Fulfilment by Amazon is a service that allows third-party sellers to use and automate their order fulfilment and shipping services. We wrote about its growing popularity earlier this year, and it continues to go from strength to strength.
Retailers use all the sophisticated might of Amazon’s highly developed fulfilment networks. They store their products in Amazon’s fulfilment centres and they pick, pack, ship and provide customer service for these products. The sellers pay storage and fulfilment fees for the service. Amazon markets FBA to retailers on the basis that it can help them scale their business and reach more customers.
We have worked with a number of entrepreneurs who have embraced the opportunities that FBA offers and who have started, scaled and, over the last year, sold their highly successful FBA businesses. Here are two of their stories, while more details of how we can help support you in the sale of your FBA business can be found below.
Vanessa Burrow | Kitzini
Kitzini design and sell a range of high quality, innovative kitchen utensils and accessories aimed at making cooking simple. Their goal is to help home cooks everywhere save time and create delicious meals easily with products that are practical, easy to use, easy to clean and made to last. Vanessa Burrow launched Kitzini in 2014 selling to the US market and sold her business earlier this year.
“After more than 20 years working for big corporations in marketing, I’d headed up some big brands with big budgets and I wanted the chance to prove I could create this success for myself!
“I launched my business in 2014. With a love of cooking and a passion for gadgets I created Kitzini to bring clever kitchen tools to the home cook. A colleague introduced me to an online business training course specifically designed to help me to sell on Amazon. A lot of people in my FBA network went through this course and it was tailored to the smaller sellers.
“The Amazon platform is really well designed for small sellers because it enables you to own listings as a brand and therefore enables you to stand out and build a brand through the platform. As a result, since about 2012 the number of sellers on Amazon has proliferated, with lots of small sellers creating significant success just using this channel.
“At the end of 2017, having grown the company into a multi-million dollar business, I set myself the goal to scale the business to a strong enough performance for a sale. By the end of 2020 my team and I decided it was the right time to see if the business was attractive enough to sell.
“At the same time, the FBA space saw a number of consolidator businesses enter the market. This is partly because you can still purchase small eCommerce businesses at affordable multiples, but more importantly the trend towards eCommerce means larger groups with more capital are keen to take on successful brands and realise strong future growth fuelled by consumer confidence and new purchase behaviour in this sector.
“When I launched Kitzini I launched it in the US because the volume I could realise is much bigger in the US market. Many sellers like me have done the same. This means that a lot of consolidators are based in the US. For UK-based sellers this can be a challenge when selling because with a limited company it’s important to get the right deal structure and this can be an obstacle.
“One of the big points of difference that Progeny provided is that they can partner with UK-based sellers looking to sell to US buyers, or US buyers looking to buy UK sellers. So they can remove this obstacle and a UK business selling to a US buyer is no longer a sticking point.”
Richard Allen | Tinyyo
Richard Allen’s business, Tinyyo, provides high quality professional products for consumers’ home, beauty, compression and craft needs.
“I had an epiphany back in 2009 whilst I was in search of basic arts and craft items for my daughter and some compression and home items for myself and my wife. I realised that these were either difficult to find at great quality or far too expensive! I noticed it was the same for beauty products and many other industries. This was when I decided to invest in some research into the materials needed to create the highest quality items at an affordable price.
“I set up the business 12 years ago and began trading on Amazon and then moved over to become a Fulfilment by Amazon business six years ago and we’ve been trading as an FBA ever since. We source and sell all our own brand stock and the business has grown significantly.
“We didn’t set up originally to become a FBA business but it was clear that there were plenty of advantages to this when it became an option. Basically, Amazon take a lot of the complexity out of the process. They deal with everything and this makes life a lot easier for the retailer. There are also the benefits they bring in terms of the trust. Consumers have confidence in Amazon so they come to it already with that trusted relationship. They have their payment and address details already saved and that makes for a much smoother, easier experience for them and the retailer.
“There are some potential downsides, which anyone entering the sector should consider, most obviously the control they have over the entire process. This is something that’s not uncommon across online retail platforms, where the tech companies have the power to influence with algorithms, or block or stop you from trading. You can feel like a small cog in a big machine but ultimately this is nothing new. Shopping centres can influence where your shop is situated in traditional high street retail, it will never be entirely your decision.
“Another piece of advice I’d offer to anyone thinking of starting an FBA business is to make sure there’s enough profit potential in your products. It’s all about the products you choose. Don’t fall into the trap of thinking you can just put your prices up if you want to increase your profits. On Amazon, prices usually come down. So make sure you’ve got enough profit in there in the first place.”
Progeny’s role in the process
Our corporate law team can provide comprehensive support and expertise in steering your FBA business through the sale process. While each individual deal is different, there are a number of key stages that most businesses will pass through on the journey to sale. Our team will:
- Quickly get up to speed on the key value drivers in the business
- Apply insight and commercial acumen when negotiating the best deal for you
- Ensure that you are properly protected on any earn-out (ie contingent deferred proceeds)
- Coordinate a successful conclusion
If you are considering selling your FBA business and would like some advice and guidance, please get in touch.