Why should I sell my Amazon business? ⎜ SellerX ⎜ EP 150

Ryan Cramer: What's up everyone? Welcome to My Corner of the Internet. I'm your host, Ryan Cramer, and this is Crossover Commerce presented by PingPong Payments, the leading global payments provider, helping sellers keep more of their hard-earned firm money. Hey everyone. Welcome to another episode of Crossover Commerce. You've made it. This is episode 150 of Crossover Commerce. This is My Corner of the Internet, where I bring you the best and brightest in the Amazon in e- commerce industry, where I bring out guests every single time to help us get their insight and knowledge to help emphasize and grow your business, whether it's a brand selling on Amazon or a direct to consumer platform, or you're just trying to take it to the next level. I wanted to have experts on this space and help you the listener to make sure that you're making the right decisions and just constant knowledge and understanding because this pace is always changing and evolving. You need to stay up to date with the latest trends, topics, and education in the e- commerce space. That being said, Crossover Commerce, if you've not been on this podcast before, watched it or listened to it, this is presented by PingPong Payments. PingPong Payments is a global cross- border payment solution that helps people send and receive money internationally, so if it's paying out your virtual assistance, your suppliers, your manufacturers overseas, or if you're paying out your employees as well that might not be in the same country you are, you can actually facilitate that through PingPong Payments. And also to date, we've helped over facilitate$ 90 billion in cross- border payments. So that's 90 with a B, not million, with a B. We're talking of billion dollars in cross- border payments to date. Now helping over 1 million customers worldwide save more money in a time where there's growing costs and concerns with shipping logistics, costs of goods. Keep more of that money in your pocket and put that towards your margin. So it's important to look at PingPong Payment, go ahead and sign up for a free account today, you can do so by clicking on the link below or in the comment section, or if you're listening to us on our podcast channels, wherever you might be listening to, this is going to be in the show notes as well. Just mention Crossover Commerce, too. That being said, today's a fun topic I always love to get into. With 150 episodes now, you would think as a listener, if you're a friend of the show, you've known that we've talked to many different kinds of guests in this space, really excited to bring on another again, the term aggregator in the space, but from a different country. They're in Berlin Germany. The company I'm of course talking about is SellerX. If you read the news yesterday, or if you're aware of anything in general in the Amazon space, there's lots of exciting. Yesterday being September 1st, there was lots of, for some reason, everyone wanted to announce all this raise of funds and capital. There was an article that came out, a Marketplace Pulse, that said there was 25 plus companies that raised over$ 100 million in both debt and equity to be able to acquire brands. An aggregator is that they're building and actually acquiring brands at scale and different capacities successfully in different marketplaces on Amazon, and that is what they're doing. They're trying to do that scale and do it with more debt and equity that they have available. That being said, it's really exciting to have one of those people on. Yesterday was really exciting for brands Oslam, Berlin Group. There's lots of great ones that over just yesterday alone was announced$ 1 billion in raises. But today, I'm really excited about one of the original ones that raised over$ 100 million too. Actually to date, they're one of the most inaudible capital. I want to say$ 267. I'm pulling that number from what I last, the article I read said$ 267 million to date to acquire brands in Europe, as well as the United States. That being said, I wanted to go ahead and welcome on Daniela Heil, she's the Investment Head Region at SellerX on today to talk about the topic, why you should sell your Amazon business today? Why today? Why not wait? Why not yesterday? Why should you do that today? So that being said on, I want to welcome on, she said Dani, but I'm going to call her Daniela, on Crossover Commerce. Daniela, welcome to Crossover Commerce. How are you?

Daniela Heil: Hi, Ryan. Hey, thanks. I'm fine. And I'm really looking forward to talking with you about that each market, which you saw yesterday or yeah, yesterday, how it works and it shows how big this market is. And probably there will be a development the next year, like aggregators will merge maybe. So it's really interesting to see this development here.

Ryan Cramer: This is my-

Daniela Heil: crosstalk positive.

Ryan Cramer: I was going to say, this is my favorite topic to talk about simply because it's such an unknown. There's so much that's happened. It really started beginning into early 2020. Just to kind of paint the picture for people who don't know what an aggregator is, it's a business that with capital, whether it's venture capitalist or private equity, they have money that says you can have access to it to acquire brands, a specific valuation. SellerX I'm assuming is no better, but let's kind of talk to that process for you. What would be your definition for your business, I would say?

