Buying a Dropshipping Store? Here’s all you Need to Know
Dropshipping stores make up over 33% of all eCommerce stores globally. This business model keeps growing in popularity mainly because it is easy to set up and carries low costs.
However, it involves a lot of groundwork before you can launch and start making sales and profit. Most people lack the time or the expertise to do this themselves. So, they can buy already established stores instead.
There are various platforms through which you can buy and sell dropshipping stores. Yet, to get the best deals, you must know what to look for to avoid getting cheated.
This article shall look at what to consider when looking for a dropshipping store to buy.
When is it a good idea to buy a dropshipping store?
Many dropshipping experts still debate whether it is better to buy an established dropshipping store or build one from scratch.
Well, it depends on your unique situation. So, consider these factors if you are thinking of buying a dropshipping store.
Before investing in any online business, especially a dropshipping store, make sure you have adequate knowledge in the field. Dropshipping is not a get rich quick scheme as many make it seem. It requires working knowledge in marketing, sales funnels, etc.
Furthermore, different stores operate differently. Some hold inventory, some sell directly through manufacturers, among others.
When you know how each model works, you will then be able to leverage the store’s assets to drive sales and profitability.
Traffic and profit streams
When you buy a dropshipping store, you take over its operations. So, it only makes sense to do this if you know how to operate it. You must know how to maintain the existing traffic and even attract more.
Without these strategies in place, you will run the store to the ground soon after you take over.
That said, it is only a good idea to buy a site whose sources of traffic you know. It gives you an excellent start to maintain the sales and profits.
For example, if the previous owner relied on social media for traffic, you may not become profitable if you take over and start focusing on Search engine marketing.
It is only a good idea to buy an established dropshipping store if you are conversant with the industry niche. Even without prior experience, you can do the necessary product and market research to understand how it works.
Knowing the industry is what helps you draft better strategies to expand the business. Otherwise, it will only be a matter of time before the store stalls and eventually fails.
Pros of buying a dropshipping store
#1. A fully functional store in no time
Buying a dropshipping store enables you to have a fully operational business faster. You get a fully designed site with products, suppliers, and even customers available.
The initial setup is usually the hardest for new dropshippers without technical knowledge. But an already made store saves you this hassle.
Your main challenge becomes creating the right marketing strategy to grow your new business. You may choose to customize the site if you need to, though. The time and costs are still less than doing it all from scratch.
#2. Lower business costs
Dropshipping as a business is one of the lowest eCommerce business models available. You will not need to buy and store products.
With dropshipping, you only need to buy from your supplier when the consumer places an order. They then ship directly to your customer.
When you buy a dropshipping store, it often comes already set up, with suppliers, a marketing strategy in place, order system, among others. The one-time fee you pay for the store saves you all the extra costs of setting up a new store and getting your first customers.
For example, you can get a functional store for as low as $80,000, with a domain name and all the technicalities sorted. It will usually cost you a lot more time and money to build a store from scratch to this level.
#3. It cuts out the technical challenges.
Buying a dropshipping store is perfect if you lack the technical knowledge to set up a site yourself.
If you don’t want a generic website you can get from site builders, you will need some technical knowledge. Alternatively, you would need to hire someone who can code, knows Site security, WordPress, etc.
Yet, when you buy an already-made store, you avoid all this and get straight to the selling part.
Cons of buying a dropshipping store
One of the major issues with buying a dropshipping store is that you are ignorant of the former owner’s dealings. You do not know the relationship they had with their customers. Sometimes, you may not know their reputation. They could be well known as a scam in the industry.
With your website, you would know all the details about your store, unlike that of a stranger. So, you may end up paying for a website that is already in trouble.
Buying a dropshipping website robs you of the opportunity to design and establish your own brand through the website. If this is important to you, you may have to redesign it after you buy it. This may be quite an inconvenience.
Furthermore, if you want to keep the site as it is, it might be a generic site that doesn’t truly stand out from the competition. Such is often the case with turnkey websites since the owners put in as little effort as possible and just aim to resell their stores.
#3. Background info/ product research
When you buy an already made dropshipping store, you miss out on the essential product research process. It is this research that helps you determine how profitable the product will be.
Product research data will enable you to draft efficient strategies for your new business.
Often, people sell their dropshipping sites because the products are no longer trendy or there is no room for growth. So, without such information, it is easy to buy an expensive website that brings you losses instead.
#4. Profit number could be exaggerated
Dropshipping store sellers sometimes overstate their profits or overvalue their stores. You cannot be sure if the website is as profitable as it seems unless you dig deep.
As such, you may easily buy a store that isn’t making any money. Sometimes, they could be selling because they have failed to monetize the site.
What should you know before buying a dropshipping store?
