Ecommerce businesses are popular for a reason. While they require a lot of work to set up, they can be a great source of semi-passive income.
Selling products online might seem difficult given the competition, but plenty of room remains for new businesses. Twenty-one percent of sales now occur online as of 2022, increasing to twenty-four percent by 2024¹. Factor in a rising middle class² in populous countries like India and the future of ecommerce looks bright.
Online brands today are even eclipsing household retail names. Workout apparel brand Gymshark was valued at $1.3 billion² in 2021. Online fast fashion brand, Fashion Nova, crossed the $700 million mark in 2022.
Direct-to-consumer (DTC) empires aren’t built in a day or by accident. Developing a desirable product and a loyal audience requires years of tight margins and sleepless nights.
If you want to create a bespoke product with your own warehouses and more, expect to invest as much as $40,000 from the start. On its website, Shopify says to give yourself a runway of 18 to 24 months for your business to become profitable³. You might spend years before recouping that startup price.
As 90 percent of startups fail⁴ (close down and write down their expenses as losses), you may be understandably worried about losing your initial investment.
However, you’re in luck. Today, with the rise of micro acquisitions, you may have the tools to “risk-proof” any Shopify ecommerce venture. Selling your startup on Acquire can more than make up for startup costs and put you on a better footing to start your next venture.
But you can only expect a successful sale with a profitable store – and you’ve seen the stats on how long that takes. So does every ecommerce store owner need to risk thousands of dollars and years of labor to have a hope of breaking even?
The answer is no.
Below, we explain how to set up an ecommerce business on Shopify quickly and profitably. One that makes buyers stop and look when you list it on Acquire, even if it’s small.
How to Create an Ecommerce Business on Shopify
Shopify already explains how to set up an ecommerce store⁵ – but we’ve outlined the process here.
Shopify’s primary service lets you create and customize an online store and website. You can also use it to manage sales, logistics, and inventory.
In brief, to get your business started on Shopify, you’ll need to:
- Find a product to sell.
- Create an account on Shopify.
- Fill out store information and product descriptions.
- Create or purchase a store theme.
- Link payment systems like bank accounts.
- Link logistics providers.
- Optimize your store for Google with keyword research.
- Add sales channels from other stores/online marketplaces.
- Create an email and SMS system for customer service (optional).
- Set up tracking and analytics for marketing.
Shopify has almost all of the tools you need to complete the above steps. It can’t help with the most important part: finding a manufacturer, sourcing logistics providers, and creating a product line that returns consistent profits as you scale.
Start Your Ecommerce Business By Selling Others’ Products
Investing thousands of dollars to create a product is a bad bet if you’re unsure who’ll buy it or how well it will sell. Thirty-four percent of startups fail⁶ from lack of product-market fit.
Fortunately, there are two common methods with less overhead you can use to find your market:
- Dropshipping
- Reselling
Dropshipping
If you’re a dropshipper, your business contracts with third-party suppliers to ship directly to customers. All you do is find the product and the supplier and set up the online store for them.
Early-stage ecommerce businesses often use dropshipping when they’re unsure of product-market fit and would rather try selling someone else’s products. It’s simple, cheap, and fast because the supplier produces the exact amount of product necessary.
For example, say you find a Chinese rug factory on Alibaba. To dropship, you’d sign a contract with the factory, set up a store for them on Shopify with your branding (a roughly $100 one-time fee), and add a small markup. Whenever someone places an order, you send word to the factory to fulfill it.
Dropshipping businesses are very sellable as they require very little asset transfer or relative financial risk – but they may fetch a comparatively lower price. While they can be profitable very quickly, most money goes to the supplier managing everything. It’s also an increasingly competitive market with a single point of failure outside of your control (your supplier). Therefore, if you’re feeling a bit more adventurous you may want to start by reselling.
Reselling
Reselling is easy to confuse with dropshipping, but it is more advanced and requires slightly more overhead risk on your part.
When reselling, you stock items from a third-party supplier and pass them on to customers yourself – paying for things like warehousing and fulfillment. Bootstrappers profiled a clothing business that started by using this model.
Using the Alibaba rug business as an example, instead of signing a contract with the Chinese factory, you would buy their rugs at wholesale prices and store them in a warehouse. When you set up your store on Shopify reselling them, you’ll need to set a price that covers purchasing, warehousing, and transportation while returning a healthy profit.
Reselling businesses may fetch a higher sale price than dropshipping if you’ve taken the time to figure out how to do logistics profitably. That gives your business the potential for higher profits as you have more control over how much it costs.
These two models are great ways to start profitably if you’re not sure what to sell yet. Once you’ve started a successful dropshipping or reselling business, you can always work with your supplier to create new, bespoke products for your customers based on their feedback. You could even create a store reselling multiple products from different suppliers.
Why Are Shopify Ecommerce Businesses Desirable to Buyers?
