Retail

VC Firm Brings Partnership Model To Amazon Sellers

VC Firm Brings Partnership Model To Amazon

There are more than a few mind-blowing stats about Amazon, most of them having to do with its 44 percent of the eCommerce market, or maybe the $88.9 billion in revenue it booked during the second quarter of 2020. But not so much is known about the world of Amazon sellers. Here, too, the numbers are staggering: Amazon has more than 2.3 million sellers currently active on its marketplace. There are roughly 25,000 sellers on Amazon with more than $1 million in yearly sales, and 200,000 sellers with more than $100,000 in sales. Every year, more than a million new sellers join Amazon.

It’s a world where the parent company has such as tight rein that one step out of the guidelines and regulations can merit a devastating suspension. And it’s a world where a new competitor, or even a dozen of them, can pop up overnight. In short, it’s a world where access to capital and legal advice is welcome. And that’s exactly the kind of bet that a unique kind of venture capitalist called AccrueMe is bringing to Amazon sellers. In mid-August, the company announced that it will infuse $100 million in capital into the Amazon seller system, along with legal and marketing advice.

AccrueMe Co-founder Donald Henig told PYMNTS that the company’s finance model is unique in that sellers receive capital to grow their business through an investment model. Instead of giving sellers a loan as a bank would, the firm invests money directly into the business as a partner. AccrueMe makes money when the business makes a profit, earning 50 percent of the investment at a time. The firm participates in the risk, while the seller, according to Henig, benefits from the lack of short-term sales pressure.

“I didn't like the industry that I saw, as far as training people on Amazon,” Henig noted. “So we looked at the financing end, and then all of those lending options. Some of those options had great marketing and sounded good, but they just didn't work for the seller. So, I thought, why don't we partner with the seller?”

From AccrueMe’s vantage point, funding through a partnership instead of a heavy debt load can free up Amazon sellers to focus on growing their business. With double the capital, sellers can purchase inventory with higher margins, thereby becoming a stronger competitor and maintaining enough of a balance to capitalize on a greater rate of buying opportunities. And with no consistent payments required, sellers benefit from reinvesting in the business.

For example, if a company that sells blouses from a supplier in India wants to gear up for a big Q4, the AccrueMe model allows them to bring in extra inventory without taking on extra risk or going into the capital markets where terms are not so favorable. With Prime Day expected soon, followed by Black Friday and Cyber Monday, in what is expected to be the biggest Q4 in the history of eCommerce, Henig believes the AccrueMe model is at the right place at the right time.

He also pointed out that capital is a more important requirement than it has ever been, as bigger companies get involved in Amazon’s direct-to-consumer (D2C) model – and as existing Amazon sellers become more business-savvy.

“And they’ve become more focused,” Henig added. “Amazon sellers have always had to be practically perfect. And we're seeing that practical perfection rise to new levels for small and large sellers. We're also seeing a tremendous number of the larger brands trying to remove other sellers of their product. And the private-label sellers and people who have developed their own branded products can use the same tools to protect their sales.

“This is an unlikely scenario compared to 10 or 15 years ago,” he noted. “You don't need a million dollars to launch a brand. So small sellers and small businesspeople are able to compete against the Nikes and the Under Armours.”

Of course, the Nikes and Under Armours have legal teams and vast amounts of capital. Henig and AccrueMe are doing what they can to level the playing field. That includes providing legal advice.

AccrueMe has partnered with Amazon specialist Rosenbaum Famularo, P.C. of Long Beach, New York, for webinars and advice. For example, if a seller is temporarily suspended – which can happen for several reasons, including having above a 1 percent return rate – AccrueMe’s legal partners know who to call at Amazon and how to prove the worthiness of the seller for reinstatement.

“I believe Amazon has provided people in companies with the greatest opportunity in the history of commerce,” said CJ Rosenbaum, founder of Rosenbaum Famularo. “Literally anybody with a phone and a credit card can take out their phone, get an app, get an account, walk into a Marshalls and start scanning products, see where there's money to be made, and start selling within minutes. And from there, they can grow to the point where they're buying products or developing private-label products. I think it's a fantastic opportunity for everyday people.”

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