CPG INNOVATION
Brand Building
Amazon Sellers Are Selling Out WITH BILLIONS IN FUNDING AND SIMIL AR VALUE PROPOSITIONS, NE W T YPES OF BR AND BUILDERS ARE SCOURING AMA ZON FOR PRODUCTS TO BRING TO GROCERS’ SHELVES. By Mike Troy
ike most things in retail, the process of launching and growing a brand has been disrupted. From product development to marketing and the supply chain, brand building today can be achieved by methods vastly different from those traditionally used by major CPG companies. Credit the internet for the monumental shift that eliminated barriers to entry that previously favored large, established companies. To compete, an entrepreneur with a dream faced an uphill battle to secure appointments with demanding buyers at multiple retailers’ headquarters. Then, if the product was deemed worthy, there were advertising commitments and sell-through guarantees to meet that retailers could justify based on the scarcity of physical shelf space. Not so with the internet, and more specifically, the advent of Amazon’s third-party marketplace. Suddenly, an entrepreneur with an idea and access to contract manufacturing facilities or a steady flow of products could set up shop in the Amazon marketplace, gaining access to the world’s largest loyalty program in Prime, the nation’s dominant product discovery platform; sophisticated marketing capabilities; and a world-class supply chain focused on ever-faster delivery times. Amazon’s marketplace became wildly successful, generating billions in sales and fees for Amazon, but also serving as a critical element of the company’s flywheel. The breadth of assortment available on Amazon, powered by third-party sellers, helped the company supplant Google several years Consumer products is ago as the place where the majority of shoppers search for products. typically a game where
The Next Phase of Growth
scale matters a lot. We find winners who have succeeded in what is the most difficult marketplace in the world, and we acquire them and bring them onto our platform and take them to new geographies and channels.”
So many third-party sellers are so successful on Amazon, generating sales in the seven- or eight-figure range, that a new type of company has emerged to help take those companies to the next level. These companies acquire the most successful brands in the marketplace, and then help them scale. Perch is one such —Chris Bell, Founder and CEO, Perch company, founded by Chris Bell, a former Bain & Co. executive who was most recently general manager of supply chain for North America with home furnishings retailer Wayfair. Bell left Wayfair in 2019 to found Perch. “We find great brands and make them better. We grow them and make them more effective and profitable,” is how Bell describes Perch’s busi-
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ness. “A big part of what we are building is a technology platform that will let us manage all these brands at scale. We focus mainly on the Amazon third-party marketplace, but we are starting to expand into other channels.” There is tremendous investor interest in what Bell is doing, because the brands being acquired are already profitable, and there are a lot of them. In Amazon’s more recent second quarter, the company said that third-party sellers accounted for 56% of its unit volume, up from 53% in the same quarter the prior year. Perch estimates that in 2020, there were 8 million third-party sellers generating gross merchandise volume (GMV) of $300 billion in the Amazon marketplace. Amazon doesn’t disclose GMV, only the fees that it earns for the various services that it provides sellers, which totaled nearly $49 billion during the first half of the year. Between the large pool of acquisition targets and Bell’s track record at Bain and Wayfair, it didn’t take long after Perch was founded to attract capital. In April 2020, it secured $8 million in funding, and six months later, in October 2020, it raised another $123.5 million. Then the company received a huge infusion of $775 million in May to advance Bell’s goal of building a next-generation consumer products company. “The raise was purely to allow us to buy more great brands and invest in them,” Bell says. To find those brands, the team at Perch scours the Amazon best-sellers lists and
