As eCommerce has accelerated over the past 18 months, an increasing number of investors have been looking for a way to get a piece of the action. Buying stock in Amazon or eCommerce platforms such as BigCommerce, which went public in August 2020, is one option. But Perch CEO Chris Bell has another: give him money.
Perch, founded by Bell in 2019, acquires and operates brands that sell on Amazon, using its platform and expertise to scale the brands’ operations — and ultimately sell their products on markets other than Amazon.
“A number of investors have told me pretty directly that they’ve been searching for a way to bet on eCommerce and on Amazon without just buying Amazon stock,” Bell said to PYMNTS’ Karen Webster. “When they saw this, they said, ‘OK, this seems like a bet on Amazon and the broader Amazon ecosystem.”
Five years ago, Bell said, what Perch is doing wouldn’t have been possible, as Amazon didn’t have enough safeguards in place to protect brands and weed out fake products and reviews.
“Five or 10 years ago, it was the Wild West,” Bell said. “You could buy five-star reviews for $1 apiece back then, so everybody did. If you didn’t do it, you were just sunk.”
Perch’s goal when acquiring a brand is first “in-place optimization,” Bell said, in which the company uses its resources and leverage to make the products sell even better on Amazon by improving ads, optimizing merchandising and making sure items are consistently in stock. “A lot of entrepreneurs go out of stock several times a year, so just being available for sale all the time can typically drive upside,” he said.
From there, Perch focuses on globalization — which right now primarily means selling in Western Europe because of overlapping tastes with the U.S. — before moving on to offering the products on other eCommerce platforms.
“This is where we’re getting into things that are just structurally difficult for an entrepreneur to do — selling on Walmart’s marketplace, Target’s marketplace, going broad with those eCommerce marketplaces,” Bell said.
Perch is also investing in direct-to-consumer (D2C) channels, the CEO said “but we’re investing in a small way,” since consumers increasingly are going to marketplaces rather than directly to the brands they like.
“To push into D2C, we have to be competitive with Amazon, which is no small feat,” Bell said. So while Perch will have some D2C capabilities, it will definitely not be the vast majority of the company’s business anytime soon.
Perch has also recently gotten interest from brick-and-mortar retailers, which Bell said would’ve been unthinkable several years ago when many stores didn’t believe eCommerce sales would equate to retail sales. Now, however, if a product is No. 1 on Amazon, retailers are highly interested and may even offer to help with packaging, since retailers can’t sell items in polybags.
“But the product stands, the quality stands out,” Bell said. “Customers vote with their feet. They not only buy it, but they tell their friends and they rate it highly.”
Finding The Right Fit
Increasingly, brands are reaching out to Perch, Bell said, but the company has specific criteria that it looks for when it’s shopping for brands: It must be among the top five brands in its niche; it must have a low return rate; and, obviously, it must be profitable and not spend more on ads than it’s making.
“We wait until they’ve gotten that product market fit and they’re winning within their category for us to step in,” Bell said. Perch doesn’t invest in “fixer-uppers,” he noted, nor does it buy ideas, but most companies are about three years old.
“We’re working to build the consumer products company of the future,” Bell said.
Bell told Webster he’s focused on finding brands that can use Perch’s cost, quality and distribution advantages, which is something that other consumer packaged goods (CPG) companies, such as Procter & Gamble and Unilever, can’t replicate.
And while Amazon, Wayfair and other marketplaces are serving consumers with a “one-stop-shop” to buy everything, “there’s still a lot of fragmentation and fragility in that supply chain, and that is what’s feeding these marketplaces,” Bell said. “It’s a really interesting, large, untapped opportunity.”
Looking along the horizon, Bell said Perch’s next strategic move is increasing its presence in Europe, as it’s a big market that’s still underpenetrated when it comes to eCommerce.
Perch recently hired former Amazon executive Rahul Shewakramani as its head of mergers and acquisitions (M&A) in Europe and committed 300 million euros (more than $354 million) to acquire third-party sellers across the continent.
Bell told PYMNTS that the company has been looking at expanding to Europe for a while, as 40 percent of the entrepreneurs whose businesses Perch acquires are in Europe. And as the company gets bigger, Europe is increasingly important, which means this is “the logical next step.”
“Globally, we’re realizing that this is a really interesting phenomenon that consumers care much less about brands,” Bell said. “They care more about what I call ‘social proof,’ which is reviews, social media things like that. And that’s enabling these brands to win.”