Amazon Due Diligence: What Investors Often Miss

The Amazon aggregator boom taught us a lot about what happens when investors move fast and skip thorough due diligence. Billions of dollars were deployed, and many of those investments have struggled—not because the brands were bad, but because the buyers didn't understand what they were really purchasing.

Whether you're a private equity firm, a strategic acquirer, or an individual investor looking at Amazon-native brands, here's what you should be examining beyond the standard financial metrics.

Beyond Revenue: Understanding True Profitability

Amazon brands often present impressive top-line numbers. But the gap between revenue and actual profit can be enormous.

Dig deeper into:

Advertising efficiency over time: Is ACOS (Advertising Cost of Sale) improving or worsening? What's the trend?
Organic vs. paid sales split: A brand that generates 70% of sales organically is very different from one that's 70% dependent on PPC
FBA fee trends: Have fees increased? How has the brand adapted?
Return rates by product: Some categories have 15-20% return rates—that's often not reflected in initial P&Ls

I've seen brands that looked profitable on paper but were actually losing money once you accounted for true advertising costs and inventory write-offs.

Account Health Is Everything

A brand's Amazon account health is like a credit score—it follows them forever. Red flags to investigate:

Policy violations: Any history of listing suspensions or warnings?
Intellectual property complaints: Have competitors filed IP claims?
Customer feedback metrics: ODR (Order Defect Rate), late shipment rates, negative feedback trends
Review manipulation history: Any evidence of incentivized reviews? Amazon has long memory

An account with a history of policy violations is a liability, even if it's currently in good standing. Amazon can (and does) suspend accounts for past violations.

Supply Chain Vulnerabilities

Many Amazon brands have concentrated supply chain risk that isn't immediately obvious.

Questions to ask:

How many suppliers does the brand use for key products?
What's the relationship with those suppliers? Are there contracts?
Is the brand dependent on a single factory in one country?
How long has the supply chain been in place?

During COVID, brands with diversified supply chains thrived while others couldn't restock for months. This lesson applies to any major disruption.

Listing Ownership and Brand Registry

One of the most common issues I see: brands that don't actually control their own listings.

Verify:

Is the brand properly enrolled in Brand Registry?
Who owns the brand's ASIN catalog? (This is different from Brand Registry)
Are there other sellers on the brand's listings?
What happens to the listings if the acquisition falls through?

I've seen deals where the "brand" being sold didn't actually own their primary ASINs. The previous owner had created the listings, and they came with baggage.

Competitive Moat Assessment

Amazon is brutally competitive. A brand that's thriving today can be displaced quickly.

Evaluate:

Review count and velocity: How long would it take a competitor to match?
Brand recognition off-Amazon: Does the brand exist outside of Amazon?
Product differentiation: Is this truly different, or just private-labeled commodity?
Pricing power: Can the brand maintain margins if competitors undercut?

The strongest Amazon brands I've seen have genuine differentiation that's hard to copy—whether that's proprietary formulations, patents, or authentic brand equity built over years.

The Seller Behind the Brand

Finally, understand who you're buying from and why they're selling.

Operator quality: Has the current owner actually operated the business, or delegated to agencies?
Transferable knowledge: What institutional knowledge will be lost in the transition?
Motivation for selling: Are they selling because they see challenges ahead?
Transition support: What level of support will they provide post-acquisition?

Some of the best Amazon acquisitions I've been involved with included earnouts and transition periods where the original founder remained involved. The worst had abrupt handoffs with no knowledge transfer.

The Real Due Diligence Question

At the end of the day, due diligence comes down to one question: Can this brand's success be maintained and grown by someone other than the current owner?

If the answer depends on relationships, tribal knowledge, or daily hands-on management that won't transfer, proceed with extreme caution.

Evaluating an Amazon brand for acquisition? Let's talk about what you might be missing.