In a lucrative new phenomenon, e-commerce investors are pouring billions into marketplace sellers who are often still operating from their own homes, transforming them into international brands in the process. This phenomenon is known as "rolling up" and helps to scale the business, boost sales and maximize profits. As international stay-at-home mandates forced brick-and-mortar stores to close over the past 18 months, pandemic-related boosts to online shopping contributed an immense additional $174.87 billion in e-commerce revenue in 2020. This figure amounts to a 44 percent year-over-year increase, with Amazon.com claiming 40 percent of online spending in the United States alone.
During the economic devastation of the pandemic, online marketplaces such as eBay, Etsy and Amazon presented enormous opportunities for entrepreneurs to grow an online business. This fact is evidenced by more than 1 million new sellers joining the Amazon marketplace over the past year alone. These businesses are facilitated by the Fulfilment By Amazon (FBA) program, which houses stock in Amazon warehouses to then be delivered by Amazon rather than by the marketplace sellers themselves. The escalating demand for Amazon "mom-and-pop businesses" reveals the maturation of the e-commerce giant’s third-party marketplace, which accounts for more than half of all products sold on the site.
Amazon seller aggregator companies such as Perch and Thrasio have raised hundreds of millions in capital to fund acquisitions, with 40 such firms exploding onto the scene in recent years. Only those businesses with at least $1 million in revenue, solid rankings, and a stellar review history are being targeted. However, these "Amazon millionaires" are becoming more common. A staggering 6 percent of all Amazon sellers have become millionaires from their Amazon businesses alone. Many of these sellers leverage international networks of suppliers and tap into lucrative cross-border trade — a vast market expected to reach $4.82 billion by 2026. These merchants are also often managing global supply chains, substantial marketing operations, and regulatory requirements all by themselves, which is a mammoth task.
Marketplace sellers are now flourishing due to the immense benefits of roll-up business operations. Sellers can suddenly take advantage of expertise in global back-end logistics, Amazon advertising, marketing efforts, and search engine optimization. On top of this, the consolidated purchasing power means lower costs paid to suppliers, factories, manufacturers and shipping companies. However, these new e-commerce champions need an equally innovative infrastructure in place to thrive, and the most successful marketplace sellers and aggregators are partnering with specialists in seamless cross-border payments.
In a fast-moving e-commerce world, with new business models emerging daily, e-commerce companies need payment services that are constantly innovating and evolving alongside them. Fueling the expansion of these fast-growth marketplace sellers means implementing seamless cross-border payment services that allow e-commerce businesses to instantly collect, convert and transfer money from all corners of the world. With everything from role-based account permissions for enhancing security to simplified supplier and VAT payments and overseas salary payments in local currencies, these innovative solutions create additional savings and bargaining power for sellers while streamlining financial operations.
Crucially, partnering with the right network will allow sellers and aggregators alike to streamline complicated global e-commerce models with visibility of multiple accounts all in one place. Having flexibility and customization is critical, and low exchange rates can also save businesses a considerable amount of money.
A marketplaces’ almost unlimited number of niche categories and accompanying communities of loyal consumers means there are also endless opportunities for future growth. E-commerce is now more dynamic, intricate and competitive than ever, and by far the most challenging part of roll-up operations is managing operational complexities and cash flow. By working in synergy with cross-border payment providers, innovative aggregators hold the key to unlocking the full potential of this nascent space and creating the newest retail conglomerate. There's currently an undeniable cataclysmic shift towards marketplace commerce — and this is only the beginning.
Kenny Tsang is the managing director of PingPong Payments, an innovative payment service provider for cross-border e-commerce sellers around the world.