The Current Market Environment
The Amazon marketplace is growing rapidly and with it, competition continues to intensify with over 6 million sellers currently operating globally  and this figure growing by an impressive 16% in 2021. Furthermore, although 2021 saw a decrease in market share for Chinese sellers ; between the years 2017-2020 the market share for Chinese sellers grew by a staggering 26% (from 16% to 42%). Many of these Chinese sellers bring to market undifferentiated white label products with the intent to compete primarily on price and as a result, other brands that fail to demonstrate a good level of differentiation have and will continue to face downward pressure over time.
At the same time sellers are also becoming more advanced in their approach improving their expertise across operations, supply chain and marketing with the wide array of educational resources freely available to them.
As a consequence of the above, building an Amazon business can no longer be viewed as a side hustle but rather a full-time job wherein long-term sustainability, growth and defensibility should be of the highest importance for both individual sellers and aggregators.
Olsam is at the forefront of not only building one of the largest marketplace operators, but at the same time implementing a long-term roadmap through the brands we acquire and operational expertise we are continuously developing.
So, you might be wondering what type of brands we target at Olsam; our key focus is placed on synergies, brand equity and financial performance because with it, this allows us to take on defensible and promising brands where resources and focus can be placed on growth strategy as opposed to staying afloat and fending off intense competition.
Brand Equity can be summarised by (but not limited to) several factors that individually add layers of defence to a business:
- Recognised brand image (logo/brand name) with a story that connects the products to the brand. This can be seen in various metrics i.e. repeat purchase rate, low ad reliance and success of D2C channels etc.
- Product differentiation that separates a brand’s products from the wider category. In addition, IP is highly valued as it offers long-term protection on these product USPs.
- Highly rated products that are well received by customers with strong organic ranking that has been built steadily over time.
- Strong social following from loyal and engaged customers that can drive higher conversation rates of new buyers as well as from repeat purchasers.
- Brands that have the potential to maintain secular growth at a healthy margin.
- Large potential market to grow into, i.e. new channels and regions, alongside flexibility of the brand to expand the product range into new categories.
- We note that, some strong brands have experienced headwinds as a result of cost inflation, capital constraints, competition etc – we at Olsam also value these opportunities as high value targets as a result of a potential turnaround scenario.
Synergies are realised over time from deploying an established value creation playbook and utilising Olsam’s operational infrastructure.
- Operational synergies exist across brand management, marketing, supply chain and finance and are unlocked as Olsam acquires brands in categories we target and look to build expertise in i.e. Sports & Outdoors, Pet Supplies, Baby, and Personal Care & Health.
Colapz, a camping accessories brand, was a 17-year-old brand generating over $2.0m in revenue when Olsam acquired the business in 2022.
The brand passed Olsam’s stringent investment criteria, demonstrated closely by the following factors:
- The business experienced strong growth in the 5 years prior to acquisition whilst also maintaining a strong contribution margin above 25%.
- Sales are well diversified with the brand operating across multiple channels (Amazon, Shopify and Wholesale) and regions (UK, EU and Asia-Pacific).
- Colapz offered significant synergies across marketing and brand operations with Olsam’s other outdoors brands.
- Colapz’s products are protected with significant IP that offers valuable USPs in what is a highly competitive market.
- Having grown impressively in Amazon’s European marketplace over the last 5 years; the US marketplace offered an even larger opportunity for the Olsam team to tackle.
- The founders built a recognisable camping accessories brand in the UK where the brand name had a strong and understandable connection to the product range.
The Ecommerce space is everchanging with the definition of what makes a ‘good business’ evolving. At Olsam we continue to build our playbook and remain focused on acquiring defensible brands with a strong focus on value creation.