. “We usually do pure takeovers, but this time we brought on the whole team because we are planning a rapid expansion of our products into brick and mortar stores.”
The Ideastream acqui-hire gives Thrasio access to the briefcase company’s accounting and inventory systems, which will be incorporated with its proprietary tech stack. The platform helps the aggregator to manage all parts of its brands’ operations, including inventory, supply chain, marketing and international launches. In addition, Ideastream’s staff will be added to Thrasio’s brick-and-mortar retail division.
It is also hoping to boost brand exposure by capitalizing on the links between online and offline retail. “We see that if you put an item in hardware stores in three zip codes in Alaska, the online searches tied back to those areas go up exponentially,” Boockvar said. “They are interconnected, not cannibalistic, and they feed off each other.”
For its part, two-year-old Boosted Commerce is using the data from its roster of 40 brands to find cross-selling opportunities in physical retail. The company’s products include Luna weighted blankets, several skincare brands and bath and potty items for babies.
“We try and gain experience with demographics and vendors within our verticals to find ways to package our other products to them,” Keith Richman, co-founder of Boosted Commerce said. “For instance, a baby’s bathtub and potty training products go well together and we want to leverage that type of cross-promotion.”
Boosted is hoping that its acqui-hire of Gen Z female haircare brand Foxy Bae can help it to get even more of its portfolio in front of shoppers at stores like TJ Maxx, Marshalls, Target and CVS, among others. Foxy Bae currently generates half of its revenue from direct-to-consumer sales on its website. Boosted is banking on retailers being drawn to the brand’s young consumer base as they look to re-capture a demographic lost to fast fashion e-commerce companies like Shein, Richman said. As part of its existing playbook, it will then pitch other brands from its portfolio to those same stores. Boosted has 1 million people on its customer database of email and text marketing info.
Like fellow aggregator Thrasio it is also bolstering its brick and mortar workforce through the acqui-hire. Richman said that Foxy Bae’s LA-based team of 30 staffers will easily fit into roles at the aggregator, which has about 60 vacancies at the moment.
Both Thrasio and Boosted are part of an aggregator market that is looking for new ways to grow beyond Amazon’s massive marketplace, according to Emmett Kilduff, co-founder and CEO at The Fortia Group, an M&A firm that specializes in e-commerce exits.
“Ultimately, Amazon aggregators are seeking to acquire strong brands that can be truly omni-channel, not just Amazon only,” Kilduff said. “The next step is for aggregators to begin to build out their offline capabilities.”
That strategy began with aggregators targeting DTC brands and is now expanding to encompass brick and mortar retail as the startups mature and seek to diversify their revenue base, according to Salmon of Global Wired Advisors.
One challenge that is likely to emerge from this expansion in the coming years is how aggregators deal with the large volume of orders through big boxes and other retailers. Without Amazon’s fulfillment capabilities for help, only the biggest aggregators that have invested in their own in-house and third-party distribution and logistics infrastructure in the U.S. will be able to handle the influx of demand from a successful brick and mortar wholesale strategy, Salmon added.
For Boosted’s Richman, the benefits of retail partnerships are straightforward. “It provides external validation,” he said. “It’s a differentiator when people view your products at a retailer’s store.”