Daniela Heil: I would say at SellerX, we buy Amazon businesses and offering sellers a swift smooth and straight talking transition, and we're helping just entrepreneurs to realizing the next stage of the business. So it's like sometimes they have limited resources to scale their business, so we support them through the acquisition of the company, but they can also participate one or two years more in that. We are completely VC funded, so we have investors, really well known investors like 83North, TriplePoint Capital ventures and others, and we have more than 30 brands currently in different categories. As you mentioned before, we've just founded in 2020, imagine, like one year and we just fundraised more than$ 250 million just as series B. In July was$ 100 million equity, and this whole space is really leading by debt capital. So we got$ 100 million equity to build up a worldwide company as a brand group in a digital space. What we do is we operate globally. So we have locations in Berlin, London, Miami, Shenzhen, so China, and we operate completely globally. And what we are doing is we acquire companies and then improving them through efficiency measurements, scaling by region, expanding channels. So like multichannel strategy and we push them worldwide. So this is what we are doing. And all of this is underpinned by deep specialism in tech and state of the art infrastructure. So, you know how it is, the whole game is leading by data driven decisions. And this is what we want to do in our investment team. It's not like you have a feeling in your belly. It's like, you need to know where is the trend of the market also for the niches. And this is what we are doing. And like SellerX, we always say this X means we look individually on every case and want to support the seller experience in the whole process. Because like most of us, they have been founders in the past and we know the few of the founders. So this is why we always want to have the best experience for the sellers.

Ryan Cramer: Well, that's amazing. And I think that this space is like you said, it's evolving quickly and it's evolving fast and there's lots of money being thrown around. We've mentioned billion dollars being announced just yesterday amongst four different brands. You guys have your own in itself. And the distinction I want to make for listener out there, the difference between investment and equity, which is within into the company versus debt is completely different. Can you describe that for the listeners who doesn't understand that's a big number, but if it's not going towards the company or if it's just going to debt or it's just going to equity, those mean completely two different things.

Daniela Heil: Yeah. The difference is this whole business model is based on private equity buy and build strategy. And in private equity, you have a high leverage of your transaction money. This is why you don't need a lot of equity for the transaction, but if an investor gives you more equity, this shows like, okay, you should expand more and it's not just transaction based, it's also trust that you grow pretty fast. So this is what I meant before about equity and that, but it wouldn't be smart to put too much equity in acquisition because you can work with that as well. So it's the leverage effect as you know guys.

Ryan Cramer: Exactly. I guess for your perspective, what were you doing before SellerX? You've been in the professional space and what was your background? Was it in finance? Was it in mergers and acquisitions? What's that background like for you?

Daniela Heil: My back ground is not the number one from other aggregators, experts, and-

Ryan Cramer: crosstalk You weren't selling in Amazon before this, right?

Daniela Heil: No, no, I didn't. But what I did was, I just started my career in traditional commercial banking. I was mainly involved in the small and medium size enterprises in Germany with financing stuff and also controlling of a small, medium bank. And the perspective of German traditional medium size companies is completely different to e- commerce. It's like this typical, maybe a butcher or a builder or whatever. So after this experience at the beginning, I just decided to switch in strategy consulting, and there was mainly focused on digitalization strategy. So at that time, I had already understood that banking as it was then could not continue to exist like that. So during that time, I also started two businesses. Now there's the founder story, but not on the e-commerce side.

Ryan Cramer: Right. There you go.

Daniela Heil: One was like a one woman show where I just sold exam preparation courses to students. So it was more in the teaching, education segment. And the other business was mainly driven by student demand. For example, my founders and I, we just sold hoodies and printed books and this add on stuff for your university time. And at the end, we just decided to donate the profits of this company. So at the end, it's not this usual story where you say I buy a car or whatever, it was just with a sustainable purpose.

Ryan Cramer: Yeah. Your profits went to a good cause, you should say. So that's amazing. So building something that led you into SellerX obviously, what was that decision like? What did you feel the opportunity was like in the space where there's not a lot of track record? You're probably a numbers person, the numbers were suggesting lots of growth opportunity at rapid pace, is that a possibility or is that a scary notion to jump into, if you will?

Daniela Heil: The background of the story was that I also was involved in a venture capital stuff. So after that, I was like years M& A advisor, transaction advisory stuff and financial services. And then I switched to technology, FinTech, into tech. This shows I always want to do new stuff, and this was something where we're really well connected in the whole venture capital ecosystem and started ecosystem. And I was simplified impressed by SellerX business and grocery and especially the founders team. So the story is like they are from Berlin and they build it up a worldwide active company. So this was for me pretty impressive, because as you know, as a US guy, in Europe we don't have this massive group. It's where I thought, wow, finally, someone in Europe to build up a really worldwide active group. And then I just thought okay, I just heard about reputation was really great, professionalism was really good and also the talks with them were just honest. So I decided, okay, the company is great, reputation is great, and also there were two facts why I decided to go to SellerX. One, I just realized that e- commerce market would be one of the fastest growing markets in the next decade. They just like, through Corona, the adaption of e- commerce was insane. Everyone was like, I'm just lazy. I want to get my delivery stuff. So this was one point. And the other point was that I have led workshops with large corporations, banks, asset managers, about future of financial services. And then I just noticed no matter what the business model is, the focus is always on the ask, and customers use case and satisfaction. And to be honest, in my point of you, no industry is as 100% customer centric as a direct to consumer business. This is why I decided market trends also definitely interested in consumer products to be honest, but also the end customer and the focus.

