In the video game Katamari Damacy, players control an avatar who rolls a sticky ball that captures anything it touches. The goal is to create a sphere large enough to become a star or moon.
E-commerce aggregators work in much the same way by purchasing smaller brands, then optimizing their manufacturing and sales channels to boost market share.
This was effective in a pre-vaccine era when consumers stopped visiting stores, but is the brand-rollup model still viable today?
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“Decreased consumer confidence, inflated brand value, and a freeze in investment capital are creating a perfect storm,” says David Wright, co-founder and CEO of Pattern, an e-commerce accelerator. “Unless aggregators change how they operate, their future is bleak at best and nonexistent at worst.”
Scaling an online business until it’s large enough to flip sounds great, but Wright (who clearly has a vested interest) says small brands should partner with companies that can help them navigate the market, not swallow them whole.
“It’s comparable to the financial crisis of 2008, when poor financial products were lumped together in order to diversify risk and make them look better than they actually were,” he writes.
“We all know how that turned out.”
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