Over the last couple of years, the ecommerce sector experienced massive growth. This trend was brewing for quite some time now and we can’t say that the outbreak of the COVID-19 pandemic didn’t give the industry a tremendous boost.
Be that as it may, this lucrative tech sector is growing at an incredible23% on a year-on-year basis. What’s even more interesting is that the experts predict that by 2040 as much as 96% of all purchases will be made online.
These numbers sound like a great investment opportunity and if you have set your sigh on buying an ecommerce business, you are on the right track to make a lot of money further down the road. Let us take a look then at a couple of suggestions that should help you along the way.
Learn as much about the industry as you can
First and foremost, we would like to point out that the ecommerce sector is a very broad umbrella term that covers a broad spectrum of different areas like B2C (business to customer), B2B (business to business), subscription services, digital goods, and C2C (consumer to consumer). All of these sectors have their own different rules, profit margins, platforms, logistics providers, marketplaces, and internal rules. You should strongly avoid committing to any of these areas at face value and, instead spend some time learning as much as you can about them and assessing which one fits your sensibilities.
Research the supply chain
This is especially critical if you are going to tackle some foreign territories like, for instance, Australia. One of the greatest benefits of the ecommerce industry is that makes purchases incredibly simple. But, unlike the traditional retail sector where consumers pick up their goods on-site, ecommerce presents a great challenge of getting said items to consumers’ doors. These logistical issues can easily make or break the success of one ecommerce company. So, before you decide on buying some business take some time to learn more about the local logistics infrastructure, suppliers, prices, and similar factors.
Take into account local legislation
Even though the ecommerce industry has been with us for quite some time, the global legislation system still hasn’t made a final say on how these transactions, as well as business buyouts, should be handled from the legal standpoint. Instead, we have countless different regulations that take some wild swings from country to country, and state to state. Therefore, tackling foreign markets entails detailed research and some local help. If we again take Australia as an example, buying an ecommerce business Down Under entails hiring a law firm from Sydney or some other developed business hub.
Think about how your business is going to scale
Developed ecommerce companies come packed with built-in markets and audiences. But your goal should never be sitting on the laurels of the previous owners. You need to have a plan for how your company is going to scale as time goes by and the ecommerce market keeps growing. When you buy some company, you should already have an idea about where you see the business in the long and short term. Also, ecommerce is not immune to various drops. You should also have a plan for how to scale down if necessary. The companies that already have these things sorted out should be your top priority.
Find out why some company is for sale
Essentially, the companies that make a hoard of money are very rarely available on the market, or at least you need to spend a small fortune to buy them out. Therefore, if some deal sounds too good to be true, you might be dealing with some hidden motives you absolutely need to uncover. With that in mind, buying struggling companies doesn’t have to be a bad idea. Sometimes, the businesses only need more money and fresh leadership to take off and current owners are not able to provide either of these factors. But, even so – you need to have a deep understanding of the business’s current state and history.
Consider if starting out fresh might be a better idea
Last but not least we would like to point out that, while buying an already-developed ecommerce business comes with a whole slew of benefits, this sort of transaction also comes with some inherent limitations. So, an established brand, a carved-out position on the market, and a previous reputation can prove to be just as damaging as they are beneficial since they drastically narrow down your maneuvering room. Working against these set positions and moving the company in a new direction sometimes takes more effort than starting fresh. If you can’t find the right purchase, you can always start from scratch.
So, there you have it – the top six things you need to consider before setting out to buy an ecommerce business. The ecommerce market is incredibly prosperous and it will only keep growing as time goes by. But, this incredibly favorable situation doesn’t mean that any investment you make in this sector will eventually pay off. The best way to improve your chances for success is to approach this issue with all due diligence and develop a deep understanding of the ecommerce industry and the companies on your radar.