How E-commerce Brand Acquisitions Help Fill Demand-Supply Gaps in the Market

Every profit-driven brand aggregator aims to expand its customer base, increase its operational footprint, and boost sales, revenues, and profits. For this, two growth paths are available, one of which is organic or internal growth. Organic focuses on increasing sales and expanding operations over time. It generally results in slow and steady growth achieved by improving sales, marketing, and customer support. The second is to acquire D2C companies or brands.

At present, the second strategy is becoming increasingly popular in the e-commerce space as, by November 2021, the total value of leading e-commerce acquisitions worldwide had gone past $40 billion. With this approach, not only do the aggregators witness fast growth but also manage to close the demand-supply gap in the market.

This article explores how companies can grow by acquiring other brands to meet customer demand for products that are new or enhanced.

The Impact of External Forces

In the free market economy, e-commerce marketplaces change and evolve in response to many unseen (and seen) forces, including external events, demand/supply trends, and new laws and regulations. These forces can create gaps between what consumers want (demand) and what e-commerce firms can provide (supply). A strategic brand acquisition can help fill these gaps.

By acquiring a brand and its resources, intellectual property, and technology, a buying firm can expand its offerings portfolio to successfully respond to market forces and meet customer demand. In other words, it can fill demand gaps with its added-on set of offerings to serve previously underserved customers.

While it may be able to pursue expansion on its own, it will take more time, money, and resources than it can realistically invest. Acquiring the capability can be an easier and more cost-effective way to expand its offerings. Plus, doing so can help the company achieve market dominance to get a leg up over its competitors. And by meeting customer demand, it can show that the customer’s voice is valued. Listening to customers and exceeding their expectations is the key to garnering loyal brand advocates and super fans.

New Opportunities to Leverage Cost Synergies

A successful brand acquisition is the result of strategic, growth-oriented planning, and lots and lots of research. When combined with a thoughtful, long-term growth strategy, an acquisition can empower the buying company to unlock new synergies that can result in both lowered costs and extended profits.

Through a successful acquisition, an e-commerce company can take advantage of overlapping operations and consolidate them into one entity. This new entity can achieve greater economies of scale and find new areas such as redundant facilities, a bloated workforce, or manual processes, to cut costs without impacting production or third-party relationships. Cost synergies can also increase the company’s negotiating and buying power, which allows it to expand its offerings portfolio and introduce more products to meet market demand.

Leveraging Revenue and Profits Synergies

A successful brand acquisition can also have a positive effect on the other side of the financial equation – revenues and profits. By acquiring a firm that’s already well-established in the market and has good relationships with its customers and suppliers, the acquiring firm can leverage new synergies to increase its revenues.

For instance, the acquisition can open new territories that might not have been reachable for the buyer or might have required considerable expense and effort that they couldn’t afford to expand. Moreover, by combining its resources, expertise, and capacity with those of the acquired brand, the buying company can both expand its offerings and access new markets to sell them. It can also market complementary products or services through cross-sells or upsells, thus allowing customers to access these new offerings while boosting its sales and profits.

A strategic, well-planned acquisition also enables the buying e-commerce company to successfully change market dynamics and boost its competitive advantage in two ways. One – by selling its existing products in these newly-accessible markets. And two – by selling new products in these markets. Either way, customers have more choices, which creates a win-win situation for everyone.

New Business Models and New Digital Workflows via Automation

We have already established how acquiring a brand may allow an e-commerce firm to expand its offerings portfolio with new products and even new categories of products. Both can have a robust impact on its top and bottom line and ultimately on its financial health and competitiveness.

A brand acquisition may also provide the impetus a purchasing company needs to digitize its workflows to make a long-term impact on its operational productivity and efficiency. Digitization of purchase orders, invoices, expense management, supplier management, and other processes can help the firm save both time and money.

These solutions also increase transparency and accountability in the supply chain so they can better manage their inventory, streamline production, and improve their supplier relationships. And perhaps most importantly, digitization and automation allow the e-commerce company to invest their precious time and resources in new product development, marketing, and brand-building.

Conclusion

A strategic and well-planned e-commerce brand acquisition creates many benefits for an acquiring company. It can leverage benefits like faster time-to-market, technological know-how, skilled resources, and cost/revenue synergies. Plus, it can create new business models and embrace automation and digital workflows to improve its supply chain and production capabilities. Acquisitions are also beneficial for customers since they help close the demand-supply gap.

Ergode knows a thing or two about brand acquisitions! Over the years, we have acquired many e-commerce companies and elevated their market profile. Connect with us to know how our successful brand aggregator model and smart AI solutions are making a splash in the e-commerce space.

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