eCommerce Acquisition Criteria

intermediary profile

November 05, 2024

by an intermediary from Texas Tech University - Rawls College of Business Administration in Dallas, TX, USA

I'm looking to learn more about searcher interest (or private markets broadly) for eCommerce businesses.

What are people focused on from a unit economic and financial profile perspective?

What product types are interesting?

Any thoughts or materials on this would be super helpful.

Thanks!

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commentor profile
Reply by a searcher
from University of Washington in Sacramento, CA, USA
Happy to chat further and I'll send you a recent margin profit report on eCOM by industry, but a few things come to mind immediately:

1/ Contribution profit after marketing: you want a path to profitability, and this will measure that after acquiring customers.
2/ When it comes to 'focus' for founders and CPG owners, many are only focused on optimizing product first, but they forget about channel distribution. Direct to consumer, Amazon, and Wholesale are really the three core distribution channels where you need to assess the brand. In terms of profitability, generally Wholesale>Amazon>DTC. And to succeed in Wholesale, it's all about dollar velocity per distribution point x distribution points at the right retailers.
3/ For most eCom businesses, marketing and cogs (product and distribution) are the two highest buckets of spend bringing down CM. It's an arbitrage game of where to find the lowest cost manufacturer/packer while maintaining quality on the Cogs side, and minimizing digital customer acquisition cost.
4/ When it comes to margin, tend to see beauty and cosmetic products at the top with regularly 40%+ CM margins, which is why there are so many low-tier/relatively unknown products that can do $10m-$20m revenue. Why? Manageable acquisition cost, high customer retention/loyalty, really low unit cogs, and relatively high-unit price.
5/ Cash is an understated aspect of this world. It's really hard to forecast demand early on, and with the need to buy in large buckets in advance, it can be challenging for teams to make it. So much needs to go into branding and placement that.

Best of luck!
commentor profile
Reply by a professional
in Israel
I look for scalability. If a brand has a good AOV, solid solid social media, and that majority of their sale revenue comes from thier.com side of their business (almost all have some retail, some amazon etc) then there is room for considerable growth, and fast growth at that.

Capital injection can often times be needed for scaled paid media spend and OR doing a new production run. Those are the 2 biggest expenses.

Apparel is still the best profit margin to "least amount of products required to be sold to compensate for ad spend" ratio - if that makes sense
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