If you're not in the industry or haven't been for a while, and have lived through the rise of Amazon, it might not have been apparent immediately why aggregators were a terrible idea.

I got asked this question yesterday, and made it a comment, but thought it deserved a proper post:

What Bad Aggregators Believe(d)

• It’s easy to acquire businesses. Just make an offer, and our valuation goes up. The more businesses we acquire the better.

• There are lot of costs to pull out of growing Amazon businesses.

• Investors can run Amazon businesses with no eCommerce or Amazon experience.

• Amazon is growing, acquiring growing businesses is great, so acquiring growing Amazon businesses must be great!

What You Should Believe Instead

• Growing businesses are not always efficient, on purpose, because rapid growth is happening. Private equity tends to come in for profitable brands at scale, for good reason. Stripping out costs is straightforward at steady state. Cutting costs in a growing business tends to kill it. Optimizers optimize, and builders build.

• Most people who think it’s easy to acquire a business, have never acquired and integrated businesses before. Between 70 and 90 percent of all acquisitions fail.

• Only extremely experienced Amazon operators should attempt to run and grow more than one Amazon business at a time.

• Amazon owns your customer, you are buying a few months of arbitrage opportunity at best before the next Amazon native brand displaces you. If you break a rule, or are reported by a competitor, your business can be vaporized in one day.

• Basically Amazon aggregators combine all the bad statements in one business. What could possibly go wrong?

Wait for the 💥

I'm not terribly convinced that Shopify aggregators are far behind, although they have one advantage that Amazon aggregators don't -- Shopify itself is unlikely to take down these brands at a moment's notice.

SaaS aggregators are better, but it's not easy to run a SaaS business either. (Even a lot of SaaS is not profitable despite the predictable models -- hiring and growth goals tend to trump profitability in VC-backed SaaS --- though I think it's hard to aggregate a VC-backed business)

Great thing about B2B SaaS is it's pretty hard to kill once you reach $5M in revenue.

Most claimed "synergies" between SaaS businesses never materialize. There are just good SaaS businesses and bad SaaS businesses. Combining two good SaaS businesses can make it worse, and combining two bad SaaS businesses is worthless.