Your Complete Guide to Buying an Online Retail Business
Published: October 26, 2017
Author: Victoria Greene
Since the heyday of the dotcom millionaire almost two decades ago, people have been aware of the huge potential to make money from operating an online business. But setting up your own business from scratch takes a huge amount of time and effort, even in the flexible digital marketplace.
For a wily operator like yourself, there is another way: instead of being the seller — become the buyer. By buying an already profitable business, you can fast-track yourself to online income success. Then you can either live off the capital, or sell the site on for a profit further down the line.
Here, I’ll run through how you can go about buying an online retail business, and the things that you need to consider when you’re shopping around for your next business venture…
Find an online business up for sale
Most websites for sale are listed as such on either website marketplaces, Ebay, or social media.
Ebay has a section within its online store that is devoted to websites and businesses. This works in the same way as the other products sold by Ebay, by allowing you to filter down to the site or business you desire. The image below shows you how this looks:
There are sites geared towards online retail businesses only — one such example is website seller Exchange.
Exchange is a platform that allows its users to either buy or sell sites. It lets you choose from a list of categories, such as Pets, Food and Drink, and Music, and gives you the option of selecting from a range of prices – from $0 – $10,000+.
If you are looking to buy an online retail store, using a site like this allows you to find the market you wish to operate in, and then enter the price you want to pay.
Facebook now has a marketplace function, which allows users to list and sell products via their Facebook accounts. There is not a specific section for online businesses; however, using the search function, you can see if there are any users who are listing their online businesses for sale.
You can also join relevant Facebook groups like these WooCommerce ones and keep tabs on anyone who might be a potential seller.
Things to Consider When Buying an Online Retail Business
Here are the things that you need to consider to buy the right online retail business.
Niche market and product longevity
You’ll want to buy a business with a solid market for the product it’s selling. To make sure you are, consider the following:
- Who will be buying your products?
- Who are your competitors? How well are they doing? Are there any market disruptors on the rise?
- How much is the product selling for? Can you increase the price, or improve margins?
- Is your product seasonal, or does it have a lifespan (is it a trend)?
- What about the local aspects of the brand? Has it got some franchise or affiliate potential? If you want to go down the franchise route, you will need to think about local marketing and SEO.
Do your research, establish your niche in the market and the longevity of your product, and then validate them. If you don’t, then you may find you’ve bought into an ephemeral retail business that will be unprofitable as soon as it becomes yours.
You can use metrics to track and evaluate the performance of your prospective online business. This will show how successful it is at shifting the products it sells. Some important metrics to consider are:
Look at all the different traffic sources and evaluate their quality. Is there a positive (or negative) traffic trend?
Get your traffic metrics straight:
- Direct Traffic: People arriving at your site by searching for its URL or brand name — sign of a strong brand
- Referral Traffic: People arriving at your site by clicking on a URL from another website (could be a blog post, a directory etc.)
- Organic Search Traffic: People arriving at your site via a search engine
- Campaign Traffic: Users who get to your site because of a dedicated campaign.
- Value Per Visit: How much average value your site receives each time one of your customers visits it
- Customer Lifetime Value: Predicts the net profit expected from the relationship with your customers — this should be quite high for a subscription site
- Conversion Rates: This shows you how many of your site visitors converted into buyers — this is where you evaluate traffic quality and your conversion funnel
- Revenue by Traffic: This reveals the core revenue source of your online business; is it coming from advertising, social media, returning customers, or elsewhere?
Note that metrics can be manipulated, and it may be that the site owner has carried out a Pay Per Click (PPC) campaign prior to listing the business for sale, making the business appear more successful than it actually is.
Make sure you have taken metrics into account when buying your online business, and that you look into them to see if they are 100% reliable.
Assets can make or break your business – if you lose your ecommerce supplier relationships, it could spell the end of your dream. Make sure you understand what assets you are buying.
Retail assets might include:
- An office: physical items owned by the business.
- Trademarks: intellectual property
- Social media accounts: digital items
- Stock: the products sold by the company
- Staff: your workforce
- Supplier relationships: the agreements and rates in place with your suppliers
- Customers: your existing/historic shoppers & their data
- Brand history: the story of your sites products and reputational strength attached to it.
You don’t want to buy a business and find that it’s had its assets stripped away by the previous owner, as this will require you to replenish them. This will then make your purchase more expensive than you had bargained for, or may leave you without a business to run.
Something else to consider is the brand strength of the business you are buying.
Want to buy a business with a strong brand?
- The benefit of this is that the brand name precedes the products sold by the business, giving you an expectation of future success. It will be easier for you to jump in succeed
- The downside is that it may corner you into a market with a short lifespan, making the strength of the brand redundant in the long run
Want to buy a business with a weak brand?
- The upside of this is that you can acquire a product with great potential for a low price
- The drawback is that it may require more work than you had anticipated in order to grow
Facebook has more than 2 billion monthly users worldwide and owns Instagram, which has 700 million users of its own. Add in the 1.5 billion people active on YouTube and 328 million Twitter followers, and you have a hugely powerful tool.
You need to invest time into understanding the followers of the social media accounts linked to your online retail business. Your followers provide a mine of data that will give you insight into your company history, and can help you market to your new target audience more effectively.
If you buy an online business without associated social media accounts, then you will need to build your following, which will take time, money, and effort. Don’t underestimate the importance of having a captive social media audience.
You’re now armed with a deep insight into how you go about buying a successful online business. You may, of course, decide that having made your way through this guide, you still wish to set up your own online retail business and build everything yourself. Whatever you do, make sure to focus on your audience and data to make the most of every sales channel.