Launching your own ecommerce brand is never easy, but you can bypass that step altogether by buying a pre-existing one. Of course, that comes with a whole new array of trouble, such as which ones to choose and how to vet them, not to mention coming up with the money.
Luckily, website marketplaces have become more commonplace in recent years. Not only does this make it easier than ever to buy a premade ecommerce business, but it also reveals more affordable options — meaning you can buy an already-launched starter store for as little as $200.
There are quite a few places where you can buy ecommerce businesses and other fully functional sites. Some of the best for online retail include:
- Exchange Marketplace — Shopify’s own website marketplace makes it easy and convenient to filter for-sale sites by profit, niche, selling price, and more.
- Flippa — Although they assist different online industries, their ecommerce section is more than sufficient.
- Empire Flippers — With an accomplished resume of business awards, this marketplace offers more precise and intricate searches to people who already know what they want.
But finding an ecommerce business for sale in your price range is only half the battle. You still have to predict how profitable it’ll be under your management, a strenuous task even for seasoned online retailers.
So to help, we’ve listed 7 tips on how to buy an ecommerce business to prevent you from getting stuck with a “lemon.”
1. Focus on Profit, Not Revenue
It’s easy to get distracted by all the digits in a company’s listed revenue, but remember that in ecommerce, the revenue stream is a bit misleading. Revenue accounts for a company’s total income, but doesn’t factor in the costs; a brand that sells high-priced items might have an impressive revenue stream without actually making any money.
That’s why you should focus more on profit, the money left over after operations. If you can, try to acquire each product’s Cost of Goods Sold (COGS), so you can plan which items you’ll keep and which you’ll discontinue to create a more accurate forecast. Ask for a profit and loss (P&L) statement to see the figures with your own eyes.
2. Research Where Traffic Comes From
A site or page’s traffic measures more than just the amount of visitors; it shows the health of their SEO strategy and the efficacy of their marketing campaigns.
Consider how much of their traffic comes from paid advertisements and see if that Return On Investment (ROI) suits your plans. If the site overspends on marketing, their traffic numbers may be unsustainable. If this is a serious investment, you may want to hire an SEO analyst to review their backlink portfolio and discover room for improvement.
3. Choose a Niche You Understand
As ecommerce becomes more personalized and specific, niche targeting prevails over general, all-inclusive stores — at least for small- and medium-sized businesses. But to tap the potential of niche marketing to its fullest, you have to truly understand the people you’re talking to.
There are a lot of variables at play when choosing a niche, including both the market’s size and accessibility. In addition to picking a group you personally belong to, follow these more advanced guidelines on choosing your ecommerce niche.
4. Vet the Site and Their Social Media
Naturally, you’ll want to test-drive a car before buying it, and with ecommerce that’s as easy as visiting the website and poking around. Put yourself in the shoes of your target customer and try to glean what impressions they’d make out of the site: pricing, policies, design style, navigation, usability, etc. And while you’re there, verify all the seller’s information is correct.
However, ecommerce success today is also tied to social media. Vet the brand’s social media accounts as well to see if the numbers and the target customers match up. Although it’s rare, some sites may try to scam buyers, so watch out for bot accounts.
5. Check Logistics — Suppliers, Shipping, etc.
As you can imagine, there are plenty of legal hurdles when buying a business, online as well as offline. Before finalizing anything, double-check that the business can and will run as usual under your ownership. This goes for shipping arrangements, affiliate programs, software licenses, and rental spaces — but, most important, suppliers.
Suppliers may have in place what’s called a “selective distribution agreement” that can limit or restrict whom they supply to. It’s not always an issue, but still worth looking into — otherwise you may lose your new store’s best-selling product.
6. Find Out Why It’s for Sale
This is good advice for buying anything: find out why it’s for sale. A lot of times there’s an innocent reason like the seller is retiring or they want to focus on something else. Sometimes the seller will be honest about a shortfalling, and you have the resources to fix it under your ownership.
But every so often, someone might try to deceive you. If you can’t discern a satisfying reason why it’s for sale, or you feel the seller is hiding something, don’t ignore those red flags.
7. Ask Yourself What You Could Improve
Are you looking for a fixer-upper? Before you buy a new ecommerce business, you should have an idea of what you’d like to do with it — particularly how you could improve it.
It’s rare that someone would sell a business that functions flawlessly, so chances are you’ll need to add a missing piece. It’s better to know what that missing piece is from the start, so you can more accurately predict how profitable it will be.
And if, under serious scrutiny, you still can’t find any room for improvement… great! It’s not common, but it happens sometimes.
Become Your Own Boss
Starting an ecommerce business can be hard for first-timers, but that doesn’t mean it’s not worth it. Once you learn the ropes, ecommerce can be a lucrative and fulfilling career with plenty of perks like working from home or making your own hours.
If you find it intimidating at first, check out our Checklist for Starting Your Ecommerce Business. It’ll give you a good rundown on the fundamentals of online retail, and you can always check the rest of our blog when you’re ready for more advanced tips.
And don’t forget to use ecomdash software for automatic inventory management — click here for your 15-day free trial now, no credit card needed!
Editor’s Note: This blog post was originally published February 2017 and was updated in June 2020 to reflect more accurate and relevant information.