The Third Stimulus Checks Are Getting Spent On Amazon. Here's How Perch Thinks Amazon FBA Sellers Might Be Able To Profit Twice.

Two weeks ago, the Internal Revenue Service began delivering the third round of stimulus checks of up to $1,400 each. Roughly 90 million payments worth a combined $242 billion were delivered in the first batch of checks, with many hitting people’s bank accounts on the 16th and 17th of March.

There’s been a lot of speculation about how Americans would spend, save, or invest this money, but it became apparent after the first couple of days, that many were taking their relief money to the same place: Amazon.

To understand consumer spending behavior on Amazon, I spoke with Chris Bell, Founder and CEO of Perch, a technology-driven eCommerce company that acquires and operates Amazon FBA (Fulfillment by Amazon) businesses. Perch is one of the top sellers on Amazon, and it has now acquired over 30 Amazon brands, on track to close one deal a week throughout 2021.

Looking at data from Perch’s Amazon brands, combined with Prosper Insights & Analytics March 2021 survey of over 8,000 consumers, we were able to unpack the impact of the latest round of stimulus checks and what that means for sellers on Amazon.

Gary Drenik: Before we begin looking at the data, you have a rather unique background that combines a lot of interesting fields. Can you tell me more about your background and how it led to Perch?

Chris Bell: Absolutely. Perch’s vision is to build a technology platform to acquire and scale Amazon FBA businesses.

This vision is really the culmination of everything that I’ve learned in my career to date. I got my start at GE in software design. I then moved to Bain & Company, where I helped private equity firms conduct over 40 M&A transactions representing $90B in value. I also consulted Fortune 500 retailers to develop organic growth strategies. Most recently, I designed and built Wayfair’s eCommerce delivery network into a complex, $3 billion supply chain with 50 hubs across North America.

Perch sits at the intersection of all of these — technology, finance, eCommerce operations, and supply chain logistics. This is probably what makes us unique in the space. We take a highly analytical and tech-first approach that has allowed us to scale rapidly while staying remarkably lean and growing our brands at an industry-leading rate.

Our growth levers, unified by our technology platform, allow us to easily expand into new markets, optimize listings and advertising, and improve supply chain efficiencies, all of which maximize earnouts for our sellers.

Drenik: So, given your deep expertise in retail, eCommerce, and Amazon, let’s talk about assumptions we had before the stimulus checks hit and what you’re seeing with your brands now that they have. Earlier in March, our survey asked consumers how they would spend their stimulus check. Can you walk us through what we were expecting to see?

Bell: Well, first let’s look at the historical picture. When the $2.2 trillion Cares Act passed in March of 2020, it was intended to stimulate spending. However, according to a study by the Federal Reserve Bank of New York, more than two-thirds of consumers actually used that money for savings or debt repayment, not on consumption.

The second check, which was only for $600 and just missed the holiday season by a few weeks, saw even less go towards non-essential items. In fact, one survey highlighted that only 2% of respondents used their check for retail purchases.

Prosper's March survey definitely painted a more optimistic picture, but mostly for one type of consumer: Amazon Prime members. Just over half of the respondents were Amazon Prime members, and across the board, they were more likely to spend their stimulus money on non-essential items.

For some categories, the jump in predicted spend was quite pronounced. Look at the over 4% difference in home improvement. When you consider that there are now 126 million U.S. Prime members, this increase in spending appetite could equate to hundreds of millions of dollars in each category.

Drenik: Amazon Prime members definitely signaled an intent to spend more money than the average consumer. As of today, Perch has acquired over 30 Amazon brands. Did you see a spike in any categories over the last several weeks since the stimulus checks began to hit people’s bank accounts?

Bell: We definitely did across a variety of categories. People first started receiving their checks on the 16th and 17th of March. We didn’t see this coming necessarily, but we started seeing our orders explode in some storefronts. We started to see the spike at that time most strongly in several “splurge” categories such as beard care, speaker wires, and VR headsets. Below is a graph of just a handful of our brands broken down by category.

As you can see, our beard care brand, Tame the Wild, was particularly positively impacted, with a 54% increase from the 16th to the 17th and a 45% increase when compared to the average of the week prior. By contrast, less exciting categories like white boards and body wash saw more limited growth since people aren’t out there saying “Woohoo, free money, I’m going to go get some body wash!”

In fact, when you track Tame the Wild’s sales data over the course of the week before and after the stimulus payments began coming in, you can clearly see the impact of the first wave on the 17th. Though a second wave of payments were issued on the 24th, the IRS indicated that a large number of this batch was sent by mail instead of direct deposit, making it difficult to attribute them to any sales data.

Drenik: So, what are the takeaways for FBA sellers, and how can they win the moment?

Bell: Despite the many challenges that Amazon presents to FBA sellers, it’s still a remarkably attractive marketplace. Global consumers are continuing to push their spending into eCommerce and Amazon specifically during the pandemic, and while these episodic peaks from the stimulus may be short lived, we believe that eCommerce is going to continue to grow as a proportion of spend for many years to come.

Third party sellers also find themselves in a unique position to profit twice from their successes over the last year. Not only have third-party sellers been growing at 52% a year, but today’s M&A activity for Amazon businesses has exploded: meaning they can potentially cash out big.

Amazon FBA Aggregators like Perch have raised over a billion dollars over the last several months, and though we are among the largest in terms of funds raised and brands acquired, what really sets us apart is our highly analytical and tech-first approach. This is a new and growing industry that’s flush with money, but not every firm has the operational and technological expertise to tackle the complexities of Amazon and maximize seller earnouts. We have that proven track record.

If you’re interested in being acquired by Perch, reach out to us and share your journey.

Drenik: Thank you, Chris. Excited to see how the space grows over the next several years and how Amazon sellers can benefit from the work that you’re doing!