What was an almost non-existent phenomena five years ago, today allows an entrepreneur to create an Amazon private brand, add a logo and outsource to a Chinese manufacturer. Suddenly, a small start-up is competing with brands that have been around for decades.
The Amazon private label business model creates incredible value much faster than more conventional models. New private label sellers compete side by side with billion dollar brands. In many cases, they’re even outselling the established brands on Amazon.
It’s no surprise that acquiring private label Amazon businesses has become a hot market. But, with it comes a host of issues. Download our Due Diligence Checklist to make your evaluation easier.
How do you put a value on a private label brand sold exclusively on Amazon? Is the due diligence involved the same as a traditional business? The devil’s in the details, as the old adage suggests.
The period prior to purchasing a new business - when the buyer examines all the details of the business - is commonly referred to as “due diligence.” Kronenberger Rosenfeld has developed its own due diligence checklist for acquirers of private brands on Amazon. We developed it based on our representation of clients in many transactions. Many of the checklist topics involve a small investment of time but can reap huge benefits in reducing your risks.
Conducting due diligence for an Amazon business is unique. There are a host of potential pitfalls that don’t exist in traditional businesses. You need to consider revenue and sales trends by product and while knowing more nuanced areas to review. How much does the business rely on sales platforms other than Amazon? Don’t ignore complaints and suspension history, as valuable insights can be gleaned from that data. Traffic information leads to important insights. Is there non-Amazon paid or unpaid traffic being directed to the Amazon listing page? What are the web services used the seller? Intellectual property is always an important area to review. Does the business have a history of intellectual property disputes?
Buying a private brand on Amazon can be an attractive, low cost investment with excellent potential. If you’re interested in buying an Amazon private brand, contact me before you make a decision. Like any acquisition, there are risks of making a big mistake, paying a lot, and not getting a return. Find the red flags in advance, and to do that a methodical approach is needed.
Your challenge is to keep focused on the main questions: Are the new private brands worth it? What methodology should be used to value them?
Click here for our free Due Diligence Checklist. We put this together based on dozens of client interactions during the due diligence process. Don’t make a buying decision without it.
Kronenberger Rosenfeld has successfully helped clients perform due diligence in evaluating Amazon private label sellers. There’s a lot on the line. I look forward to assisting you.Karl Kronenberger Partner 415-955-1155, Ext. 114 [email protected]
This entry was posted on Tuesday, July 31, 2018 and is filed under Amazon Marketplace Sellers, Internet Law News.