[The Street] Amazon-related retailer files surprise Chapter 11

[papy]

Amazon-related retailer files surprise Chapter 11 bankruptcy

Once again, 3P business existing solely on Amazon–or putting all of your eggs into Amazon’s basket, as a sales channel–is shown to be unsustainable.

The pandemic provided exposure, which could have launched some Amazon-owned-and-operated (O&O) private labels and/or third-party private labels to new heights. Unfortunately, for that to happen, these unknown brands would have to make an impression on customers.

In order for sales to grow, or at least stay steady when more choices were in stock, customers would need to like these brands enough to seek them out. Unfortunately for Benitago, a company that both creates and acquires brands specifically to sell products on Amazon, it could not keep that momentum up once the online retailer’s inventory returned to something approaching normal.

[papy]

Another article, clearly calling them an aggregator:

[TechCrunch] E-commerce acquirer Benitago files for bankruptcy

Indeed, in 2021, the e-commerce roll-up, or aggregator, market was growing rapidly and companies joined Benitago in raking in large amounts of venture capital to continue that aggressive momentum.

That said, e-commerce growth has been relatively flat these days. And that aggressive acquisition of third-party e-commerce brands? It has slowed down. There’s even been some consolidation within the aggregator sector. And few of these kinds of companies saw venture capital come their way in recent months.

[Lost_My_Marbles]

Like in the California Gold Rush (1848–1855), people flocked to the Amazon Banaza (2020-2021) not knowing the deep valleys of sorrow would soon follow.

{{{ sometimes is sounds like a book and … eh … ya … sometimes it sounds like a book }}}

[Roxy]

@papy

In order for sales to grow, or at least stay steady when more choices were in stock, customers would need to like these brands enough to seek them out. Unfortunately for Benitago, a company that both creates and acquires brands specifically to sell products on Amazon

What I find so interesting is that the people taking in all this money in venture capital seem to have such little knowledge about how Amazon works.

People don’t buy X brand product because they want/like it. They buy it because Amazon put it in the Buy Box or move it to the top of the search results. Unless you have a strategy to keep winning position #1, sales will go to whichever other seller Amazon favors at the time.

Even if people like your random brand of widget, most buyers won’t find you if they have to look beyond the ‘promoted’ seller and the top of the search results.

During the covid pandemic, people needed things and bought them from whichever retailer had them.

And after the pandemic (side note - covid cases are on the rise again), people buy them from whoever Amazon pushes them towards.

[GGX]

This is what happens when you take on debt to buy out fake “brands.”

When the only thing your “brand” did is put your trademarked name on a white label product, all someone needs to do is create their own “brand” on the same white label product, outbid you on the relevant keywords, and you’re now done.

[Image]

@Lost_My_Marbles

Like in the California Gold Rush (1848–1855), people flocked to… Amazon … not knowing…

And like the Gold Rush of that century, 175 years later, those that control the venue, (the land and mines in 1848) (the eCommerce Channel in 2023) make the money.

Others that make the money in 1848 are those that supply the miners with what they need. Today the suppliers that provide sellers what they need make the money.

The smart miners/sellers are few and far between. Most were/are just making others rich.

[GGX]

Private labeling generic products with crappy fake brands is actually a viable strategy. You keep costs to a minimum and try to get the momentum going. When the momentum stops for whatever reason (probably because of a competitor marketing aggressively, or amazon basics stealing your placement and your sales) you pocket the money and move on to another product.

The problem is when you have bonds and investors to pay back and the fake brand flops within a few months of you buying it. The key point – “keep costs to a minimum” – is violated by these aggregators.

[lake]

@papy

Benitago

Our Process - Benitago Group

Going those course gurus one better.

Wanna bet that they did not pay cash upfront for the Brands they acquired.

[packetfire]

This kind of “business” is nothing but a rug-pull that traded off low interest rates, and money looking for any kind of a return better than interest or bonds.

“…it raised $55 million in both equity and debt to fund acquisitions of brands built to sell on Amazon’s marketplace… Later in 2021, the company raised again, this time a whopping $325 million in Series A equity and debt…”

So, the investors got scammed, as there wasn’t any value being purchased here, and the sellers of “brands” got scammed too, because the “valuation” these bottom-feeders do barely pays for inventory on hand. This is very similar to “private equity M&A” type work, except there really wasn’t anything to sell in the way of tangible assets beyond the inventories themselves.