CSA Exclusive: Perch gives small brands a big digital chance
A Boston-based, technology-driven commerce company is looking for small companies with potential for widescale success on Amazon and other e-commerce marketplaces.
Chain Store Age recently spoke with Chris Bell, CEO of Perch, about how his company seeks to identify and acquire small CPG brands for promotion via Amazon Marketplace, with an eye toward expanding to other third-party online marketplaces in the near future.
“As Amazon, Wayfair, and other major platforms are taking a lot of e-commerce share, microbrands are taking share from large CPG companies,” said Bell, who previously held high-level supply chain executive positions at Wayfair. “We want to acquire winning CPG products and brands and sell them through Amazon.”
For smaller CPG brands that might be overlooked by private equity firms, Bell said acquisition by Perch offers several key benefits.
“We provide supply chain efficiency and access to different channels and geographies,” said Bell. “Selling in the U.K. or E.U. is difficult. Products are often constrained. We offer entrepreneurs liquidity. We give a platform to products and brands and then see them go.”
Specifically, Perch targets branded companies that offer original brands and trademarked products that already demonstrate some resonance in the marketplace.
“Perch looks for compelling products with a meaningful purchase history and review history,” stated Bell. “Typically, the founder exits between two and 12 months after the purchase.”
Perch maintains the individual identities of the brands and products it acquires, and markets and sells them separately. However, the company does drive awareness with a “master brands” strategy of adding Perch labeling to products (in the way a CPG conglomerate will include its corporate branding along with the brand name of a specific product).
“We also want to launch a sub-master brands strategy, such as putting all of our beauty products under one larger label, like what Sephora does,” commented Bell.
On the back end, Perch mostly uses the managed Fulfillment by Amazon (FBA) supply chain service to handle distribution of the products it sells. However, the company does partner with some direct-to-consumer and third-party logistics companies to distribute certain items, and is also standing up some of its own fulfillment centers and warehouses to serve as a value-add resource where it makes sense to do so.
Perch is currently investigating expanding its activities to other major online marketplaces, such as those operated by Walmart and Target. In addition, Bell said the company will “almost definitely” launch its own e-commerce site and is conducting some testing, although nothing is live yet.
Bell also reflected on the impact the COVID-19 pandemic has had both on Amazon and Perch during the past year.
“COVID-19 has had a big effect,” he stated. “The bump in e-commerce was great for Amazon’s core business, but it has been harder for Perch in terms of acquiring brands. In the last 12 months, there have been lots of wild demand surges. It makes it hard to normalize what we should pay for an acquisition price.”
Despite these challenges, Bell sees a bright future ahead in the online marketplace space.
“Amazon is moving more money into its third-party marketplace,” he said. “They can launch new products without inventory, at lower risk. Amazon needs depth of product to become the ‘everything store.’ In the U.S., the market is dense enough you can do that mostly with third-party products.”
And Bell already sees an increasing amount of activity in the online marketplace space from sources other than Amazon.
“The marketplace model is growing globally,” he said. “In the U.S., you have Walmart Marketplace and Walmart Fulfillment Services. Google is trying to get in. Facebook Shops is basically operating as a digital marketplace in North America, Europe, and South America. In Japan, you have Rakuten. With a marketplace, you focus on the top of the funnel and driving profitable traffic. The model makes sense.”