Ryan Cramer: Well, it's amazing. That's a good space to be in, and you made a lot of good points. I think in this space, as it continues to grow, in the aggregator space, people ask the question, is it a trend? Is it something more of a feature say? Are people going to get pushed out? What would you say for like, because there's only so many sellers in the world. There there's a lot, but a lot of people think that there's more and more aggregator space coming into the play. They either cannibalize each other, or they're all just stay as this major corporation, like a Johnson& Johnson, if you will. Not a bad thing, but they have lots of brands underneath them going almost as an umbrella. What's the consensus over in Germany, because you said there's not many in Europe, there's a maybe handful on one hand in both UK, as well as in couple countries, a couple in Germany and a couple in the United Kingdom. In the United States, a little bit more focused and that we're seeing pop up in in Asia. But, is there a point where you see a roof for people coming into the space or do you think that there's just so much opportunity out there that everyone can play in the same box together? Does that make sense?

Daniela Heil: Yeah. I think there are two different perspectives. One perspective is they could also exist standalone without any exit, because everyone is profitable. They just acquire profitable companies. But as a private equity investor thing, is that you buy an entry purchase price, a marketable, and then you're looking forward to the exit. So you need to understand what kind of exit could that company have. And if you are not big enough, you cannot do an IPO. You could do a smaller IPO, but at the end it depends. There are some cases where you could say, okay, they can exist some years, maybe they will be acquired by strategic investors, for example, such as Nestle, or I don't know Hanker or this big corporate. They sometimes really acquire consumer brands and then they could acquire like a brand group. This is one exit case which can be happen. The other one could be that the market will be consolidated. So there will be like a mergers in the market and then they go for an IPO. This is also something that can happen. And the other thing is like, okay, what kind of exit could be also possible is maybe also traditional private equity companies will acquire them. This could also happen. So there are a lot of different exit cases, but at the, I think everyone has this focus on, okay, when can you exit? Because this is the game here, it's private equity.

Ryan Cramer: Great. I guess in that case, what are we looking for at SellerX? Tell me the stipulations at which a brand can come to you to the table. What's the minimum that you're looking for in that regard?

Daniela Heil: So you mean our investment criteria, right?

Ryan Cramer: Yes, please.

Daniela Heil: Okay. It depends. In the past, we knew like... In general, SellerX looks for Amazon native brands, and they should demonstrate a track record and a high growth profile. We just look on, okay, what happens in the past, and then we think about how can we build up this brand. So we think about new expansion, other markets, new channels, new product launches. This is one thing where we take a look on it. We also love brands with competitive review modes in their specific niche niches. Sometimes they're niches, which are not really competitive because there is no one in it. So this is where we always have a spot on it. And I would say also high quality products with great reviews and also the reviews should be true. We also track are there fake reviews. This is really important for us to understand the product and the customers.

Ryan Cramer: Highlighted lately. Yes, exactly.

Daniela Heil: Yeah, And there should be also this case where we say we should avoid those where we perceive a inaudible or temporary in nature. We don't like to have this seasonal product-

Ryan Cramer: crosstalk You don't want trendy products.

Daniela Heil: Yeah. We love evergreen products. So this is where we focus. And from the financial perspective, we generally look on businesses that have a certain size. So more than$ 1 million revenue, fast over year growth. I would say minimum 30% per year, and the margin profit should be like 20% minimum. But the thing is we only invest if we are convinced that we can hold this margin level in the long term. Sometimes if you have discussions like, Hey, my margin is 50%, and you take a look on the market, you understand like, okay, this won't happen the next six month. And especially after Corona peaks, we know the market changed a little bit the last four, five months. So Amazon market is the most dynamic market all over the workd.

Ryan Cramer: I was going to say both good and bad. Let's call it what it is. Well, that's fascinating. So you're a numbers person and I think numbers are super important. Let's think about this, as cost of goods and logistics have gone up four times over the last year, year and a half or so, is that concerning for a business like yours to consistently try to, with cost of like PPC logistics and everything like that, is that a concern for you and your team to know that those trends will continue to grow exponentially, maybe cutting into margins, or what's kind of the consensus around prices where they're at right now?

Daniela Heil: Markets are in general dynamic. You have different developments depending on raw material, demand. So this is something what you always need to force. We wouldn't say this stick for ever, this is like market development works. One thing is like Cox development depends definitely on the product. There are some raw materials which are high demanded. And also this supply chain costs I would say issues, it depends how you, if you own the supply chain process, you have more room. This is why we want to own the whole operations and we are on this way. This is why we will exist in the long term, because we have this experience and the whole supply chain start from developing products until brand management, supply chain management, and also negotiation with suppliers. And as it is, you can just negotiate if you have a big pool of reliable suppliers, and this is what we have. So this excellence in whole operation is really important to be in a long term successful. And this is what we do, especially like I just said, market trends, it's normal that you have dynamics in it.

Ryan Cramer: Is there a, I know there's not specific brands you go towards, but is there specific categories that you feel most comfortable talking to, almost like for example, a non- starter would be maybe electronics, I would say. If I were to guess, electronics are very difficult. You have to constantly be updating. It's a hard product to cover in warranty, law breakage. There's a lot of varying factors in there in the cost to make it so on and so forth. But if you go into more of like a home and kitchen category, you might have like little less even competition, but you have a little more margin to play with. There's lots of things that are evolving and growing, not as much as a risk, if you will. Is that fair to say or what what's SellerX's kind of philosophy around that?

