Case Study: EZTool

Case Study: EZTool

Platform: Amazon FBA
Business Model: eCommerce
Business Age: 3 Years
Sell Price: $160,000

EZTool sells watch repair kits via Amazon FBA. They’ve tapped into a niche and the growing direct-to-consumer FBA space. The search power and logistics capability of Amazon has helped them to find a sweet spot. The product is simple and suits the home watch enthusiast! This month EZ Tool Founder Angus Hess successfully found a buyer and has recently completed the sale on Flippa.


What is the product?

EZTool sells two different watch repair kits. Kit one is more conclusive with a wrench and illustrated manual and kit two – the QuickFixxer – is a 16 piece tool kit.


What makes EZTool such a good business?

There’s really two things. Firstly, it’s found a path to popularity in a niche. The product is well supported by a 41 page illustrated guidebook and comes with a 100-day replacement guarantee (nothing like a guarantee to woo customers). Secondly, they’ve successfully leverage Amazon FBA and benefit from cost-effective shipping, storage and world class customer service.


Who is the EZTool customer?

There best selling kit is perfect for watch enthusiasts and connoisseurs alike. Aimed at those who enjoy DIY as well as those looking to save money on pricey jewellers fees the EZTool products sell steadily all year round. And, they’ve found their kits have become very popular gifts.


Why was it so appealing?

Easy to understand this product had significant interest among the Flippa buyer community. Couple that widespread appeal with the FBA model, the strong consumer feedback scores and strong financial results – EZTool was generating between $5-14k profit monthly, which is in part due to low time commitment – and you have a winner.


How did Flippa assist?

The Flippa model has evolved and it’s beginning to suit higher value buyers. That alone is a big win. Flippa now has over 150,000 registered buyers representing a combined purse of over $9bn wanting to be placed. There are not enough sellers. Once they pop up, sellers like EZTool are benefited from the self-service platform, lower success fees than other channels and dedicated account management.

Seller showcase: Dion Lovrecich, oktoberfest.com.au – eCommerce business for sale on Flippa

Seller showcase: Dion Lovrecich, oktoberfest.com.au – eCommerce business for sale on Flippa

This week we caught up with Dion Lovrecich, who along with his sister Andrea, are the owners of business oktoberfestcostumes.com.au. The business is currently listed on Flippa. Here is the full conversation below. 

Background of the business 

Tell us a little bit about the background of oktoberfest.com.au? I understand your sister is involved in the business in some way?

Yes she is and we can’t believe how this has taken off! Within three months it’s doing $60,000 in revenue and has already made $14,000 in profit. This is my sister Andrea’s business and I’m helping her sell it. She’s had ten years experience in costumes but always in a bricks and water capacity. I told her she had to take it into an online capacity and I was open to helping her since I have worked in digital marketing for years. Within just a couple of months, it absolutely took off and we are still getting sales even though October has finished now.

 

That’s probably a big question and tell us more about your customer base? What do you sell on oktoberfest costumes.com.au?

We sell a traditional German costume with the ladies wearing a dirndl and gents a lederhosen. These costumes are actually used all year round which many people don’t realise. In truth, this a highly seasonal business and we did more than 800 transactions over the last two and a half months. The thing is, customers still come through, but if I’m being honest it is a seasonal business. It has achieved huge growth and the potential is there for someone to build the business with other types of costumes or for a buyer to attach the business to something else.

 

The customer base and how this was grown

 

There are customers coming through thick and fast from the October period, in celebration of Oktoberfest of course. As you have said, the opportunity for the new owner is to obviously take it on in its current form but is it also to grow this into a generalist costume business?

Yeah, it could be a generalist costume business or it could be a closer niche to German costumes or you could pick another niche entirely to get into. There is a lot of organic traffic coming through and we have used social very successfully, along with some paid advertising too. The combination of the two was such a beautiful start. Andrea and I are keen to sell it but she is torn because she wants to keep the business given the phenomenal results we have seen in the first few months. At the end of the day, we’ve decided ‘let’s do this, it’ll be good for you (Andrea)’ and hopefully, we can find the right kind of buyer. Andrea wants to pass the business onto the right buyer.  

 

The business opportunity and marketing efforts to date 

 

Fantastic, when we talk about buyers, we here at Flippa often educate buyers and tell them to make sure that they know how the business is acquiring customers. So from the perspective of Oktoberfestcostumes.com.au, how has it been so successful early on? What are your marketing methods?

