Journal Bought an e-commerce site: time to rebuild/expand

Discussion in 'Case Studies and Journals' started by Insaint, Dec 29, 2015.

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  1. Insaint

    Insaint Member

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    I planned on starting a general thread on buying/selling websites, but @nate beat me to it. So instead I will start a case study/journal for a site that I bought a few days ago. The money arrived at Escrow.com yesterday so with some luck I can start working on it in a few days.

    My background:

    Some of you may have seen my journal on WF, but here’s a recap: I started out by building (horrible) sites about 5 years back while I was in university. At first I only focused on content sites, because hey digital nomad and all that. None of those sites took off. Usually due to a combination of not knowing what I was doing and not doing enough in the first place. This changed after I read a thread about importing products. After spending a few days on Alibaba I found my first product. It was a complete failure. Both the product and my ‘market research’ were virtually useless. I returned to Alibaba and after a week or two I found a far better product. More than 3 years later I’m still selling the same product and every year is better than the last. This summer I finished my master’s degree and got an offer to stay at the company I did my final internship at, but I turned it down and started working on my business full-time.

    Back to the buying/selling websites part. I used the money that wasn't needed to expand my e-commerce site to buy some sites in the last two years. A few examples:
    • A foreign language site I bought for mid $xxxx in early 2014. I almost made my money back in the first year. I currently spend about an hour/month on it and the 2015 ROI was ~150%. The site is now worth 4-5 times more than the purchase price. Overall it was/is a great investment. Forums are not dead (yet) and are great CPM ad targets.
    • An evergreen content site about healthy food. Bought for mid $xxxx at the end of 2014. The ROI so far is 60%. However, that is where the good news ends. Over the past year I almost completely neglected it and the traffic keeps declining. Most likely I will sell this site after the Januari/Februari New Year’s resolution bump. My guess is that I will be around break-even after the sale. This was a great purchase, but neglect turned it into a bad investment. Lesson learned: evergreen does not mean you can sit back and expect that the money will keep rolling in. If you buy a site that needs occasional updates make sure it’s on a topic you enjoy or that you can outsource.
    • A simple one-page calculator type site. Bought for low $xxxx around 9 months ago. I only changed the ads on the site and the ROI so far is around 30%. Traffic is slightly increasing. So far it’s a nice 100% passive investment. This shows that you do not need a big budget to start buying sites.
    New e-commerce site:

    This time I bought an E-commerce site as that is what I enjoy the most so far and have had the most success with (coincidence?). I will try to be as detailed as possible about the financials, problems, solutions, successes and (most importantly) failures. I will not post the domain/niche (not even if I sell the site). In case you figure it out anyway please do not post about it. If it gets leaked I will stop posting.

    Some info about the site I bought:

    The site is 100% dropshipping. I’m not a huge fan of dropshipping to be honest as I like being in full control of my product. However the number of products is in the thousands so it is not reasonable to keep stock myself.

    The site has been neglected for almost 1.5 years by the previous owner. Products and stock haven’t been updated for months and checkout was disabled over 2 months ago. After negotiations I was able to buy the site for $12k. Using the 2014 stats and the 2015 traffic trend I should be able to make back the investment in 2016 just by getting everything running again.

    I've started doing a SWOT analysis of new projects to get a good overview before I commit. Before someone points it out, I know the opportunities part doesn't follow SWOT to the letter.

