In the last few years, there’s been a push to acquire small retail brands that sell on marketplaces like Amazon. Fueled by the pandemic-induced surge in e-commerce growth, aggregators raised billions of dollars to acquire Amazon.

Aggregators remind me of private equity—but more focused. They build a scalable platform that allows acquired companies to benefit from economies of scale. They acquire a number of tiny retail brands and plug them into their platform. The idea is that these small brands can scale more rapidly as part of a platform. From what I’ve read, many acquisitions are teams of five or fewer people doing $1 to $5 million in annual revenue.

Many aggregators raised billions in debt to fund their acquisitions when interest rates were low in 2020 and 2021. Now, for a variety of reasons, they’re beginning to experience some pain. First, e-commerce growth rates in 2020 and 2021 have not held up. E-commerce is still growing, but at a rate much closer to historical averages because people are shopping in person again. This means that the growth projections of companies acquired in 2020 and 2021 aren’t being met, which in turn means that cash flow projections aren’t being met. Second, inflation has increased costs substantially. Costs for producing, packaging, and shipping physical goods are materially higher. High costs (absent offsetting price increases) translate into lower profit margins and cash flow. Third, interest rates have increased substantially since 2021. The debt service on some of these loans is an issue. When debt needs to be refinanced, it can be hard to demonstrate how you’ll repay the debt—especially when sales, margins, and cash flow aren’t meeting projections.

According to a Bloomberg article earlier this month, the Amazon aggregator industry is in trouble and may begin consolidating. Based on my e-commerce experience, I agree. But where there’s pain, there’s also opportunity. I can see sophisticated investors who are experienced in e‑commerce purchasing some of these assets at very distressed prices, turning operations around, and transforming these brands into assets that generate great returns.