You can’t be that successful without paying for traffic. If you see a website that says they don’t pay for traffic and claim to have thousands of viewers, ask them a few questions. In fact, ask the guys at Flippa, they’ll help you out with that.

 

So you guys are buying keywords around the Oktoberfest period and around no doubt the specific product units so lederhosen and dirndl. You mention social, so how has social been beneficial? What platforms have been working for you?

It has been Incredible and the cost per click has been so low. There can be a lot of industry terminology that people throw around. But, at the end of the day, the cost per acquisition/cost per sale was exceptionally low. People liked the adverts, and they were being shared a lot on Facebook and Instagram and that’s how we built the business so quickly.

 

Andrea and Dion’s business is now on Flippa and its Oktoberfestcostumes.com.au. This successful start-up is six months old and has already made $60,000 in revenue. Make sure you check this profitable listing out. 

Seller Showcase: Madeleine Saric Dubleup – eCommerce Business for Sale on Flippa

Seller Showcase: Madeleine Saric Dubleup – eCommerce Business for Sale on Flippa

This week we spoke with Madeleine Saric, owner of Dubleup business which is currently for sale on Flippa. Here are some highlights from our conversation with her.

Can you introduce us to Dubleup and tell us how it all got started?

So Dubleup is on an online e-commerce platform and we sell tech accessories for Apple and Android products, phones, tablets, watches. Everything is on there that you can imagine, from power banks to cables and cases. The list goes on.

 

Your top seller is the credit card power bank charger, so tell us a little bit more about this?

I developed the worlds smallest power bank. It is the size of a credit card and fits into the credit card slot of your wallet. It is essentially designed to give that extra bit of charge for when you are out. That was the idea behind it, I did travel a lot and didn’t need the chunky power bank, I just needed a little bit of extra charge.

 

Let’s us back up a little bit, who are you and how did all of this come about?

I’m Madeline Saric and this came about when I was doing an internship overseas and the boss I had told me, ‘start something when you are young and you won’t regret it’. So I came back to Australia and whilst I was still studying I came up with the designs for the power bank. Working at Apple, I came to understand what consumers wanted and what was missing from the market. This is what led to the evolution of Dubleup and this small power bank. From there I started working with teams in China, R&D and engineers and coming up with the final product which is the power bank.

 

Approximately how many units of this product have you sold into the market?

Apple and Android combined we have sold tens of thousands. Apple is obviously a lot more successful and we have Apple certification as well so it is approved by Apple and supports any products that they sell.

 

Looking at your business, what is there for a potential buyer to take over?

At the moment most of the operations are outsourced, marketing, production, manufacturing etc. You as a purchaser for the business would just simply use your laptop and your phone to run the business. Everything is produced and manufactured in China. It’s a very self-sustaining business with a huge opportunity for growth in terms of building new products and investing in marketing to grow the business. You could get the product into brick and water stores and also grow the online store

 

Do you own the brand and have the ability to continue with manufacturing in China?

Yes and definitely.

 

Why are you selling Dubleup?

The first reason is that I wanted to build a business, get it to a stage where I could sell it and differentiate myself from other people. The second reason is I’m a firm believer in doing something that you absolutely love and are passionate about and as much as I love technology, I’ve lost the passion for it.

 

 

 

Madeleine Saric is the founder of eCommerce electronics business Dubleup, which is currently for sale on Flippa.

Why you should hate dropship ecommerce like I do.

Why you should hate dropship ecommerce like I do.

For the last few years, buyers have been purchasing a type of website that, left unchanged, is almost always doomed to fail. The worst part is, it’s probably one of the most popular types of site being sold.

This is part of a series of guest posts by Justin Gilchrist the cofounder of Centurica, a company that provides due diligence and website assessments to people who buy web based businesses.

I’d like to show you how you can avoid the same fate. More importantly, I’ll take you through a strategy that’s been working for over 8 years now, turning these problem sites in huge profits for buyers.

A few months before writing this I sat opposite a lady on a flight and we had one those really awkward cross-aisle conversations. The type that happens when the other person sees Google Analytics on your screen and realizes you also have an internet business, but neither of you know if the other person really wants to talk.

Originally, she said she ran an ‘ecommerce company’. Five minutes in, it was actually a farming supplies store in the British countryside that happened to have a website … where about 5% of all their transactions happened, compared to the other 95% that happened in store. Her website was three months old and she was very proud of it. I didn’t have the heart to tell her otherwise.

I guess running an ecommerce company sounds so much cooler than “I run a small shop” but that wouldn’t be the first time I’ve heard ‘ecommerce’ used for all the wrong reasons. People’s definition of ecommerce varies depending on who you speak to.