    Strengths:
    • Stable traffic despite an almost complete lack of updates in the past year.
    • Aged domain. Almost 10 years old and it has always been used for e-commerce.
    • 100k+ Facebook fans.
    • 15k+ email subscribers.
    • Nice (mostly) natural backlink profile.
    • Around 8 years of Analytics data with ecommerce data enabled. 150k+ visitors with keywords visible and 230k+ visitors through AdWords. Hundreds of referral sites that sent traffic at some point. Dig in.
    Weaknesses:
    • The neglect will have permanently driven away some customers and some bad reviews are floating around (though nothing serious and they are buried in the SERPS).
    • The CMS is relatively unknown and seems a bit outdated.
    • Thousands of products. This will make it almost impossible to get high quality unique descriptions and pictures for every item.
    • Many products are no longer being sold by the suppliers. My guess is a few hundred.
    • Dropshipping (lack of control, lower margins and a lower barrier to entry. It could also be a strength depending on your view because it saves time).
    Opportunities:
    • A large market that should be easy to reach through social media advertising. Their low income also means that this will be relatively cheap.
    • Sponsoring deals should be easy to find and based on experience free products will be enough for all but the largest influencers. No competitor is active in this area from what I have seen.
    • Low/medium competition and low CPC’s for many interesting terms on AdWords.
    • Very low conversion rate. In its prime it hovered around 0.25% for organic search traffic. In 2014 it was even lower at around 0.16%. Simple things like extra payment options, free shipping and optimizing the checkout should be able to increase this.
    • Cross-sells and upsells have never been used.
    • Interlinking is horrible (from a conversion and SEO viewpoint).
    • Site speed can be drastically improved.
    • A few powerful links might give search traffic a nice boost.
    Threats:
    • Dropshipping. Anyone with a company can sell these products with little to no startup capital.
    • Most products are listed on Amazon/eBay at prices that leave little margin. This means that people who like shopping around will find a better deal elsewhere. Silver lining here is that dropshippers with these margins will have very little (or no) room for advertising.
    • Many customers will be fairly young and thus have low disposable income.
    Goals:
    • $75k+ revenue in 2016
    • 150% ROI in 2016
    • Sell the site in early 2017 for at least $50k. Unless I see more potential or was able to automate/outsource everything to the point where a few hours of my time per month is enough.
    To-do list:
    • Move site to a new host
    • Change ads
    • Fix contact pages/setup email accounts
    • Contact wholesalers
    • Get a second Stripe account
    • SSL
    • Update/remove products
    • 301 removed products
    • Remove ads
    • Enable checkout
    • Optimize checkout + offer free shipping for orders above $xx(x?)
    • Optimize site speed (lots of clutter, might need to change theme)
    • Optimize internal links
    • Optimize the most popular pages (conversion/SEO)
    • Start (paid) marketing
    Updating/removing products is what worries me the most. There is no easy way to find out just how many products are no longer being sold by the suppliers. It could be 100 or 1000. Based on a spot-check I’d say it’s between 250-500. Redirecting those products will also be annoying. Automated product imports should be possible, but I’m not familiar with the CMS so it could take some time to figure it out without breaking things.

    Hopefully I will be able to get things going before the year ends, but it will depend on how active the seller is.

    Most likely I will post an update a few times a week at the start. After things get rolling I will at least post a monthly update and whenever something interesting happens.

    Feel free to chime in with questions or insights, thanks!
     
    TeeBird100, ..., mstchr and 4 others like this.
  2. Golan

    Golan Established Member

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    Amazing reading. Exactly what i need now. Looking forward to the next series - and the best luck!
     
    Insaint likes this.
  3. cardine

    cardine Administrator Staff Member

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    Fantastic journal! It definitely looks like you have a long road ahead of you with a lot of potential upside!

    You said there are thousands of products, how are orders concentrated? Are people mostly buying a couple of them, or are they very evenly spread out?

    You also mentioned selling the site in 2017 - is your business model in general going to be buying "distressed" websites, repairing them and selling them? Or is there something about this site that makes you more inclined to flip it? Just how passive it is? Depending on exactly how difficult it is, if you think you'll be getting a bunch of these "5 hour/week" websites it might be worth getting a VA at some point to handle the everyday minutia.

    Not that I expect anyone on here to do so, but if it does get leaked, let me know and I'll delete that post and ban the person who outted it.
     
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  4. Insaint

    Insaint Member

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    Thanks!

    About half comes from a few dozen products. ~95% comes from 200-300 products. I don't want to piss off Google by suddenly 301'ing a ton of pages, but I think I will remove at least 50% of the products over the course of the year.

    This will be the first time I buy a 'distressed' website. The other sites I bought were running fine, but I saw an easy opportunity to increase traffic through (basic) SEO or a simple way to increase advertising revenue.

