Navigating the world of buying and selling Amazon FBA businesses can feel like charting uncharted waters especially if you’re new to the game.
Back in 2017 we dove headfirst into this market analyzing a whopping $3650106.28 worth of transactions.
What we uncovered then and continue to see today are some fascinating trends that can help both buyers and sellers make smarter decisions.
Think of this as a friendly chat sharing lessons learned from the trenches.
Understanding the Amazon FBA Landscape in 2017 (and Beyond)
The Amazon FBA (Fulfillment by Amazon) model was experiencing a significant surge in popularity in 2017. This wasn’t just a fleeting trend; Google Trends data clearly showed consistent and growing interest in “Amazon FBA” indicating a market ripe with opportunity.
However the landscape wasn’t static; it was evolving rapidly and that evolution continues to this day.
This dynamic nature is a critical factor for both buyers and sellers to consider.
The initial years saw relatively low multiples for FBA businesses similar to the early days of affiliate marketing.
As investors learned the ropes these multiples began to climb steadily.
By 2017 we were already seeing a shift towards higher valuations with averages exceeding expectations.
This upward trajectory has continued with current multiples often surpassing 50x significantly higher than the average 20-50x range seen across other online business models.
Understanding this historical context is vital for setting realistic expectations and negotiating favorable deals.
Decoding List Prices vs. Sales Prices
One of the most crucial lessons we learned is the distinction between “list prices” and “sales prices.” List prices are the asking prices set by brokers often inflated to accommodate negotiations.
Sales prices on the other hand reflect the actual transaction amount – the final price the business sells for.
Many industry reports rely solely on list prices painting an incomplete picture of the market reality.
Our study however analyzed both offering a more accurate reflection of the market’s true value.
Niche Performance and Market Trends
Our 2017 analysis of 19 FBA business sales revealed some intriguing niche trends.
While previous studies showed no clear dominant niche our expanded dataset identified “Home and Kitchen” as a surprisingly strong performer.
This isn’t entirely unexpected considering the sheer breadth of products within this category.
Health-related niches including sports fitness and personal care remained consistently popular highlighting a sustained demand for health and wellness products on Amazon.
This data underscored the importance of niche selection when buying or selling an FBA business.
The sustained success of certain niches like Home & Kitchen and Health & Wellness suggests a consistent customer base and ongoing demand.
Conversely other niches may exhibit fluctuating performance so thoroughly investigating a niche’s long-term viability is essential before making a significant investment.
Time to Sale and Deal Size
Another key finding was the average time to sell an FBA business—around 74 days in 2017. Even excluding outliers the average hovered around 64 days exceeding the average for other online business models.
This longer timeframe is due to the complexities inherent in FBA businesses: multiple suppliers logistics systems and often more involved customer service than simpler affiliate sites.
The average deal size in our study was $192110 with a more realistic average of $108339.24 after removing outliers.
The larger deal sizes often require sophisticated deal structuring involving negotiations and financing arrangements which naturally extends the sales process.
Understanding these complexities is crucial for both buyers and sellers.
For sellers this means preparing for a longer sales cycle and potentially complex financial arrangements.
For buyers it highlights the need for patience and a well-defined financial strategy.
Sales Multiples and Market Dynamics
Despite the higher sales prices our analysis revealed that the market was still tilted in favor of buyers in 2017. While the average listing multiple was 26x the actual sales multiples were closer to 23x—a significant discount.
This buyer’s market presents an excellent opportunity for savvy investors.
However this dynamic is constantly shifting and the market is trending toward a seller’s market where multiples could potentially reach the 35-45x range.
This fluctuation highlights the importance of timing.
For buyers it emphasizes the need for due diligence and strong negotiation skills.
For sellers it raises the question of whether to capitalize on the current market conditions or wait for potentially higher valuations in the future.
Careful consideration of individual circumstances and market trends is crucial.
Strategies for Buyers and Sellers
For Buyers: The current market presents a prime opportunity to secure established brands at a discount. The tangible nature of FBA businesses with existing logistics and product lines presents a lower-risk entry point into the ecommerce realm. Buyers can leverage these established businesses to expand into other marketplaces or create their own branded stores.
For Sellers: The decision to sell now versus later depends on individual circumstances. While waiting could yield higher valuations there are compelling reasons to sell now: generating immediate capital for other investments addressing time constraints related to managing multiple projects or capitalizing on the current buyer demand.
Expert Advice: Our team of seasoned advisors strongly recommends not waiting until your business declines before considering a sale.
Selling a stable or growing business fetches a higher price and maximizes leverage.
While foregoing a few months of profits might seem counterintuitive the benefit of immediate capital often outweighs the potential for marginal future growth.
Navigating the Account Transfer Process with Amazon
One of the significant challenges in buying and selling FBA businesses is transferring the account and associated assets to the new owner.
Amazon’s policy strictly prohibits the direct sale of seller accounts raising concerns about how to legally and effectively transfer business assets without violating Amazon’s terms.
However this is a common misconception.
Legally Amazon can’t stop you from selling a business as long as you don’t violate their terms regarding account selling.
We typically handle this by working closely with Amazon ensuring they’re fully aware of the sale and the subsequent asset transfer.
This involves clear communication and documentation to avoid any issues related to fraud or account misuse.
There are two primary approaches: account takeover (a simpler but less preferred method) and listing migration (more involved but preserves historical data). In both cases proactive communication with Amazon is vital.
Addressing Buyer and Seller Concerns
The issue of account transfer often causes concerns for both buyers and sellers.
Buyers might be apprehensive about losing positive reviews and sales history while sellers might worry about violating Amazon’s terms.
The key is transparent communication with Amazon and utilizing the appropriate transfer method.
In many cases Amazon proactively helps with the process.
Conclusion: Making Informed Decisions in a Dynamic Market
The Amazon FBA marketplace is dynamic constantly evolving presenting both opportunities and challenges for buyers and sellers.
Our 2017 case study provided valuable insights into market trends sales multiples and the intricacies of account transfer.
This information serves as a guide but should be interpreted within the context of ongoing market shifts and individual business specifics.
Whether you’re a buyer or seller thorough research well-defined strategies and proactive communication are crucial for success in this vibrant and competitive market.
Remember understanding the nuances of the market and having a clear plan will greatly enhance your chances of a profitable outcome.