Upexi (NASDAQ: UPXI) acquires highly profitable brands that lack the resources that they need to grow and inject capital, personnel and supply chain efficiencies to scale revenues and increase profit margins.
What's going on?
A market leading Amazon and eCommerce brand owner and aggregator
Why should I care?
Allan Marshall - Founder of XPO Logistics - leads the way as CEO
Core features that have been implemented to drive maximum value for Upexi’s brands include:
- Nationwide distribution and fulfillment centers set for scale
- In-house, programmatic ad technology to lower costs and increase margin
- Acquisitions focused on consumer data and cross-selling between portfolio of brands
Read the guide to Upexi
An introduction to Brand Aggregators
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Thanks to the internet, starting a business has gotten a lot easier. There’s no need to scout out locations to set up shop and pay a hefty deposit – now almost anyone can now start an online business with very little cash. That explains why thousands of online brands have sprouted up in recent years. But most of these new brands lack the resources to establish themselves in a crowded market. This has created the perfect opportunity for brand aggregator businesses. You can think of these companies like a house of brands: they specialize in buying brands in hopes of scaling them up and making them more profitable.
How brand aggregators work
Brand aggregators work simply: buy good brands, scale them up, and cut costs where possible to improve profits. Some aggregators specialize in a product category and only buy brands that fit that segment. Others specialize based on the selling platform – for example, they only buy brands that sell on Amazon. More established aggregators tend to have even more specific criteria. Their chosen brands often need to be private label, have a proven success record of in-demand products, and generate a minimum level of sales or profit.
Having repeatable and scalable processes gives brand aggregators a key competitive advantage.
Value-add of brand aggregators
Brand aggregators hold lots of value for brands. They have far better resources than a single brand owner, such as bigger marketing budgets and a global supply chain. This means they can help scale brands much quicker than if they remain standalone. Their broad operational experience and deep market knowledge also makes scaling up easier.
They also benefit in other ways. Rather than creating duplicate functions for each brand, brand aggregators can spread out the fixed costs of marketing, logistics and supply chain operations over many brands, helping reduce costs. There are often also sales synergies like cross-selling in a multi-brand portfolio.
The brand aggregator industry is fragmented with many players, in part down to a low interest rate environment. The low cost and easy access to funding has reduced the barriers to entry for new competitors. Some of the largest players in the industry were only founded in 2018 but are already worth billions.
Brand aggregators need to have the right industry expertise and experience to pick good brands and scale them profitably. The explosion in new online brands has increased the bargaining power of brand aggregators, since they now have a wider selection to choose from. However, they also face threats from established brands buying up smaller players to consolidate their industry.
What drives growth?
There are a few main factors that drive the growth of brand aggregators:
Online spend: The spend shift from offline to online is good news for aggregators with online brands – not only in terms of sales, but also in bringing new players to the market.
Interest rates: Higher interest rates make it more expensive for standalone brands to scale up on their own, so they’re more likely to accept a buy-out offer.
Seller valuations: Brand with high valuations aren’t a great choice for brand aggregators. They usually buy brands with lower valuations as they represent a lower risk. A financial climate with lower valuations is positive for growth.
Brand fragmentation: With increasing numbers of smaller online brands leading to a fragmented market, it’s harder for smaller brands to make a profit and that increases the value of aggregators.
Industry trends and risks
Inflation and high interest rates can bring real challenges to growth and profitability. In this scenario, you might see brand aggregators being even more specific when investing. Aggregators have to be more selective in what they purchase and how they grow – for example, by becoming experts solely in sports products or expanding in only one region. Aggregators might also choose to consolidate or merge with each other if they can’t grow quickly enough. Sometimes aggregators can even launch their own brands or products.
There are risks associated with every business. Doing your homework to avoid overpaying for a brand is critical for aggregators. But it’s not enough to simply buy a good brand at a fair price. Like with any acquisition, aggregators need to manage the risk of integrating their new brands with their existing portfolio. For example, they should have good knowledge and control over the entire supply chain so they can react quickly to things like shortages.
What differentiates Upexi from the competition?
The brand aggregation market is rich with its very own giants, including the likes of Thrasio (valued at $7.5 billion), Berlin Brands Group (valued at $1.2 billion), and Perch (valued at $1 billion). However, while these aggregators have collectively raised over $910 million between them, all of them are privately held. As a matter of fact, all aggregators across the industry are private and therefore not available for people to invest in.
Upexi (NASDAQ: UPXI), on the other hand, is a public aggregator that provides a unique opportunity for investors to get in on the ground floor of an up-and-coming aggregator that is undergoing significant growth.
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Disclaimer: This content is for US investors only, if you are not a US investor please ignore this content. This content is a paid advertisement for Upexi (NASDAQ: UPXI) from Interactive Offers and Finimize. This is not Finimize editorial content. Finimize received a fixed fee for producing, hosting and promoting this content on behalf of Upexi, totalling $23,000. Other than the compensation received for this service, Finimize and its principals are not affiliated with either Interactive Offers or Upexi. Finimize and its principals have no ownership in Upexi. The content on this page should not be taken as advice, an endorsement, or a recommendation from Finimize and its principals to buy or sell any security. Finimize and its principals have not evaluated the accuracy of any claims made on this page. Finimize and its principals recommend that investors do their own independent research and consult with a qualified investment professional before buying or selling any security. Investing is inherently risky and capital is at risk. Past performance is not indicative of future results.
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