Chinese Sellers on Amazon: Attracting VC & Roll-Up Investment

The Rise of Chinese Amazon Merchants and Brand Aggregators

A significant shift is occurring for Chinese sellers on Amazon. These exporters, traditionally operating from factory districts and facing financial challenges, are now attracting attention from major Chinese venture capital firms and representatives from large internet companies.

These investors are actively seeking the next successful brand like Shein or Anker, and are prepared to offer substantial funding. However, many venture capital firms may lack the specialized knowledge needed to provide strategic guidance for rapid scaling.

The Role of Brand Aggregators

This is where brand aggregators, also known as roll-ups, come into play. These companies specialize in acquiring promising e-commerce brands to leverage operational efficiencies.

Following successful launches in the United States, Europe, and Southeast Asia, this model is now gaining traction in China. Traditional white-label manufacturers are aiming to enhance their position in the market and build recognizable brand identities.

Berlin Brands Group Enters the Chinese Market

Berlin Brands Group (BBG) is the latest roll-up company to enter China. Founder and CEO Peter Chaljawski stated to TechCrunch that the company intends to acquire “dozens” of brands within the country over the coming years.

This expansion will substantially increase BBG’s current portfolio, which includes 14 proprietary brands and over 20 acquired brands.

Funding and Strategy

BBG’s move is supported by $240 million in debt financing and a commitment of $300 million from its own balance sheet for acquisitions. The firm chose debt financing due to its consistent profitability since its establishment.

The founder indicated that this funding round is unlikely to be the last, and the company may explore other financial instruments in the future.

Competition and Opportunities

Chaljawski doesn’t view venture capital and corporate investors as direct competitors in the search for brands. He believes that while VC funding is suitable for some sellers, the roll-up model is also appropriate for a select group.

He emphasizes that even a portion of the “tens of thousands of sellers in China” generating significant revenue on Amazon represents a substantial opportunity.

Leveraging Existing Relationships

BBG has a long-standing relationship with China, having relied on Chinese manufacturers for 15 years to produce its kitchenware, gardening tools, sports equipment, and other household items. Currently, 90% of its products are still manufactured in China.

To support its brand acquisition initiative, BBG is expanding its team in Shenzhen, which Chaljawski refers to as the “Silicon Valley of Amazon.” This city plays a crucial role in global export, manufacturing, and increasingly, product design.

An Alternative to Amazon for Chinese Brands

BBG is aiming to provide a novel pathway for Chinese consumer goods to expand their reach within the European and American markets, moving beyond simply being an unidentifiable brand on Amazon. Sellers are increasingly seeking independence from the American e-commerce giant to gain greater command over customer data, however, establishing a direct-to-consumer (D2C) brand presents significant challenges.

The company’s founder points out that many merchants successful in managing Amazon third-party operations often lack the necessary infrastructure to operate independently, such as dedicated in-house logistics capabilities. BBG addresses this by managing 120,000 square meters of fulfillment centers in Europe, thereby reducing reliance on Amazon’s services.

European markets present a particularly compelling opportunity for Chinese brands seeking alternatives to Amazon, as the e-commerce environment is considerably more diverse than in the United States, as Chaljawski observes.

“While Amazon holds a dominant position in the U.S., its market share in Europe’s online retail sector is only 10%. This leaves 90% of the market outside of Amazon’s control. Countries like the Netherlands feature platforms such as Bol, Poland has Allegro, and France boasts other leading e-commerce businesses.”

To facilitate the expansion of international brands into Europe, BBG operates nearly 20 D2C online stores across key European nations, in addition to maintaining a presence on Amazon. The firm is also experiencing substantial sales growth within the U.S. market, with over 60% of its revenue now originating from channels outside of Amazon.

BBG is currently engaged in advanced discussions with several brands in China, though the identities of these companies remain confidential at this time.

This article was updated to provide clarification regarding the number of brands within BBG’s current portfolio.