The Playbook for FBA Success - Mastering the 3 Es

Christian Umbach

There are about 130k FBA sellers in the US with annual revenues >100k, about 25k in Europe (numbers by hy). If we get to businesses above the $1M threshold, the air becomes a bit more thin: 10k in the US, 2k in Europe. For those who are seeking to prove that the Amazon marketplace aggregator model works, it’s about proving one thing now: making it work at scale.

The 3 Es of FBA Aggregator success: 

  1. Effectiveness to acquire 
  2. Efficiency to organize
  3. Efficacy to scale

Effectiveness to acquire 

As FBA aggregators are refining their algorithms to provide a great outside-in view to create a lead funnel for their M&A teams, effectiveness comes into play as that view is mirrored against the true state of those sellers. In the acquisition process it has proven effective to perform an automated data audit across the reports from Seller Central to validate the expected past performance and future potential of the company. 

Three focus points here besides the obvious gap analysis around financial performance are: 

  1. Current product momentum & competitive situation
  2. Understanding seasonality and externalities impacting product performance
  3. Margin development - mainly as a function of fulfillment and advertising spend

Those provide both a good snapshot of the business as well as a thorough basis for future modelling of the success of the brands (and hence the basis for earn out structures of sellers).

Efficiency to organize 

FBA aggregators are building out novel eCommerce structures on the fly. A new eCommerce infrastructure is coming into play which requires processes, organization, and integration of the individual parts into a common engine. Several established players have this in place already, yet processes are primarily manual. In parts, semi-automation has been established to support processes with alerts and automated flows to get a handle of the growing amount of products to be steered. 

Areas where this will be key:

  • Automating reporting flow across the various available reports (finance, accounting, inventory, FBA, settlement) to flow into data warehouses and ERP to establish a single source of truth that is controlled by the aggregator 
  • Enriching data with third party sources to broaden the intelligence and be able to dig deeper in the exploration 
  • Building out common flows in areas such as handling information regarding 
  • Customer
  • Products
  • Orders
  • Ad Channels & PPC 
  • Reviews & Feedback Management 
  • Inventory 
  • Fulfillment
  • Settlement
  • Reimbursements
  • Shipment & Tracking 

Such flows will become the spinal cord of the aggregator, AI can be leveraged overtime to support the automation and draw the attention of staff to outliers while having 80-90% of products move through a well-oiled machine. 

So, yes. Hiring people is a way to scale:

Image Source

But it will likely yield frustration:

A better path is possible:

Efficiency to scale 

Last but not least we have to think about scalability. Let's break it down to the most important areas where scalability is needed and how to achieve this:

  • Across geographies within a single channel: make your products available across any of the 17 Amazon FBA markets that appear to be a meaningful fit 
  • Scale across platforms: Leverage the integrations with Shopify, Walmart, Instagram/Facebook marketplace and others to expand your visibility across other channels 
  • Stepping up your advertising game: Not only managing (and mastering) advertising on Amazon itself but optimizing PPC per lead across supporting platform such as ad targeting across Facebook, Instagram, Google and Google/Bing searches 

All areas here follow a common pattern, organizing people, processes and technology as such that automation can be leveraged to guide teams towards focusing on the most critical parts of the business. Over time this means bringing in more and more intelligence around automations such that in the millions of products that are steered human focus is on the true outliers. 

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