While some buyers like to buy incomplete businesses as hobby projects, your average buyer is looking for five things when buying ecommerce businesses:
- Predictable revenue
- Targeted marketing and branding
- Simple logistics
- Low competition
- Ease of operation
Rarely does an early-stage Shopify ecommerce business possess all five. We’re going to go into each of these more specifically below.
Targeted Marketing/Branding
As you’ve likely noticed with companies like Gymshark or Fashion Nova, branding is worth almost more than the quality of your product. That’s why the little Ralph Lauren polo player drives a polo shirt’s price up to $100.
Great branding risk-proofs your business too. If your brand attracts hordes of loyal customers clamoring for your next product, it significantly reduces the chance of your company being nothing more than one flash-in-the-pan product. Fans of skating brand SUPREME, for example, queued for hours just to buy company-branded bricks⁷.
In many ways, marketing is the other half of branding. Your brand is a shining beacon that attracts interested customers. Your marketing should speak directly to your target customer, who benefits most from your product or service.
Marketing includes traditional campaigns like paid ads on Facebook and Google targeting relevant keywords. However, track your cost per acquisition (CPA). Anything that chips away at your profits chips away at your sales price.
Probably the safest profitability bet is organic content marketing. That’s things like creating a social media presence, making helpful videos, and writing blogs. The network effects from volumes of content can bring in more customers than any successful ad campaign.
Do everything possible to make your store appear at the top of your category in places where you sell:
- Fill out your product descriptions properly.
- Get customer reviews.
- Use keywords throughout your store so Google and marketplaces index your products correctly.
Your Logistics Plan
It’s not enough that you have a great product with high demand, you need to move it to customers quickly, efficiently, and affordably.
While dropshippers needn’t worry about logistics, every other type of product sales business does. Fortunately, many full-service courier companies like FedEx, Amazon Shipping, and UPS operate globally that can deliver your orders to customers fast. Shopify even has a default, on-platform shipping service, although it is somewhat limited in the types of items it will ship.
Courier service contracts are easier to transfer to buyers than other contracts but can prove inflexible if you’re operating at scale. Once your business reaches a certain size (millions of dollars in ARR) you’ll probably want to contract your own logistics providers.
Your Manufacturer
All products come from somewhere. Unless you’re crafting products in the shed, you’ll likely work with a factory in a place like China or someone working as an intermediary for one.
Ensure your manufacturers are reliable and will allow your business to transfer ownership to a buyer. Also, remember the more complicated your product lines are, the more difficult it will be for a buyer to switch suppliers.
Competition
Buyers want to Acquire a business that will give them a return on investment. If buyers find out your competitors are well-funded and stealing market share, they can kill your deal. One way to get out from under the thumb of competition is through strong branding.
You can also try things like differentiating your product lines from your competitors. Maybe to stand out from your competitors you start manufacturing rugs made for gyms. While that may not be the route you want to explore, if no one else is doing it, you don’t have competition!
Most ecommerce marketplaces like eBay or Rakuten are a blessing and a curse in this category. On the one hand, you compete with thousands of other listings. On the other, you can easily find your competitors and research them.
One last tip: Shopify lists businesses sold on their exchange so you can see which businesses people like to Acquire.
Easy Operations
Would you rather work 40 hours a week to make $1 million a year or just four hours? If you’re like most buyers, you want the latter.
When selling a Shopify ecommerce business, consider how much time it takes to maintain. Your buyers probably don’t want to do customer service from their cellphones or call their logistics providers and factories daily.
As you grow, reinvest some profits into operations. Purchase a chatbot subscription, minimize contact points for your logistics, and hire a customer service team – that money may increase the value of your business more than it ever could as profit.
Sell Your Ecommerce Business on Acquire
Ecommerce businesses are one of the hottest categories on Acquire. As of Q3 of 2022, ecommerce businesses with a cumulative total of over $50 million in TTM revenue were Acquire’d. We’re confident yours will sell too.
Why use Acquire? We created it as an easy, safe, and useful tool for startups to transact their businesses. By listing your business on our marketplace, you gain exposure to thousands of buyers at once and the tools you need for a fast close.
All you need to do is sign up, verify your account, fill out a brief bio, connect metrics, and your life-changing acquisition could be right around the corner. You can list your business on Acquire the minute you’re profitable and start fielding offers with no obligation to sell until you’re ready.
Are you ready to make your exit? Register for a free seller account and we’ll get you started in minutes.
We’re rooting for you!
Resources:
¹https://www.emarketer.com/content/global-ecommerce-forecast-2021
³How To Start an Ecommerce Business: Build an Ecommerce Store (2022) (shopify.com)
⁴https://startupgenome.com/article/the-state-of-the-global-startup-economy
⁵https://www.shopify.com/blog/start-online-store#1
⁶https://www.failory.com/blog/startup-failure-rate
⁷https://theoutline.com/post/24/supreme-brick-costs