We frequently work with buyers at Centurica where someone wants to purchase an ‘ecommerce business’. Sometimes, they want an online store. Sometimes, they’re just referring to any business that transacts on the internet – like a content site.

Both are technically ecommerce, but not the online store we usually mean.

Ecommerce can be split up into

Physical Ecommerce (PSE) – an online store selling a physical product that is either warehoused and dispatched by the owner, or warehoused by a third party fulfillment center such as Amazon FBA or ShipWire.

Drop-ship Ecommerce (DSE) – an online store that also sells physical products, but these are dispatched directly from the manufacturer or wholesaler.

Digital Ecommerce –  is a website that sells one or more digital information products where the transaction happens on the site. If this were an Affiliate site, the user would be sent elsewhere to make their purchase. If the user is taken to a third party hosted page to make payment (like many shopping carts do) then it still counts as Digital Commerce, providing the site owner also owns that cart transaction.

Knowing the difference is pretty important.

One of those three models comes almost doomed to failure unless you’re able to do something about it. Can you guess which one? Pretend for a minute that you didn’t already read the title.

Here’s the problem with drop-ship

In my opinion, drop-ship ecommerce (DSE) holds the least value out of all three of those types of business.

And to clarify, the ‘bad’ kind of drop-ship are those stores that sell generic products that are easy to source. The kind where you type ‘drop-ship directory’ into Google and your supplier pops up. If you have a site with a distribution agreement, or products that are difficult for competitors to find elsewhere, then the rules change.

New buyers tend to see DSE as being extremely low maintenance. After all, you’re just sitting watching the orders come in while someone else does all the hard work right? If you’ve been around for a few years you’ll probably know anything that seems like easy money on the internet is a problem waiting to happen! Less work means far less reward and whole host of other issues, but we’ll get to those soon.

In reality, Digital Product Ecommerce tends to be the lowest maintenance of the three different types. Outside of customers being unable to open a zip file (yes … it happens), and people asking for a refund, there’s very little maintenance that you need to do providing the product itself is evergreen.

Meanwhile, drop-shipping (which everyone assumes is the easy option), is probably tied second with Physical Ecommerce (PSE), often to people’s surprise. This is providing you have a PSE store where you:

1) Use a fulfillment center to warehouse and dispatch your goods, and a shopping cart that automates most tasks for you, like sending the orders to that fulfillment center when they come in.

2) Outsource or hire someone for basic customer support and

3) Set up triggers with your suppliers for automatic reordering whenever stock runs low. Again, this is something most modern shopping carts will automate.

You’re likely to spend about the same amount of time maintaining a physical ecommerce store (with fulfillment) as you would with a drop-ship one, so the argument about maintenance becomes redundant.

But you promised ‘hate’ in the title …

Being ‘comparatively not as low maintenance as everyone thinks it is’ is hardly a crime or a reason to loathe drop-ship ecommerce. The maintenance issue was merely making a point that DSE’s biggest perceived benefit actually isn’t that much of a game changer.

My personal vendetta against drop-ship ecommerce is that the business model is seriously flawed. When you sell goods on a drop-ship basis, you will always have the smallest margins in the supply chain. UPS will often make more than you do on a typical transaction.

DSE margins are usually so slim there’s not enough left to run paid traffic campaigns. And love or hate paid traffic, most new buyers soon learn this is the ONLY reliable and consistent way to grow an ecommerce business.

Look at it this way – organic traffic is nice, but difficult when you sell a generic product with the same description as everyone else and very few genuine product reviews. You could start a blog and you will get traffic, but most of that traffic will read the article and bounce. Ecommerce blogs typically have low conversion to sales, even with remarketing. Social marketing works well in niches where people care enough to share their love for the products you sell, but what if that product is a lawnmower … or worse still a pubic hair trimmer? Suddenly, your only source for new customers are those where you have to pay to reach them.

Based on the average conversion in your niche, and the cost to buy one click (which is dictated by the other advertisers who all have bigger margins if they’re supplying direct), the amount you would spend to get a sale usually doesn’t generate enough gross profit to make buying clicks sustainable. I’m sure there are exceptions or sites that convert so well, they buck the trend but you’ll find this isn’t the case for the majority of drop-ship sites that you look at.

This why most drop-ship stores rely on Organic Search traffic.

The owners try paid traffic and quickly give up. But we all know that an ecommerce store without paid traffic is like a goldfish in a shark tank right? Besides never being able to hit scale that matters, you’re stuck in a market dominated by competitors who can and will spend whatever it takes to steal your market share, and you’ll be defenseless to do anything about it.