Daniela Heil: Definitely there are some niches which are really growing, especially baby, kids. Sorry.

Ryan Cramer: No problem. You were talking about baby, kids categories, games, things like that.

Daniela Heil: Yeah. So parents normally they don't want to spend money for bad quality for their children, so they really look on quality and they would also spend more per item if they know it's safe. I don't know, safety focus, more safety focus, more quality focus. It should be sustainable. It shouldn't be toxic. So there are some points where they think it doesn't make sense to buy this normal China product for my child, I just want to have sustainable products, for example. So this is one niche where it's possible to have this unique value proposition. And to be honest, in household and kitchen, there's sometimes challenges if you have commodity products as it is, especially in Germany. We have a lot of Chinese sells on the market and they have really competitive prices. So the pricing game is really strong, and sometimes it's not possible, for example, to have a triple price for a pan. So it depends on the quality, but Amazon is difficult with this high premium pricing product. So it depends on the use cases, what kind of story you want to tell and your brand strategy.

Ryan Cramer: Right. Because I know that there's aggregators that have more brand specific that would go just health and wellness, for example, or just stick in the specific categories. Your approach is more find profitable products, know that you can scale them at profitably, and then really grow out the brand itself. Is that kind of fair to say?

Daniela Heil: Yeah. We are more opportunistic, I would say-

Ryan Cramer: crosstalk There you go. That's the word I was looking for.

Daniela Heil: Yeah, but we don't invest in electronics as you've mentioned before, but in general evergreen product.

Ryan Cramer: Okay. If I'm a company and I want to come to you, we've set kind of the table in that regards, why should a company, what are the number or top things that you would convince our end to say now's the time to exit a business? Is it kind of all those things that we highlighted earlier of, Hey, we have the ability to scale and you kind of don't like, I could be a brand of one. And instead of me doing all these terms of things or inaudible you have a team of, 50, 100 people, I'm not sure how big SellerX is actually right now, but you guys are continuing to grow and develop those operations. So you have a team dedicated to one brand, and you have the ability to scale it, whether it's, myself I may not have the time money or capital to do such. Is that the number one thing to...

Daniela Heil: Yeah. I think there are more trends why sellers want to sell. I think like five years ago, I'm assuming business where not founded with a perspective of an exit. It was more than like, I just want to build up my own company. It should be lean. I just want to be like this digital no made where I can live where I want to more in this space. And also some of the e- commerce sellers just build the brand as a side business as well. They didn't want to go fully in this medium size company or whatever, so if this is the case, the exit opportunity is a no brainer. So after transaction, SellerX will scale the brand with all resources and the seller can still participate without risk. So we contribute liquidity as an upfront payment and participate them in some cases with an earnout as well. And the thing is execution, operational excellence is key here. Why is it so? It's clear. It's our resources, we invest our employees, our teams in scaling the company of the seller. And this is why we are definitely cherry picker regarding our teams. So, our teams are highly experienced also in e- commerce. They came from Amazon space and they joined for many years in these well known companies. So this excellence is important for seller to know. And also the seller should be really aware of this operational skill of the aggregator, because probably they talk to a lot of them. So this is why they should also do a due diligence from their side about operations and excellence in that space. The other point is like most of the sellers, especially in Germany, they would like to expand and grow, but this is like the biggest, biggest challenge for them because they have limited resources. They don't have money, working capital financing until the limit. They don't want to get this risk. They don't want to build up big teams to invest in that growth. Also sometimes they don't have knowhow about the foreign markets, especially like US sometimes it's completely different from the culture. So you need to close this culture gap as well. These are some challenges where they say like, I cannot scale this company right now, so you should do it. And there are also some developments challenging for sellers. As everyone knows, Amazon gets more competitive every day. So in different categories, it's really, really insane how competitive and some sellers cannot compete in this niches in the long term, they think, so this is why they say like, I cannot invest everything, so let's do it, but with you. Maybe there's also like, as you felt before, there were changes in restock limits and so on, so they just felt like, okay, I'm completely dependent on am Amazon, I feel really bad right now. So I don't want to have this risk anymore after all this changes and this margin pressure. So some of them just feel like, I just want to have a break. These are some reasons. I have more. If you talk with sellers, you get so many reasons. It's also about passion with the product. It's about, I want to invest. It's a lot of reasons to be honest.

Ryan Cramer: Right. And I think a lot of people now they see it. There's a couple different ways. There's an opportunistic valuation of maybe valuations are at an all time high and they won't get better than what they are at, but I think I also want to look at, from the aggregator perspective of, you're not going to just jump and acquire this processes because you don't think it's going to last beyond two years. You want something that's going to last 3, 5, 6 something years and it's going to have staying power. That being said, why would you, maybe this is kind of a theoretical or a philosophical notion, why would you look starting at Amazon native brand instead of maybe looking at a direct to consumer brand and getting a better idea of numbers? Is it just because of data is more accessible through Amazon or is it because it's hard to measure just a direct to consumer brand that might actually be doing very well and you can still scale it onto Amazon instead?

