eCommerce Aggregator Model Gets Makeover With Brand Building and Logistics

When big eCommerce aggregator Thrasio hit a wall earlier this year, it revealed a weakness in the strategy of rolling up promising sellers and brands then struggling to figure out the nuances of creating popular consumer brands with the right logistics in place to optimize growth.

On the flip side, consumer packaged goods (CPG) firms are expert at brand building and logistics. That’s the direction some aggregators are now taking to create more dynamic marketplaces with optimized traffic from which the household brands of tomorrow will come.

A prime example of the trend is Cincy Brands, which was formed earlier this year and announced its first acquisition of “everyday essential products” marketplace Vitabox on Thursday (July 21).

Speaking with PYMNTS’ Karen Webster, Cincy Brands President and Co-Founder Sean Lee said that he and Co-Founder Andy Cipra spent about 30 years between them at Proctor & Gamble, where they learned how to build and distribute brands.

“We’re trying to take that learning and our background from P&G and know that you have to have the operational expertise from the get-go,” he said. “That’s why we made the Vitabox acquisition from the start.”

With some 70,000 products ranging from beauty to vitamins and pet supplies, Vitabox fits well into the “better for you” direction that Cincy is taking as it seeks differentiation from a gaggle of eCommerce aggregators that often appear more obsessed with size than specialization.

Calling Vitabox a good fit from the operations and tech stack view, he said, “Oftentimes in any consumer goods business, operations is where you tend to stumble. We view the Vitabox acquisition as really buying our operational base with a consumer segment that overlaps.”

That allows Cincy to “plug any brands into the distribution network, the technology, to distribute … in all the places online where consumers will shop,” without the warehousing and other baggage that comes with other types of online sellers.

The Cincy co-founders are big fans of the strategic brand-building model perfected by CPG giants like Unilever and P&G, and feel it has applications in growing online sellers into more.

He said, “If you look at Unilever, P&G, at their core they’re brand-building companies, but they’re also massive logistics and operations companies, and that’s what we want to kind of build from the ground up.”

That’s where competing aggregators hit an inflationary speed bump, he said.

“Many of them came to market with big M&A teams and the thesis of buying 30, 40 brands a year,” he continued. “Now in reality, they have to operate those 30 or 40 brands. They’re dealing with multiple contract manufacturers, multiple third-party logistics warehouses, multiple eCommerce platforms and retailers. The lesson they’re learning right now is that operations is key.”

See also: Report: Average Consumer Carries out at Least 2 Online Transactions a Day

Betting on ‘Better for You’

Defining the blossoming “better for you” space as “brands that Andy and myself would like to consume,” Lee elaborated, saying “that could mean clean ingredients for beauty, that could mean home care products that have ingredients that are safe for people and pets. If it’s dietary supplement, things that are a little bit better for you, that could be plant-based ingredients.”

He said the point is making sure sellers pass the test of “would [we] use [it] ourselves with our pets, with our families,” adding that acquisitions must also resonate with millennial and Gen Z consumers “because that’s ultimately who’s going to be buying products as we move forward.”

“Our spin on it is using our background and finding [fewer] brands than some of these aggregators have. We’ll probably acquire three to five a year and look for assets that can do well in the marketplaces, do well direct-to-consumer, and have a lot of potential in retail or brick-and-mortar and take an omnichannel approach,” he said.

He dubbed it “kind of the classic spin on a roll up model with a digital forward focus … on fewer higher quality assets.”

Take that and a combined 30 years of experience between the co-founders working for P&G and Lee believes brands can trust Cincy’s unique approach to online marketplace selling.

“I’m not an investment banker,” he said. “For my background, it’s a more brand-building kind of general manager P&L approach, really try to get to know them, why they built the brand, what their vision is, and see if there’s a match for how we would grow it. It’s very important to me that anything that we take over that we can kind of see the founder’s vision through.”

Achieving that goal is a matter of creating brand personality and building awareness around it, which at this level requires deep knowledge of how to do that for dozens of products.

Lee said content and messaging are crucial, as is “not putting all your eggs in one basket. As we’ve probably seen with some of the brands that were 100% reliant on Facebook, with the iOS change they struggled.”

This is the classic product marketing conundrum of “how many people can you reach, how many times can you reach them, and can you get them to take action,” Lee said. “Social will continue to be a big part of that, and amplifying influencer. TikTok’s emerging. I don’t think it’s quite there yet but will be. The channels will come and go, but the fundamentals of how you make people aware and having the right message will be the same.”

See also: Amazon Could Kill Private Label Unit Accounting for 1% of Sales

Big Questions for 2022-23

Lee said that a key differentiator for Cincy in 2022 is its omnichannel view of brand-building that starts by selling the right mix of eCommerce brands, without necessarily ending as an online transaction.

Noting that 2020 and 2021 saw eCommerce grow mightily as a percentage of total retail sales, he said, “It’s kind of leveled back to the average or the mean.”

And they’ve learned a few things. “If you have a quality brand and you’re doing brand-building and doing things within each channel that are right, you can grow and stand the test of time,” Lee said, adding particularly since the majority of sales still happen in physical stores.

“I don’t think I would say we’re going to be 100% Amazon only, or 100% D2C. We want to make sure if there’s a chain or a channel that makes sense for a brand, we’re going to also be there.”

He went on to say that even some of the big players like Caspers, and Allbirds, are across all channels including marketplaces, and brick-and-mortar stores, because they recognize that the consumer shops in all those places, and they need to be there.

It also might be helpful if Amazon were to decide to exit the private label business that’s taken flak for essentially competing with independent sellers that helped make Amazon what it is.

Asked about Amazon’s rumored plans of dropping its private-label goods in a concession to sellers on the platform, Lee said, “I’m still cautiously optimistic that they’ll actually follow through on that.

“I think it makes sense. They make so much from their AWS cloud service. They’d much rather charge you a 15% fee to sell on the platform and a logistics fee to use their warehouse than manage their own supply chains and carry all the inventory for 1% of sales.”

The other benefit in Amazon curtailing private label is “if there’s a category that Amazon has a big brand that was a big player that they exit, that may make that category more appealing” to other comers who are happy to pick up the gauntlet as it may perform well if done right.

As for his forecast on aggregators and online sellers, Lee sees more big brands using eCommerce as a “learning lab for new innovation” where they can test and learn.

On the flip side, he believes that there will be “a ton” more brands that are launching in marketplaces and as direct-to-consumer and will soon realize that to get to their next stage of growth, they’re going to need to go to physical retail.