The Ecommerce Business of Buying and Selling Other Ecommerce Businesses

Set Up an Online Marketplace for Buying and Selling Ecommerce Businesses

Buying Ecommerce Businesses
Buying Ecommerce Businesses. MCKIBILLO / Imagezoo / Getty Images

When we think of ecommerce, we tend to think of B2C ecommerce, and within that, online sellers of consumer goods take up the most mind space. Recently I have talked a lot about acquiring ecommerce businesses as well as getting your ecommerce business acquired. So, I think it is high time that we explore the ecommerce business of buying and selling ecommerce businesses. I know that sounds like a tongue twister, but the basic premise is very simple: ecommerce businesses are being bought and sold all the time.

Anything that is bought and sold can be bought and sold online. The act of buying and selling online is called ecommerce.

Ecommerce Businesses Are Hot Acquisition Prospects

There are several reasons why an online marketplace to buy and sell ecommerce businesses makes sense:

  • Unlike the mid-'90s when ecommerce meant different things to different people, today we are at a stage where technology, as well as processes, is fairly standardized. So it is possible for someone to acquire an ecommerce business without being exceptionally worried about not being able to run it.
  • Acquiring ecommerce businesses can sometimes seem like a situation of 2 + 2 = 5, i.e., two ecommerce businesses when combined into one can save costs, time, and money. At the same time, they can up sell and cross sell more. That makes acquiring ecommerce businesses a financially efficient proposition.
  • At present, investors are valuing ecommerce companies on the basis of their active users, number of transactions, and sales. They do not seem to be as concerned about profitability. Consequently, acquiring other ecommerce businesses, even at a high cost, can end up increasing your own valuation.
  • As an extension to the previous point, investors seem quite pleased to fund the acquisition of ecommerce businesses. In fact, some of them seem to be in the full time business of sending out feelers to ecommerce businesses about acquisition.
  • The markets also seem to be evaluating companies on the basis of their growth, and not profitability. That explains why continues to be the darling of the markets while simultaneously struggling to make a profit.

    A Dedicated Marketplace for Ecommerce Businesses Makes Sense

    Though there are several major marketplaces for websites, e.g. Flippa, none of them focus exclusively on ecommerce businesses. As a result, the metrics they display tend to include a whole lot of stuff that is irrelevant to ecommerce businesses:

    • Alexa rank
    • page rank
    • advertising revenue

    ... and the like

    At the same time, they do not include several critical data points that would help in evaluating an ecommerce business for purchase:

    • number of transactions
    • logistics costs
    • customer locations
    • product mix
    • repeat customers
    • advertising spend
    • cost per customer acquisition
    • affiliate data
    • inventory data
    • percentage of orders refused/returned
    • technology platform
    • shopping cart abandonment rate
    • physical assets, e.g. warehouse, call centre, inventories

    ... and the like.

    So if you would set up a marketplace solely for ecommerce businesses, I think you would be doing a great service to buyers and sellers in this space. That this has not yet happened in a serious fashion is strange, and presents an opportunity for entrepreneurs. I think, with time, gaps in the business landscape tend to get filled as astute entrepreneurs help iron out customer pain points. This is one of those pain points that has not yet been addressed effectively.

    I would love it I found out this article inspired one of my readers to set up such a marketplace.