Daniela Heil: Yeah. To be honest, the conversion rate on Amazon is the best conversion rate ever. So-

Ryan Cramer: crosstalk It's very good. It's not bad.

Daniela Heil: Yeah. It's like a no brainer, especially the analytics is just great. So you find out a lot about behavior, customers and also brands and trends. This is one point. And the other point is it's easy to scale within buy and build strategy on Amazon, if you start with that business. So in the long term, as I mentioned before, we will do definitely multichannel. We will definitely Shopify buildups and so on. But as a start, it's just great to start on Amazon because at the end, most competitive platform, also just really honest, really customer centric, customer focus, and customers say directly if they are not satisfied, you have it in your review mode. So it's the high transparency you can ever have. So this is like for buy and build strategy, the smartest, smartest entry point.

Ryan Cramer: Right. Do you ever fear, this is a notion I've heard a couple times, is there a fear or a reality where you think that all the top selling products are just going to be ran by aggregators in the next two to three years, pages one to two, and then it's going to be harder for small, medium size businesses to even break into the entrepreneur space on Amazon, or what would you say if you heard that statement?

Daniela Heil: To be honest, after this development and this professionalism in that space, we just know that with all this expertise from the market, it will be really competitive to go in this market in two years, because experts will be in this market. And if you are this small seller, as I mentioned before, five years ago, it was easy to go on that marketplace and to perform well. But I think in two years it's more difficult. You need to find this niche where no one had the spot on it. I think this is really difficult compared to five years ago, but I don't want to say to people, you shouldn't try it, because at the end, risk gets return. So sometimes it makes sense. It depends.

Ryan Cramer: Great. Well, I'll give you my thoughts after this, but I'm curious, if I'm a small to medium sized brand right now, should I be fearful of any sort of aggregator right now, or should I actually welcome competition and welcome in the space? What's kind of the thought by that? Because if I hear that and I say maybe I might not be able to be competitive in top selling markets and there might not be opportunity anymore, maybe I don't want aggregators keep coming and raising money in the space. There's a pro to exiting a business, but if I want to keep selling and operating myself, why would I want to invite that competition then?

Daniela Heil: Oh, okay. Understood.

Ryan Cramer: Does that make sense? What would you say to someone who feels that way? There's no wrong answer. I can tell you my thoughts and who I've defended aggregators as well as that everyone can play in the same, same box.

Daniela Heil: Yeah. I think there are two sides, so totally understood that point with the competition, because at the end, most of the aggregators also build up new brands, new product launches. If they're in different niches, they would launch also new products. But at the end, this market is really huge. So this is one fact. And if you have a nice product, really well performing, quality, good marketing, whatever, it should work if you are currently in that space. So just to say like that, five years ago there was no possibility for an exit for an e- commerce seller. So it should be more like a chance and not just like a competitor. Sometimes we say to targets where we acquire, Hey, it's so cool that we can acquire your company, you can build up a new brand but in another niche. This is okay for us. We think this market is so huge that we allow everyone who sold his business to us can also found a new company. And this shows how we think, and also this shows how the e- commerce seller should think. It's like, yeah.

Ryan Cramer: I can add out too. So Daniela, that's a fantastic point. And I said this statement literally yesterday when I made those announcements again, a billion dollars raised in capital. The phrase that I responded to is actually to someone I really well respect in this space. And they said scary. And I said, a lot of people are like, well, it's great because people can exit. They're like, well, are we going to, there's this concept of will small the medium size businesses eventually once they exit the first time and they try to do it again the next time around, scaling at the same way won't be the, because there's competition, there's aggregators that are now acquiring brands. They're taking tops selling performers and almost like pushing out people. But I said, how I think of this is, think about a boat, right? Aggregators are going to be big. They're going to have multiple brands. You can't just ebb and flow like a small this medium size business can. They can make changes on an instant that's only impacting them. You are, or people who have 25, 50, 100 plus brain, they can't do that necessarily at the speed and the effectiveness that maybe a one person shop can do right. They can look at the trends. They can look at the innovative in that regards. They can only worry about one. You almost have to be responsible for a conglomerate, if you will. Again, you're not taking over the world. You're talking about multiple brands you have to adhere to, and you can't maybe take as many risks or as all these different kinds of things. So you have to think about there's opportunity to be innovative and flexible versus consistent and have capital that come back. So that's why kids can play in the same sandbox because they have different pros and cons to both. Does that make sense?

