Top 5 criteria we look in an Amazon brand
As an aggregator of Amazon brands, there are several criteria that we look for when evaluating potential acquisition targets. These criteria are essential to ensure that the brands we acquire have the potential to generate sustainable growth and profitability. Here are the top five criteria that we consider:
- Growth of Gross Sales: We look for brands that have a track record of consistent growth in gross sales over time. This indicates that the brand has a strong customer base and has been able to adapt to changing market conditions.
- High Profitability Margin defined as SDE (Selling Discretionary Earnings): We also consider the profitability margin of the brand, measured by its SDE. We prefer brands with high profitability margins, as this indicates that they are well-managed and have a competitive advantage.
- Sales Diversification in terms of different products (ASINs): It’s important for brands to have a diverse range of products (ASINs) to mitigate the risk of relying on a single product. This also indicates that the brand has a deeper understanding of its customers’ needs and preferences.
- Complexity not too many products, not complex operations and not a complex supply chain: We also consider the complexity of the brand’s operations, supply chain, and product range. Brands with simple operations and a streamlined supply chain are easier to manage and can generate higher returns.
- Growth Potential (different geographies of Amazon Marketplaces, different online channels and marketplaces): Finally, we evaluate the growth potential of the brand. Brands with the potential to expand into new geographies and online channels can generate higher returns and provide a larger platform for growth.
In conclusion, evaluating potential acquisition targets based on these criteria can help aggregators of Amazon brands identify brands with the potential to generate sustainable growth and profitability. By focusing on growth of gross sales, high profitability margins, sales diversification, simplicity of operations, and growth potential, we can acquire brands that have the potential to provide long-term value for our business.
Flummox is a brand acceleration house specialized in acquiring locally proven Amazon-native brands and expanding their reach by opening distribution across Europe on Amazon and other online marketplaces. Reach out if you’re interested in learning more!
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