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.

Ecommerce Platform Update

Engadget of all things has a nice update on the current status of Ecommerce Platform marketshare:

1

I think it’s surprisingly vibrant in an era when so much of technology is in the hands of so few. This is especially true with infrastructure and middleware (looking at you AWS) controlled by just a handful of companies such as IBM, Google, Amazon, Oracle, Microsoft etc.

Application developers are embracing both open source and creating closed source ecommerce solutions and this is good news for merchants going forward. The perennial question for merchants is however, which one do I choose? There’s no easy answer but at least there’s lots of options.

Read more

Hosted vs Self-Hosted

I was browsing through some of my old bookmarks today and found an excellent article by EcommerceFuel’s Andrew Youderian. In the article, “Migrating to Shopify from Magento: The Results of our $50,000 Redesign”,  Andrew discusses moving his ecommerce store from Magento to Shopify.

This is well worth a read if you’re considering moving your site in general but more importantly, discusses the age old question in ecommerce; hosted or self-hosted?

Andrew sums up the argument:

I gave up having micro-level insights in order to more efficiently transform the website and brand into what I wanted it to be.

This is exactly why smaller stores and ecommerce newcomers should go with hosted aka less technology, more commerce. As you scale in terms of SKU’s, required functionality etc it makes more sense to go self-hosted (or proprietary for that matter).

What’s your thoughts on hosted vs self-hosted? your technology preferences?

Open Source Ecommerce

Interesting news today from Automattic – the people behind the most popular website cms ‘WordPress’ – that they’ve acquired WooCommerce. The release:

Since late last year we’ve been talking with Matt Mullenweg, CEO of Automattic and co-founder of WordPress, and his bridge team about what we could build together. Our plan is to leverage our combined wealth of knowledge, skills, vibrant community and joint infrastructure platform to reach new eCommerce heights.

So, the goal with WordPress + WooCommerce is to create the most open and easy way to sell on the Internet. You would imagine that this is quite plausible given the scale of WordPress. Today, WooCommerce is the second most popular ecommerce software behind Magento as detailed below:

ecom

Magento owned by Ebay appears to be in relative stagnation but it still represents 20% of total ecommerce solutions (both hosted and  open source). Nevertheless, I do think we need a alternative solution for people that have outgrown a hosted platform like Shopify or BigCommerce.

Time will tell whether the new WordPress-WooCommerce acquisition fills this void but it’s exciting news for online merchants and developers.

Shopify Going Public

One of the most popular hosted ecommerce platforms (arguably the most popular) is going public. Shopify has just released it’s SEC filing and it’s worth having a look at; especially if your business runs on the platform or you’re developing your own ecommerce software.  An interesting note in particular:

We incurred net losses of $1.2 million in 2012, $4.8 million in 2013 and $22.3 million in 2014. We also incurred net losses of $6.4 million and $4.5 million in the three months ended March 31, 2014 and 2015, respectively. At March 31, 2015, we had an accumulated deficit of $33.6 million. These losses and accumulated deficit are a result of the substantial investments we made to grow our business and we expect to make significant expenditures to expand our business in the future.

So despite being in software and having thousands of customers – over 10,000 according to the company themselves – they’re still not making money. How does this make one feel running a business on the platform? Well, somewhat nervous I guess. Remember when Magento decided to abandon hosted stores and recommend switching to BigCommerce? The same could happen again and if you have a lot of code and SKU’s, it could be a massive headache having to re-platform.

It will also be interesting to see how being public changes the company’s philosophy as it’s built it’s business on supporting small merchants. Typically in ecommerce and in actual fact, all software, the real money is made in big, complex, enterprise accounts and so it could be tempting for them to go after this space.

Nevertheless, Shopify should be congratulated as they’ve really opened up ecommerce to thousands of people and created a fantastic ecosystem in a similar vein to WordPress in the blogging space. As a merchant, you have to start somewhere – be that Ebay, Amazon or indeed an entry level hosted service and Shopify is the best out there.

Do you use Shopify? What do you think of this move?