Daniela Heil: Yeah. So maybe one add on to this. I think there are trends, which are a resort from the digitalization. So if you say in general, the small local shop, then you shouldn't say that because in general, a lot of consumer product are advertised via Instagram. So at the end, this whole story also depends on other social media platforms and not just Amazon. So just one point. At the end, also Amazon went in this direction that the small shops needed to use Amazon as well. This is like the same trend with Instagram. This is just like a inaudible, which is from this digitalization, we cannot change that. And we should use this point to grow and to build up great brands for customers. This is like, also for customers, they want to have the transparency. For example, if you know a local shop next to your door, you would go in a restaurant or whatever, you would go to there. If someone tells you, Hey, this is a nice restaurant. We should go. And also Google tells you on Google maps, I don't know, five stars. And then you go there. So the whole transparency is there because of the digitalization and we should use it to have good experiences for consumers. Right?

Ryan Cramer: Absolutely.

Daniela Heil: So this is like the same point, I think.

Ryan Cramer: Well, like you said, the idea of trends, you have technology as it will continue to grow and develop, there'll be companies and services that will allow small, medium size businesses grow. We're one of those, we work with the whole scale and plethora of both aggregators, but also small, medium size businesses. But that concept, you're talking about different economies worldwide. So looking at opportunistic natures with sells in Amazon in the United States, you may not sell on Amazon in Germany, which is why it's super fascinating. You're seeing more country centric aggregators starting to pop up. You know Germany inside and out. And I'm assuming like you, and I think the other one is Berlin Group. Again, not many people will know the inner workings of amazon. de, so it's going to be, you have a leg up on the competition in Germany, as well as the United States, but then someone might have it in Japan or, you know what I mean? There's lots of different markets where trends are different amongst economies. There's buying power that's continuing to grow on Amazon across the world, not just in the United States, because Germany is number two market behind United States. Japan grows as Canada grows, as Australia grows as China grows, all these different platforms, but then also you take that core and then build outside of that on different marketplaces, different wholesale and retail opportunities. It's like the opportunity is incredible. That's what I'm saying is, it's almost impossible to have a corner the market, if you will, because the market doesn't exist in the world. There's no way because there's always going to be new trends. There's new categories that will emerge, new trendy topics. You'll have an aggregator who wants to only do trendy things and launch it themselves. Say we can do that ourselves and launch our product and then move on. So there will always be these opportunities. They're just going to evolve over time.

Daniela Heil: Yeah. Totally understood. I'm from the FinTech space as well, so what I know is also in the tech industry, financial services, also the services are worldwide, especially in the crypto space. What I mean is like, through digitalization technology, we are completely global active always. It's a insane. This is the development from the past five years I think, and it will continue to be honest. I think everyone will just speak at the end, maybe in a lot of years just only English or I don't know, but it's insane how international business is and it won't go back.

Ryan Cramer: Absolutely. So in that context, we're talking about 2021 and we're kind of looking into, this is an anxiety time going into Q4. This is probably the first full year you and your team have been able to plan. As we're acquiring new businesses, what's the most important thing for SellerX right now? Is it establishing for your brands in certain markets? Is it the acquisition or a number of acquisitions you want to have in your portfolio by the end of the year? What are the most important things for you at this juncture before the end of the year?

Daniela Heil: Definitely the deal flow. So to scale via acquisition, because this is the main business model. So acquisition after acquisition, this should be running. And also scale the existing portfolio companies profitable and to keep the growth high of this existing portfolio companies. And also I think all hyper growth company is forcing hiring great people. This is a big challenge, but we were gathered because reputation is important for that space and we are pretty convinced that we can build up the whole team in an appropriate way in the context of our growth story.

Ryan Cramer: Absolutely. So in terms of valuation, if I'm a seller and you're looking at their numbers. This is the processes, submit numbers, kind of go through all the number of boxes that you need to fill in order to see deal flow, how many units you're selling, what's kind of the turnover rate, so on and so forth, margins. I won't go through all the different data points, but what's the number one thing you look for that's actually the most negative towards a brand's valuation? Is it just the nature of either being attacked or just having seller central issues? Because I have a conversation to set the table for you, Daniela. Earlier this week, I had a conversation with Chris McCabe and he was talking about not a lot of aggregators or people in this conversation are talking about risk management in terms of looking at a brand. You have to look at the terms of, will my brain be attacked if I transition from them to us? Is that a component that not a lot of people are talking about or what's the number one biggest risk that you think that you have to worry about when acquiring a brand?

Daniela Heil: Okay. So for the transition phase, we just call it onboarding phase. We secure-

Ryan Cramer: crosstalk Or just knowing that a, I would say like knowing that a brand is actually going to say what it's doing. Does that make sense? The numbers look great and everything like that, but if it's doing too well, am I opening myself up for someone to attack me? If there's like a shutdown or anything like that, is there something that you're looking at that brings the most fear in you when you are initially, like you have acquired a brand? Does that make sense?

Daniela Heil: Sorry. I don't know what you mean with attack me, inaudible.

Ryan Cramer: Okay. No, no, no, that's fine. No, that's great. So using the phrase attack, and I'll take that off the table. So when your account gets suspended, so if I have ASINs that have been suspended in the last year or so for a couple times, like once or twice, you guys look into, obviously the reason why they're either not, they're no longer available on Amazon. Like Amazon took them down. It could be because of competitors actually attacking your brand and that brand itself, and on the back end, putting different keywords or changing out images or something where it's actually malicious against it in the invitation, because you're a top brand you might have competition trying to be malicious towards you. Do you ever fear for that towards your brands if it's a top selling in that category, we're inviting malicious activity towards us? Does that make sense?