Purchasing a dropshipping store can be a steep slope unless you know what to look out for. You can easily overpay for a site. So, what are the top criteria for buying a dropshipping store?
Check Ads Account
You must first assess the Ads account of any dropshipping website you wish to buy. The spending on advertisement to gain customers indicate how well the site is doing in customer acquisition. Why is this important?
A low customer acquisition cost would indicate how much traffic the site could scale , translating into potential sales.
A site with high customer acquisition cost may not offer enough room to scale. You want a store and niche that customers can easily find and thus buy from.
Check Technical design
As you consider dropshipping stores to buy, you must assess their design. This covers the website design, back-end processes, among others. The last thing you want to do is spend a lot of money on a website you have to reconfigure or redesign.
Analyse the web host and themes used, source codes, checkout processes, etc. From these, you can get a rough idea of whether the site is worth buying.
Online reputation and customer relationships are critical for any eCommerce store. You want to ensure that the site has an excellent online reputation and gets decent referral traffic.
So, before you buy, investigate the site from the consumer standpoint. Read all the reviews available, whether on Google or on the site itself. Customer perceptions will determine the site’s potential for more sales.
However, be careful with fake reviews. Some unscrupulous online sellers pay for fake reviews to entice customers. But there are several ways to find these out easily.
- Notice if they posted many reviews on the same day.
- If many reviews come from robot-like people, e.g., RosX1235.
- Most of the reviews say the same thing. It is quite unlikely that 10 customers would all say “nice product and great customer service” or “great quality.”
Do products and Seller Research
Before you buy a dropshipping store, you should conduct ample product research. You must know whether the product is profitable on the market and has growth potential.
The market: How big is the market. Market size shows you your potential sales area. If it is too small, it could be a sign of low profitability unless the products attract higher prices.
If it is too big, it could also mean higher competition, which often renders it unprofitable.
Nature of the products; Often, products reach their sales growth limit and cease to be profitable, causing website owners to sell their stores. This is common with trendy or seasonal products. Therefore, you want to do your research and ensure you will be able to grow the business within a few months and get your money back.
Some common tools you can consider for product research are:
Google trends: Helps you find which terms/products customers are searching for the most.
Sell the Trend: It helps you spot trendy products across different websites, along with estimated sales prices.
Niche scrapper: Finds winning products that you can sell in your store
.. and others.
Seller transparency is the key
Before buying a dropshipping store, you must seriously consider the seller’s transparency.
How much are you able to get from them for the price that you are paying? A few essential items you must consider are:
- Email lists
- Supplier lists
- Social media accounts
- Physical inventory
- Branding assets like logos
- Domain name
- Product photos
Most of these elements are essential for getting started with a dropshipping store, especially if you did not build it yourself.
Sometimes, sellers may refuse to give them to you. While this is within their rights, it should be a red flag. It would essentially mean that you will be starting from scratch on the essential part of dropshipping, which is marketing.
This is wasteful since it will take you months before you can eventually scale and make a profit.
How dropshipping stores are valued for purchase?
There are multiple tools sellers use to determine how much their website is worth before putting it on the market. However, major factors that influence this figure include
- Website industry: The value of a website defers with the industry. Some niches have high markets and selling price, making them relatively more valuable than others with the opposite.
- Age of the website: The older the site, usually the more it will cost. Older sites have relatively steady sales values. You can quickly assess their value. On the other hand, newer websites often do not have a track record of sales success. This increases the risk, thus lowering the purchase costs.
- Monthly/ Yearly earnings: Sites are also valued based on the last 12 month’s net profits. With a predetermined multiple, you can then calculate the value by:
Valuation = Yearly Net Profit X Multiple + Inventory
Most valuation tools will require additional data to give you accurate valuations, such as inventory, expenses, among others.
Where to buy established dropshipping stores?
Typically, there are two main ways you can buy an established dropshipping store.
In private deals, you reach out directly to the store owner you want or vice versa. Both of you can talk and agree on the price, then transfer the site and the payments.
Whereas many buyers opt for this route, it may not be the most efficient. Dealing with a seller directly could cause multiple problems, such as valuation, communication, website transfer, etc. In the event of unscrupulous sellers, it is also easy to get cheated.
Marketplace/ Brokerage services
Professional site brokers are the ideal option for most people looking to purchase dropshipping websites. Marketplaces like BuySellEmpire.com, Shopify exchange can help you and the sellers to get the best deals possible.
Most of them offer valuation services, communication platforms, and even payment protection, among others. They take up commissions for every transaction. Yet, considering the risks that come with buying and selling websites, it is worth it.
Purchasing a dropshipping store is a lucrative business venture, but only when you have the right tools and information to make it work. Getting the best deals will make you a successful eCommerce entrepreneur, but the wrong ones can bring massive losses.
With this guide, you will be able to identify the right dropshipping opportunities to invest in.