Ecommerce in 2022: Sellers are challenged, buyers must adapt
By Ruben Amar, Co-Founder and Co-CEO of Forum Brands
Prosper 2022 showcased the vitality of our industry, with more sellers, investment brokers and bankers, tech vendors and acquirers from around the world in attendance than ever before.
Here’s what I heard in Las Vegas:
From Sellers - Shifting Challenges and Priorities
It is harder than ever to manage a brand as a seller on Amazon. The landscape for how consumers shop for products is constantly changing and, of late, costs are rising:
- Global Challenges: The supply chain ramifications of macro events are well documented, and these challenges continue today. Instances of global instability also impact freight reliability and delivery costs. COVID-driven port closures in China, the ongoing war and humanitarian crisis in Ukraine, and the prospect of increased tensions in Taiwan are all obstacles sellers are up against. These obstacles threaten margins, which are always top of mind for FBA businesses.
- Marketing Innovation and Competition: With a rapidly growing number of third-party sellers on the Amazon platform, it is increasingly challenging to be ranked at the top of page one. As a result, sellers are adopting scrappy, innovative solutions to drive traffic to their Amazon stores. Examples include affiliate marketing programs, Google ads and social media promotion. These marketing solutions are now a necessity for success, but can also place a financial burden on sellers.
- Need for PPC: Amazon PPC is a vital source of growth and brand recognition for sellers. In recent years, Amazon has increasingly favored sponsored products over organic listing. Only four of the first twenty products a shopper sees when searching on Amazon are organic results. There is little space left for organic results at the top of the page - the placement that drives most sales. This increases Cost Per Click, driving pressure on sellers to be even more tactical with their advertising spend.
- Evolving Exit Priorities: Finally, with a maturing industry, sellers have witnessed and experienced many M&A transactions in the market. In the early days of our industry, the size of the multiple was the driving force behind a seller’s decision to exit their business. Today, they are evaluating exit opportunities differently. The size of a potential payout no longer reigns supreme. Instead, sellers are focused on the reliability and reputation of buyers for closing deals post-LOI. In an uncertain business environment, sellers cannot afford to have a deal collapse at the eleventh hour.
We founded Forum at the height of the pandemic in 2020, in the midst of massive global and economic uncertainty. Our team of customer obsessed brand builders, technologists and acquirers has already been tested by a changing world. We have the right people to continue to grow businesses that consumers love and build them into leading omni channel brands, no matter the challenges to come.
The strength of our team is precisely what allows us to honor our commitment to sellers. We know that building a brand takes time, effort and sacrifice. When sellers work with us, they’re trusting us with their legacy. And we do not take this for granted. We’re completely dedicated to offering a clean, efficient and seller friendly transaction process with absolutely no exceptions.
From Buyers - A New Paradigm for Acquisitions
As capital flooded the market in 2021, we saw acquirers bid competitively for brands in a race for scale. This artificially inflated multiples to unsustainable rates. Now, our market is maturing. Buyers are more selective in the brands that they acquire, focusing on genuine operational excellence. As the pace of acquisition slows, the highest quality brands are now trading at reasonable, attractive multiples. This development is no surprise and we’re well positioned to succeed in a new paradigm.
We founded Forum with a commitment to a disciplined, quality over quantity approach to acquisition. This has not changed. We’re laser focused on our six core categories of consumer durable goods - pet, family, health and personal care, home and kitchen, patio, lawn and garden, and sports and outdoor. These products will be in demand for decades to come, regardless of economic or market conditions. Our portfolio of brands is built to thrive in a changing world and an evolving industry.