Daniela Heil: Okay. Understood. Understood. I think that in general-

Ryan Cramer: crosstalk It makes sense to my mind.

Daniela Heil: I think in general, every seller has this risk in general. So you have always the risk to get attacked via fake reviews, via, I don't know, maybe copycats, they want to just copy you to get the reviews and then get fake reviews, same images and try to get the ranks. So this also something-

Ryan Cramer: crosstalk Hijack your listing and things like that.

Daniela Heil: Yeah. This is like the operating business, this is normal to be honest. You need to understand how you can be pretended to that space. I think it would be strange if... So if we would like to go in the product and then during the due diligence, we would see there are four copycats from China with half of a price, to be honest, difficult maybe, because like at the end, you don't know what happens the first three month, but this is a risk that always can happen. But normally, we have a feeling like, especially for commodity products, this can happen. So it depends on the niche, on the category and on the product what will happen. And also you cannot keep that risk totally from the table because it's always the operational risk on Amazon. So this is why our strategy is to do multichannel because at to end you are not dependent like before on the market.

Ryan Cramer: You're not a one- legged stool. You're not one- legged stool. You're not only supporting, and we did see that. In 2020, you saw a lot of brands who were only selling on Amazon. And they got shut down because they were no longer, their brands or their products were not deemed necessary. Or it was a, back when Corona hit worldwide economies, they were not accepting products that were not deemed necessary whether it was like necessary items for like baby or like goods and solid goods, if it was deemed unnecessary you couldn't even get your inventory into a warehouse. But now a lot of people can sell and that was their only source of revenue. So that's why the multichannel idea has become accelerated for lots of brands and lots of companies like yours, I'm assuming. I guess on the flip side-

Daniela Heil: crosstalk I'm sorry, one thing...

Ryan Cramer: Yeah, go ahead.

Daniela Heil: ...one thing pertaining the risk. Sometimes you have products where you need to do a deep dive in compliance stuff. Like in Germany, for example, we have different rules for consumer products, especially in the beauty segment. Some player go in that market and don't understand that there are requirements for it. Also in the marketing labeling, and like what you say about the product. For example, if you say like your skin gets better, if you take this product, sometimes that's not allowed, especially in the CBD space, for example. And then the people just do it. They have it in it and then Amazon cutting them. But to be honest, they should cut them because this is illegal.

Ryan Cramer: Right. Like for compliance reasons, nation and nation, you've been in the FinTech space. That's what we have to do to be implicit in each country that you have to be compliant in. You can't have false claims. You have to have certain checks in if you make certain certifications in order to deem it safe, reliable, trustworthy, all this fun stuff there. I'm sure you guys get to worry about. And like, do we want to put it into that market or not because of how it states XYZ, does it actually hurt a brand maybe if it's in all these multi- channels that you have, and it's not every single like marketplace, for example, if at scale you have to worry about that coming up? If I want to put my product that's in America and I want to put it in Japan, for example, that requirements won't allow for that product specifically to work there. So that actually caps the growth potential of that product.

Daniela Heil: Yeah. I think it depends on the market. If you cannot put in the shelf of Walmart this kind of cream, then you are limited. So it depends on the case. But in general, I would say one strategy, what I would say concerning, if you have like a German company and this company is already multichannel and this company didn't really work well in that market, you need to understand why it said so. Is it because they didn't push the retail stuff or was it just that the retail didn't want to have product in the shelf? So I think there are different cases where you can say, okay, if they already tried to go in retail and it didn't work out, should we want to buy that company? So, especially in Germany, we have big retail like the inaudible, Horseman, and these are the biggest players in Europe, inaudible. If you have this relationship that they don't want to put your product on the table, it's concerning. So this is why sometimes it could be risk for a seller to try to push it in multichannel. If it doesn't work out, then you have a problem at the end, I think.

Ryan Cramer: Absolutely. I know we're coming up on the top of the end, Daniela. Again, you've been so fantastic in getting in theory, and I think this is super important for our listeners out there, if you're listening or watching this to understand where this industry will go and then how, not just entrepreneurs, but you as a business will continue to evolve and push business to growth in this economy too. We've seen trends like how social media kind of developed the digital social commerce space. E- commerce has made possible for small, medium size businesses to make their products available internationally, worldwide, however you want to call it at an instant to be delivered to you in two days, that whole adage, like Amazon's delivered to you in two days. But as the economy grows, you know the German market, you know Europe a little, I would say more than a lot of our listeners, but what's kind of exciting for you in this space as you continue through this year, and then next year, what are you keeping your eye on specifically? Is there something that's under the radar that not all of people are talking about, but that you are specifically keeping an eye on?

Daniela Heil: Yeah. As it is, I cannot talk about everything, but-

Ryan Cramer: crosstalk That's fine.

