Online sales are increasing like never before, especially post-pandemic, when social distancing, touchless operation and contactless technology are the new buzzwords. There are many factors that help decide the success of an e-commerce store including sales revenue, website traffic and social media reach that are comparatively easy to track and measure—these numbers simplify the sales process. However, online business, despite their rapid customer acquisition, may decline in sales over time due to intense competition by retailers online. If so, what are the factors that a buyer should typically assess for buying an e-commerce business?
Business valuation, similar to offline business, covers different aspects of online selling including profit margins, growth and revenue stability; growth potential; customer & supplier relationships, age of the (domain) site; growth of the retail niche itself; processes and systems including CMS, CRM, warehouse and fulfilment; legal disputes including Intellectual Property Rights (IPR) and number of new customers, repeat customers and/or engaged site subscribers.
How is the traffic going to come from? Or in other words, what are the permanent and variable traffic sources? What are the other channels that contribute to business growth: fairs, exhibitions, ads, billboards, contacts or networking opportunities? These are some of the questions that a buyer may have before buying any online business or e-commerce store? There are many online strategies that help attract customers, the explanation of which will be beyond the scope of this article.
A buyer may also want to know how good the business may perform in times of an unforeseen crisis or an unprecedented economic recession? Is the business really fool-proof for scalability? Can it churn out the numbers required for growth? All the aforementioned questions and so on.
Buying an online ecommerce store can get tricky when the seller doesn’t agree to negotiate with the price. As a buyer, you must be aware that you agree to buy the business based only on the success metrics of the ecommerce store. As there aren’t any physical assets involved, the seller must be prepared to soften the deal without losing out on the trading.
Due diligence, as discussed previously, is important in the overall outcome of the buying process.As a buyer, you need to check the sale metrics of the ecommerce website or app integrating any reliable third-party tool and web traffic using Google Analytics data. The deeper you dig in terms of extracting data on the ecommerce store you want to buy, the better you are positioned to grab the deal or abandon it altogether.