If that wasn’t bad enough, you might also be competing against your own suppliers, who can offer lower prices if need be and spend more to advertise than you ever could.

In short, DSE is a flawed model that SHOULD never scale. It sometimes does, but it’s usually short-lived. Buy at the wrong time and you’ll be left paying for the seller’s mistakes.

So wait, I should never purchase a drop-ship Store?

Not quite.  Drop-ship purchases have been some of the most profitable ones I’ve ever made. The problem comes from purchasing a drop-ship store and leaving it that way, expecting untold riches and a place on the Inc 500.

If you buy DSE, do so with a healthy dose of reality. You could keep it as is, but chances are you’ll find it difficult to grow and scale, and often struggle to just maintain your current position.

A more effective strategy for renovating drop-ship sites is to see it for what it really is – an opportunity to acquire customers cheaply and build a more sustainable system around what is already there.

Take this example

You purchase a store that sells stationery and office supplies to businesses that order online. Currently, they drop-ship directly from the manufacturer and have an average of 100 orders each month. The site generates a profit of $10 on a $100 average order size.

Most of the traffic comes from organic search and the seller has told you PPC is too expensive and doesn’t work. When he tried it, he experienced a conversion rate of 2% and an average cost per click of $0.80

Your first step would be to look at the most popular 20% of products that account for the majority of revenue. In this case, it’s pens, staples and paper. You can order these products directly from the manufacturer in bulk and pay a wholesale rate. On stationery, the margins are significantly higher when you buy wholesale as it’s a commodity item dominated by low cost Turkish and Chinese imports.

Next, you setup an account with a fulfillment provider like Shipwire. They handle all of your warehousing and shipping just for these new products. After Shipwire’s costs have been considered, let’s assume you’re now making an average profit of $70 on each $100 order that you dispatch from the fulfillment centre. All the other long-tail products like lamination machines or laser toners are still drop-shipped as it makes no sense to keep inventory just for the occasional purchase.

Your profit on a sale now averages $60 on a $100 order. This is an average of the majority of products where you earn $70 and few drop shipped items where you still earn $10.

With increased profit per transaction, paid marketing is now back on the table.

Based on the figures above, 100 clicks would cost $80 and generate 2 sales. Previously, this equaled $20 profit (a $60 loss after marketing costs are removed) whereas now, it’s $120 (i.e. a $40 profit after marketing costs). If a campaign works on Google Adwords, then it’s highly likely it will work well with retargeting platforms and paid social too (e.g. Facebook or Twitter Ads), often at a fraction of the acquisition cost of Google.

You now have a system that’s scalable and gives you far more defense against new competitors. You’ve also increased the value of what you purchased several times over before even thinking about recruiting an extra visitor. Any kind of strategy that doesn’t involve the ever-vague “doing SEO” instantly gets my vote.

Conclusion

So on reflection, hate was a little strong.

If you own or you’re thinking of buying an ecommerce store, then you should think twice before diving head first into drop-shipping as a model.

That said, you can turn a negative to your advantage and acquire drop-ship ecommerce sites, providing you intend to change the model, and you’re able to do so quickly.

In Digitally Wed, I go into some depth about how to avoid the type of purchases that appear great on the surface, but deliver mediocre results because of a flawed business model. You can download or order a copy really soon from Flippa – with a special price just for Flippa members. Stay tuned for my next post to get this deal.

Happy Hunting!

5 Things to Look Out for When Buying an E-commerce Website

E-commerce websites are popular here at Flippa. Wouldn’t it be nice if you could buy a profitable dropshipping site for cheap and travel the world as it earns you a healthy amount every month?

Unless you’re extremely efficient and experienced, it would be hard to replicate the results you hear about from Tim Ferriss and other 4-hour workweek advocates. That doesn’t mean it can’t happen, it just might take some time to get there.

Of course, the entire reason you’re buying an e-commerce site is to get there faster. You don’t have to go through the entire process of setting it up and finding suppliers because someone has already done it for you.

On the other hand, you don’t want to invest a whole lot of money to buy an e-commerce site only to find out that that it doesn’t generate enough money, or that it takes up all your time. So to protect you from making a bad investment, here are five things to look out for when buying an e-commerce website.

1. Niche

You want to make sure that the site you found has a good niche with acceptable demand and low competition.

There are lots of e-commerce sites selling popular electronics, but these are very broad markets and you are competing with thousands of others. Unless the site has some extremely obvious USP (Unique Selling Proposition), this business will end up taking all your time and will force you to drive down profits to compete.

