NUMBER OF $10M+ US AMAZON SELLERS INCREASED BY 40% IN THE LAST 12 MONTHS

Written By Eivind Holum

Amazon has published some interesting data on the number and success of US-based marketplace sellers in its 2021 Small Business Empowerment Report, released yesterday.

The total number of US sellers has increased to more than 500,000, and they averaged $200,000 in annual sales (up from $170,000 in the previous period), implying combined total sales of over $100 billion. Most of the sellers are new or just getting started, as the data show that the number of sellers with sales above $100,000 is only just over 65,000 (approximately 13% of the total). The number with sales above $500,000 is only 27,000 (5.4% of the total).

Amazon didn’t disclose the number of US-based “7-figure” or “8-figure sellers” (those with sales above $1m and $10m per annum respectively), but it did say that the number with sales above $1m increased by 15% over the previous year, while the number of sellers with sales above $10m increased by 40%.

The fact that Amazon says 4,000 sellers reached the $1m annual sales benchmark for the first time during this year shows the varied fortunes of Amazon sellers at this level, with many sellers presumably needing to fall below the $1m mark during the year for the total to increase by only the stated 15%. This is in line with the overall story of e-commerce over the past year, which has been generally very positive, although with great variability in the fortunes of different businesses and different categories.

The global e-commerce sector has seen a massive surge in activity, boosted by the Covid-19 pandemic. In 2020, global e-commerce retail sales grew by 33.6% and exceeded $4.2 trillion, with over 2 billion people having purchased goods or services online.

With the increased adoption of online shopping by consumers worldwide and a decline in foot traffic to brick-and-mortar stores, businesses are continuing to shift their focus to online shopping platforms. Large retailers dominate the e-commerce space, with the top 10 retailers contributing 68% of all US online sales last year, and Amazon alone representing more than half of e-commerce sales.

This is not very surprising, given that Amazon boasts over 3.6 billion average monthly visitors, outperforming the second most visited website eBay by more than three-fold.

A large part of Amazon’s success can be attributed to its nearly 2 million third-party selling partners. These are small and medium-sized businesses which sell directly to consumers via the Amazon marketplace. Their products account for over half of everything sold on Amazon.

While there are sellers operating in all 50 states of the US, Delaware tops the list for having the most sellers per capita. The top 10 states with the most sellers per capita are:

 
 

In terms of growth, sellers in Nebraska experienced the highest year-over-year percentage increase, at a whopping 60%.

 

The pandemic has contributed to a boost in sales for sellers across a variety of categories and there is an increasingly large pool of multi-million dollar revenue third-party sellers. It is these fast-growing, profitable brands that have garnered the attention of some of the largest e-commerce roll-up businesses – known as Amazon Aggregators. These aggregators operate a buy-and-build model, deploying capital to acquire attractive brands and leverage in-house operational expertise to supercharge their growth and maximize margin. A variety of strategies can be used (often in combination) to achieve this, including listing optimization, marketing & advertising spend, inventory & supply chain management, geographic expansion, and expansion into other direct-to-consumer channels.

There are 79 aggregators with $10bn in disclosed funding to date. A full list of aggregators can be found on Hahnbeck’s website, including their geographic focus and total disclosed funding.

Given the increasingly crowded aggregator space and amount of available funding ready to be deployed, competition to acquire top Amazon brands has driven valuations to an all-time high. These acquirers tend to move fast and can complete a deal from beginning to end in as quickly as 4 weeks.

There is some indication that valuation multiples may start to level off in 2022 as the astronomical growth experienced during the pandemic begins to plateau. But there is still plenty of momentum in the space, with eager acquirers paying top-dollar for leading brands.

At Hahnbeck, we have established relationships with the world’s largest aggregators. We conduct extensive buyer research for our clients and undertake a multi-pronged sale process where acquirers of all types (not just Amazon aggregators, but also trade buyers and private equity firms) are contacted about a potential sale, leaving no avenues unexplored. Our success has been built on a single principle – we simply get the highest prices and most favorable terms for our client. The best possible outcome.

Eivind Holum
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