4 Tips for Buying an ECommerce Store

Running an online commerce store can be painfully competitive. However, this continues to be one of the most popular ways to start an online business. The reasons are simple. An eCommerce store is a ‘red ocean’ business - you already know your customers and the marketing channels to reach out to the audience has been well established. This makes it easy for business owners to set up and start making money. Your million dollar business idea on the other hand, would need to be validated, pivoted and marketed before you can see your first dollar in revenue.

However, the toughest part of running an eCommerce store is the setup. Business owners will need to establish supplier relationships, negotiate the prices and also manually add each one of the different SKUs to their inventory - all of this can take a few weeks to months to get done. If you have the budget, it makes sense to buy an established eCommerce business that can start making you money from the moment you take ownership.

Know the pitfalls

There are a few caveats to this process. Buying an eCommerce store requires a great deal of diligence. The revenue that a store makes may not always reveal the complete picture because the net profits are only a small percentage of the total revenue. Also, where your visitors come from matters a great deal since an online store that is affiliated with a popular content site could receive a lot of its traffic and revenue from referrals. Buying the store as a standalone business could abruptly end this influx of traffic.

Use established marketplaces

One way to protect yourself from eCommerce scams is by restricting your search to established marketplaces. For example, Shopify runs its own marketplace called Exchange where buyers could look at well-established and trusted stores that they could invest in. Such platforms are transparent and allow the potential buyer to look into the authenticated revenue and traffic of the websites they are interested in. The onus is still on the buyer to look into the supplier contracts, traffic sources and margins to see if the business is indeed worth buying.

Find stores where you can add value

Not all eCommerce stores that make money are a good investment opportunity. One overlooked aspect of the buying process is what value you, as a buyer, could bring to the table. An eCommerce business comes with a lot of moving parts and a buyer must invest in properties where they may add value. For instance, it is a logical decision for a technology enthusiast to invest in a store selling electronic goods because it makes it easy for them to perform due diligence on the purchase or offer customer support. Similarly, a content marketing consultant may invest in an eCommerce store that has not taken maximum advantage of marketing strategies like content marketing. Such value additions either help in improving margins or increasing traffic which, in turn, shortens the time to break even.

Understand product category

No matter how credible the revenue numbers are, it may not make sense to buy some eCommerce sites. This is especially true if the online store stocks products that are typically fads. A product like fidget spinner does not have a history and buying a store that sells them exclusively can be a risky proposition. Also, when buying a store, look at the domain to see if it offers scope for expansion. A store that promotes itself as a tech toy store offers scope for expansion into newer geeky products that may become available in the market in future. On the other hand, a store that positions itself as a fidget spinner site may lose charm if the product category ceases to be popular in future.