It seems you can buy pretty much anything you want on Amazon these days. But when Perch CEO Chris Bell goes shopping on the world’s largest online retailer, he’s not looking for a deal on socks; he’s looking to acquire companies.
Perch buys what were once mom-and-pop operations selling good through Fulfillment by Amazon and takes them to the next level. Bell, a former Bain and Wayfair executive, described his role in a conversation with PYMNTS as “finding winning products and then working to scale them across geographies and channels.”
He said the fact that it’s gotten so much cheaper and easier for entrepreneurs to launch new companies and sell products has increased the need for firms like Perch.
“We are going to work with entrepreneurs who have created something great — who have already found that product market fit — and then we can build a technology platform that will give those products the benefits of scale as if they were at a big [consumer packaged goods] CPG company,” Bell said.
The end goal? New channels and global growth.
Fulfillment By Amazon’s Coming Consolidation
Bell said there are currently about 8 million sellers on Amazon — two-thirds of which aren’t very active.
That leaves about 2.5 million sellers representing somewhere in the neighborhood of $250 billion in gross merchandise value, but he said he expects continued consolidation of the best Fulfillment by Amazon sellers for years to come.
“I think there's a lot of space for a lot of consolidation, [but] Amazon would still be very fragmented,” he said. “We could create a $10 billion company and still not be a meaningful percent of Amazon's marketplace revenues.”
Bell said what Perch is attempting to do wouldn’t have been possible four or five years ago because Amazon wasn't protecting brand rights very well or corralling fake reviews the way it does now.
“Today, they've really cracked down on all of this in a way where we can acquire a company that has a winning product with confidence that Amazon will be on our side,” he said. “[Amazon] will help us to protect the brand and the product and help us to grow.”
It’s All About A Good Product/Market Fit
Bell said the key to finding good operations is to look at how well a product satisfies a strong demand in the marketplace, explaining that “the hardest part is product/market fit.”
He said Procter & Gamble is a good example of just how hard launching successful new products can be. Bell said the conglomerate reportedly spends $2 billion a year just on new-product introductions and was happy when its success rate doubled to 3.6 percent.
“So, even for the best and the biggest — with the most money and the best data and the best talent — it is really hard to launch a great consumer product,” Bell said.
However, he said he takes comfort in the fact that the barriers to launching new products have come down tremendously in recent years.
“Ten years ago, you had to find your own manufacturer and the MOQs [minimum order quantities] were so high, you had to buy probably $50,000 to $100,000 worth of inventory to get anybody to pay attention to you,” Bell said. “And then you had to find a channel to sell it through, which was also very difficult.”
But today, entrepreneurs can find manufacturers through Alibaba or mfg.com, discuss a design with them, buy 200 or 300 items for a few hundred dollars, and then put an item on Amazon to get millions of eyeballs on it, he said.
Bell said that means that entrepreneurs are “launching new products at an unprecedented rate. They fail just as much as big CPGs, but they can innovate so much faster and so much cheaper. So, our model is … going to continue — [and] we're going to embrace that.”