E-Commerce multiples low

by a searcher from University of South Carolina - Darla Moore School of Business

1 year ago

I have come across a few deals in the e-commerce space and it looks as though the mutiples are very low, in many instances###-###-#### 25X EBITDA. I suspect this mainly is due to the short life of these companies, as many of them were started over the last 2-4 years.  There there any other reasons why mutliples may be so low? Do e-commerce brands (selling on Amazon or Shopify) typically rise and fall quickly? Do they often have a few good years and then fizzle out?  What are the primary factors making these so low?  I'm not too familiar with this field, so thanks for any input.

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professional from University of Wisconsin - Madison

I've seen several of these deals come through. Highly competitive space and easy to be displaced. Amazon is a bit of a black box as a platform to sell on - one minute you're the top blanket basket and the next minute your product is on page 4 and your sales decline rapidly. It's all about reviews and cost and your marketing costs only increase over time. I'd look for eCommerce products that sell across a diverse set of channels (ideally branded and they own their own website with a DTC angle vs. just Shopify and Amazon).

11 months ago | like reply | 0 likes

searcher from New York University - Leonard N. Stern School of Business

As someone who grew up in digital businesses and now runs a manufacturing based education company, I see a massive haircut in multiples for having a physical product. That said, I wonder what people are seeing in terms of multiples due to rising interest rates....tech companies are shedding bloat which could make the disparity even greater. What are other peoples' experiences?

1 year ago | like reply | 0 likes

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