Daniela Heil: There's something we're always passionate about is to talking to sellers and then you find out, what is the opinion of the market to be honest. So this is something where I'm pretty excited to have a look on it. I would like to go in the future and would like to know what the sellers will tell me in one year. So this is something where I'm really-

Ryan Cramer: crosstalk That would be amazing.

Daniela Heil: Yeah. That would be amazing. I think the market works like, it's really important that you as an aggregator are a good entrepreneur, so you need to understand the market and also you need to understand the pain points of the participants in the market. So this is one point why I'm excited. And the other point is like, I'm just excited to know how is the portfolio companies running. I love to know the growth story of them. I love to know how will be the advertising, digital work, all this stuff. It's just amazing to see this hyper growth every day. And also, I just would like to know how it would be in one and a half year. And I'm pretty convinced that it will continue on to then.

Ryan Cramer: Yeah. A inaudible.

Daniela Heil: Yeah. I think every aggregator has maybe a different focus a little bit, but at the end, I think the market is huge. So I'm not concerned about, as you said before this pressure, or I don't know, I'm pretty convinced that the good entrepreneurs will keep running.

Ryan Cramer: Absolutely. Well, I think as long as a company is innovation first and they're customer- centric, I think ultimately that's where the success has to come from. And as long as people are knowing that's the case, it's not a, let's try to figure out how to take over the space and wipe everyone out. It's more of a, Hey, we can operate and do it our way and everyone else can have a seat at the table. I don't think we're going to be overcrowded by any means anytime soon. I think there's a lot of capabilities and capital to be had. And that's what's exciting. It's a growing market. It's kind of a, well, we think we can do it better and you're going to try to do that your way and best of luck in, that's what capitalism is, right? You're trying to make business better year over year, day over, however that looks. Daniela, I know we're at the top of there and I don't want to squeeze you for more time. I know it's laid over there, but for people who want to work with SellerX or just learn more about the processes, I know we talked about your due diligence model and it's fantastic. All the markets that you look for, the minimum requirements, they want to reach out to you and your team, how do they go about doing that?

Daniela Heil: Yeah. So you can reach out if you're interested on our homepage and as well on LinkedIn. They can just text me or also via our homepage and get contact there. We also work with some brokers, but at the end, sometimes it's easy to talk directly. So feel free.

Ryan Cramer: Hey. As long as what's best for the seller at the end of the day, but also for both businesses, I think everyone can work together in that regard. So reach out to you if they want to learn more information or obviously work, if you're working with a broker, talk to them and point them in that direction too. Hey, thank you so much. I know I would talk to you more about this if time permitted, but we'll have to have like a part two or three of all the exciting things. Is there anything we should be aware of? Is there any news that you want to drop here on this podcast for us or it's a wait and see statement?

Daniela Heil: Wait. Not yet. Not yet.

Ryan Cramer: I was going to say, if I read an article today, Daniela, about SellerX, I'm going to be a little upset you didn't tell me about it today. So no, that won't be the-

Daniela Heil: crosstalk I'm sorry.

Ryan Cramer: No, that's okay. I'm just kidding. I know there're exciting things for you and the company and I know you're one of those few who are growing in Europe, as well as the United States. So continue success for you and the team and I'm excited to hear about and watch you guys continue to grow.

Daniela Heil: Thank you.

Ryan Cramer: No problem. Again, thank you so much again, Daniela for hopping on today. This has been, I'm going ahead and, this is what happens to everyone when you go ahead and produce yourself. You have all these different malfunctions and errors. But anyways, if you're watching or listening to this live, again, we appreciate you spending some time today to talk about why I should sell my Amazon business. Again, such a fantastic conversation with Daniela of SellerX. They're based out in Berlin, Germany, but you can actually reach out to them on their website, just sellerx. com is comments in the comment section below. You can certainly check that out. If you're listening to the show notes we'll also link out to her and her contacts as well how you can reach them and see if exiting is that time. Again, we learned about multiples are high, reinvestments are high. If you don't want to have to worry about the headaches of ongoing cost issues, you know you got a brand, but you want to invest in another opportunity or idea, now is the time to do it. I think lots of people have been happy in their exit. They're able to reinvest into another business online, or you can actually do other ventures that you might want to do. That's the beauty of e- commerce and entrepreneurship. There's always opportunity available and we kind of discussed and touched on those today. But again, this is Crossover Commerce. My name is to Ryan Cramer. This is My Corner of the Internet, where I bring the best and brightest experts in the Amazon e- commerce space. Again, thank you so much for Daniela and all of her team for hopping on today, for watching and listening today. And if you have questions, go ahead and reach out to her. But in the meantime, this is episode 150 of Crossover Commerce. You can listen to any channel where the podcast might I be available, again on Apple, Google Spotify, any sort of podcast platform, or you can watch this live on our social media platforms on YouTube, LinkedIn, Facebook, and Twitter. But again, I'm Ryan Cramer. This is episode 150 of Crossover Commerce. We'll catch you guys next time. Take care.