Build or Buy?

This is a guest post by Ben Koppenens of Ecquisition.com, an online website marketplace (https://www.ecquisition.com/).

Before you set up an ecommerce business, you will have to invest 6-12 months at least. Is your goal a website with high rankings in Google? Then add another 6-12 months. You can skip this initial phase by taking over an existing shop. This way you can save a lot of time and get a head start. In this article we will discuss this kind of acquisition.

Buying an existing web store

By buying a web store you have some major advantages. Often there is already revenue, contacts with suppliers, clients and of course the website itself.

If you are going to buy an existing webshop, there are a number of factors that can boost the price considerably. For example, if you have to buy the current stock directly or if the seller based the price of the webshop on turnover that he expected to make in the future. First and foremost, based on a broad-based valuation method, our advice is to come up with a price that you both consider acceptable. But in whatever way you come to a price, when the website has proven itself, the purchase price will reflect this success and requires an investment.

On the other hand, the self-launching of a webshop also has its drawbacks. Adapting that design every time, creating valuable content, building up SEO positions, fine-tuning the technology or building a regular clientele can be a lengthy and expensive process. On average, starting a serious web store costs 25,000-30,000 US$ at least.

Ways to find an existing web store

If someone possibly thinks about selling his web store, he will not immediately show it on his website. Showing that a webshop is for sale will quickly make you lose customers. That is why there is usually nothing to see on the web shop itself. But just like in the other company sales there are special mediators and websites for this. This ranges from simple advertisements at market places to full purchase guidance. This website offers ecommerce company’s for sale as well as advice when you want to buy or sell: ecquisition.com.

Risks when buying a webshop

Always make sure that you carefully examine the price of a webshop. In many cases this is based on, for example: numbers of visitors and generated revenue. But does this mean that there is actually profit? What are the costs of those visitors, for example? If there are a lot of advertising spending needed to attract those visitor numbers? Because we can all advertise and buy visitors! (effective and cheap advertising is still good though). Visitor numbers can also drop quickly in the event of a possible takeover. For example, the seller may have mentioned his shop on many other websites (his own PBN). If he is no longer owner, these links will be removed, which means less direct visitors, or even visitors from search engines. You will have to build all of this yourself. So always do good research before you purchase a website.

Advantages of taking over an existing webshop

You no longer have to worry about creating the website, finding suppliers or buying the domain name. Because that’s all done. Often there is still stock present, or a dropship contract, and if you are lucky, the website already has quite a few visitors. So you can get started right away. And with problems you can still ask the seller for help.

Other advantages:

An existing customer base
Backlinks to the web store
Existing stock/suppliers

Disadvantages of taking over an existing webshop

But there are also disadvantages to taking over a ready-made web store. You did not set up the webshop from the beginning, so probably certain elements are not entirely to your liking. The start-up period often consists mainly of hard work and a lot of investing, but during this start-up period one learns to know a shop and niche through and through. You made every decision and solved every problem, so that your webshop will no longer have any secrets.

A Primer on Sourcing

What sets a successful production run apart from the rest is a company’s initiative to engage with a manufacturer while maintaining their relationship. If you’ve been looking to start producing your products overseas, it’s about time you tried. What are you waiting for!

Nathan Resnick has written an excellent piece on sourcing goods from China that can be applied to any business (regardless of sourcing country).

Go to A Better Lemonade Stand to read more.

Nasty Gal Bankruptcy Ecommerce Takeaways

A shocking story to outsiders but perhaps less shocking to people in the know, Nasty Gal, the poster child of Fashion Ecommerce to many has filed for bankruptcy protection. The full story is here and it’s worth reading to consider what this – and the many other ecommerce failures – teach us today.

1) Firstly, it’s a rocketship. Nasty Gal like most Ecommerce success stories had grown like crazy from a small Ebay store to ‘International’ retailer. This growth is not typically experienced with other businesses. It means they hired aggresively, built structures and systems as well as financed the venture all at extreme speed. Ultimately, this contributed to their downfall.

2) Fast growing revenues don’t equal fast growing profits. In fact, the opposite is usually true and losses are deep for a long-time..even perpetually. The model of ecommerce as pioneered by B2C giants like Amazon, JD.com etc is all based on two things; scale, and secondly, ways to make money other than shipping merchandise i.e marketplaces, payments, digital goods and so-on.

3) You need all the channels. Ecommerce, at least stand-alone, is not viable. We’ve seen time and time again pure play ecommerce companies go out of business. Who is winning in ecommerce? It’s multi-channel. That means you have to integrate stores and other channels to maximise your customer retention (stickyness) and sales. That’s hard.

4) Really consider your goals. Nasty Gal was a founder led business that was quote ‘successful’ ie they had real revenue, real customers and a real brand. But that still wasn’t enough to save it. Perhaps if the company didn’t take venture funding or had grown at a more realistic speed then it would still be on track. When you’re starting, you should consider your goals. Not everyone can be lucky but you can be good.

Have you learned any Ecommerce lessons you’d like to share? Let us know in the comments.

Yup, Ecommerce is Hard

WSJ reports Walmart is in talks with Jet.com, the barely one year old ecommerce startup:

For Jet, a takeover by an old-line retailer would demonstrate the challenges of attempting to go it alone in the hypercompetitive e-commerce market.

This business is capital intensive, heavily reliant on brand and a massive slice of luck..

Read More

AI and Discovery

Watch Amazon’s David Limp explain more about Alexa – the voice based device and shopping service – and their use of AI in commerce.

Alexa is a ‘computer in the cloud’ and could change the face of ecommerce due to the fact it really hits on the discovery rather than typical mission based approach of ecommerce today.

The World is Flat…and Fast

The Economist has a good piece on why the world is getting flatter and faster. This is to the detriment of large companies, particularly those in the FMCG space. They note:

Yet these advantages are not what they once were. Consolidating factories has made companies more vulnerable to the swing of a particular currency, points out Nik Modi of RBC Capital Markets, a bank. The impact of television adverts is fading, as consumers learn about products on social media and from online reviews. At the same time, barriers to entry are falling for small firms. They can outsource production and advertise online. Distribution is getting easier, too: a young brand may prove itself with online sales, then move into big stores. Financing mirrors the same trend: last year investors poured $3.3 billion into private CPG firms, according to CB Insights, a data firm—up by 58% from 2014 and a whopping 638% since 2011.

If you’ve got a good product, it’s never been easier to get it out there.

Read More

B2W