Now, there’s no such thing as the perfect niche, but there are profitable niches around. These niches usually have the same or similar characteristics.

You need to find something that you’re interested in and that you can add value to. This means you have some expertise in your niche and that you’re able to write good content for your site. If the product being sold has multiple components and complex installations, you can add your expertise by creating a free manual to go along with the product, thus giving you an edge over Amazon and allowing you to charge a premium.

Products that are difficult to find at a local brick-and-mortar store, that have a lot of accessories, are small and have low turnovers are usually good products to sell online. Disposable products mean that people will be coming back to your site often and you can build a regular customer base.

2. Suppliers

When it comes to suppliers, you want to ask yourself a few important questions:

  • Are the suppliers any good? Do you want them to stay on?
  • Where are they located? Where do they ship?
  • Are they wholesalers, manufacturers, or middlemen?
  • Are they offering a good wholesale price?

You certainly don’t want to take on a business with unreliable suppliers. If they mess up on orders, not only can that cost you financially, you also have to deal with irate customers, and you don’t want that.

The best way to determine if you want to keep the supplier is to meet with them in person. A face-to-face meeting is always the best way to build trust, and that’s exactly what you’ll need to ensure your store runs smoothly.

You may want to start by creating a few test orders to make sure your supplier is reliable and easy to work with. Also, when starting out with a new supplier, and this applies even if you aren’t buying an established store, you need to set your expectations from the start. Miscommunication is one of the leading causes for problems in business.

3. Website Design and Marketing

Marketing is what brings customers to your site, but design is what convinces them to purchase.

When buying a new site you want to see what it actually looks like. Look at the design with a critical eye and see if it inspires you to buy any product. Click through to see if the shopping cart is user friendly. Poor design means you might have to redesign the site, which might cost, so keep that in mind.

Next, take a look at the site traffic. Specifically, look at the organic traffic, because paid traffic means a further monthly cost, which will reduce your margins. Regular traffic with returning customers is a good sign. Sometimes you might see sellers claiming high average traffic caused primarily due to irregular traffic spikes from some one-off marketing push, but if it drops back to a low level it clearly means people aren’t interested in visiting again. For better performance, remember to keep track of the key metrics for your website.

After that, research the SEO and backlinking work done on the site. Then, use Open Site Explorer to see what work has been done on the site. Remember, poor backlinks means Google will penalize you. Other factors that affect Google rankings are domain age and page rank. Bigger numbers mean better rankings and site quality. Buying a brand new e-store that was set up a week ago won’t give you any added advantage on the marketing front than if you set it up yourself from scratch.

If you’re stuck on this stage, make sure to follow these 12 smart SEO tips to keep you moving forward.

4. Financials

Revenue is all well and good but what matters more is profitability and margins. Low margins means low profits. And if you have to spend money each month on a marketing strategy, you might end up making a loss no matter what your revenue is.

Get detailed income statements from the seller and analyze them yourself. Income statements might sound a bit intimidating, but you should be able to figure them out easily. What you really want to look for are trends over the past five years or so of the business. Are margins rising or falling? What about revenues? Are there any sudden spikes in costs?

5. Sale Price and Valuation

After having gone through the previous steps, if you have determined that this is indeed a good business, with strong financials, you will want to figure out if the seller is selling the site for a premium or a discount.

This is where the concept of multiples comes into play. Sellers will obviously try to sell the site for a premium, claiming that they invested so much in design and marketing. However, you need to figure out whether it is worth it for you, regardless of the investments the previous owner made.

Usually, multiples for an e-commerce business would be in the 1x to 3x range. That means the sale price of the store would be 1 to 3 times the yearly profit. Of course, this isn’t taking into account all the other factors previously mentioned. At the end of the day, each business is different. If you feel like you can take the site and increase sales and profitability, you might want to seriously consider anything less than a 2x multiple.

Conclusion

Buying an e-commerce store has some obvious advantages over starting from scratch. To begin with, it’s already an established business with a website, suppliers and customers so that saves a lot of work right off the bat. However, in some cases, it just might make more sense to start one from scratch if an existing business seems to have too many problems. It really all depends on how much time you’re willing to spend on the site and how much money you have to set aside for it.

Have you bought any e-commerce websites lately? What are your tips and thoughts? Please share your experiences in the comments…

P.S. Did you like this article? Make sure to check out 5 Simple Rules for Running E-commerce Sites

Photo credit: VintageDept