Direct to Consumer private label brand ecommerce diligence

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December 04, 2020

by a searcher from Indiana State University in Minneapolis, MN, USA

Looking for help/advice on diligence of an ecommerce direct to consumer brand.

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Reply by a searcher
from Babson College in Raleigh, NC, USA
Are they selling via Amazon? If it is a significant portion of sales, realize that they have a large degree of control and can change on a whim. On the flipside, adding amazon as a channel to an existing online property can be a nice boost, just realize it can be very easy to become dependent on that revenue.

More broadly, consider sources of traffic, product differentiation and variation, and fulfillment. The scale of an online business makes it potentially attractive, but you also face worldwide competition to a greater degree than a traditional business. The 3 or 4 major traffic sources tend to control the market, and can be fickle. In addition to cost per customer acquisition, look at how it has been trending over time and run your own numbers.

A huge opportunity for most online businesses is developing the customer relationship through content, email marketing, referral systems, and add-on sales opportunities to help reduce the reliance on cold traffic. Most do it to some degree, but not nearly to the extent possible.
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Reply by an intermediary
from Arizona State University in Las Vegas, NV, USA
Josh, you are really diligencing two different types of companies. The first is a traditional retail and the second is a tech company. Sales, returns, spoilage and inventory status merit a look as do customer acquisition costs and recurring customer spend. Product source is vital to review in this crazy age. Make sure you get to see the physical inventory. Acquisition costs can be very high in a small company and, for certain products, ad purchases are becoming so expensive as to be almost cost prohibitive. This of course is not a comprehensive list but a good place to start to get a feel for the company.
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