    Eventually I want to end up with 1-2 large sites that require serious effort and 5-10 almost passive sites. I think buying distressed websites is a good way to get the capital I require for that more quickly. Mostly because distressed websites are usually undervalued (imo). One reason is most people that want to buy a website don't have the time or knowledge to fix the issues or simply don't want to take the risk for a potentially higher payoff (similar to real estate I guess). Another reason is that the sellers are very motivated to sell the site because they know the value of their site will go down the longer they wait. This site was priced at $25k, but I assumed there was very little interest and apparently was right.

    It can take a long time to find a distressed site that you think you can turn around though, I started looking about 2 months ago.

    The start of 2017 will be a good time to make a decision on selling or keeping the site. A year should be enough time to make all the improvements I want. Plus the holiday season will be over giving me a full annual sales cycle to base my decision on.

    I definitely want to start outsourcing more next year. This year I did everything myself apart from some content and links, but it distracts from the big picture.

    I added that as an afterthought, but should have just left it out. Thank you for addressing it though.
     
    cardine likes this.
  5. cardine

    cardine Administrator Staff Member

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    Ah ok, you had mentioned there being too many products for you to keep stock yourself so I was asking the question to see if there were any specific products where that might not be the case. It still sounds like it might be impractical to do, even for those dozen products.

    That makes sense. I guess the better heuristic to apply is to find sites that are operating under their potential, which might include a lot of distressed website, but doesn't require an website to be distressed.
     
    Insaint likes this.
  6. Insaint

    Insaint Member

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    Most of the dropship charges are built into their prices. I assume it would be possible to negotiate a discount for large orders that you then distribute yourself. For now I will stick to the full dropship setup. Especially because most of the customers are in the US and I'm in Europe.

    In case the site really takes off I will definitely look into a fulfillment setup though.

    True. This time I specifically looked for a distressed website to see what it would take to turn it around and whether it is more profitable than improving underdeveloped websites. Small sample size of course, but gotta start somewhere.
     
  7. Insaint

    Insaint Member

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    I have just received all the logins, suppliers, etc. It took longer than I anticipated, but things are finally moving.

    The first step is to move the site as it currently sits on a dedicated server that costs $379/month. I'm not paying that bill luckily, but the previous owners are anxious to get the site off the server ASAP. Knownhost support is working on migrating the entire account over to my VPS, but it could take a while due to timeouts. There is a ridiculous amount of images and it's slowing things down.

    In the meantime I will start contacting the suppliers to set-up new accounts.

    Updates should come more often from now on.
     
    megodon and cardine like this.
  8. Insaint

    Insaint Member

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    Well it took 14 hours to finish, but I finally have a full backup. I assumed that it would go way faster on a beefy server like that. There are still some issues with the migration (different software versions or something), but Knownhost is working through it. They even temporarily increase the disk space of my VPS to accommodate the transfer. Pretty great support for a $30/month VPS.

    In the meantime I got accepted by 2 suppliers and am working on 3 others. My location in Europe is making things more difficult, but the fact that I have a site with a nice amount of traffic is making them more cooperative.

    I also found out that there are around 14k products. I assumed there were 4k, but search on the site apparently only shows the products that are in stock and I never thought to confirm the total number with the seller. I have identified some categories that are only loosely related to the niche. Combined they have around 5k products and had a revenue of ~$3.5k over the last 5 years (only a few hundred in 2015). I have to check how much traffic these pages are getting, but most likely they'll get chopped first.

    Almost every product/category has an SEO URL ready to go, but for some strange reason the option was disabled. So all the SEO URL's are currently redirected to the original dynamic URL. A single click can change that (I think), but I don't want to freak Google out by deleting thousands of products and changing every single URL at the same time. Does anyone have experience with switching permalink structure on a large site?
     
  9. Jamie Brelsford

    Jamie Brelsford New Member

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    Is it not a risk taking it off a dedicated server? I know the cost sounds high but any serious down time could cost you a lot more?
     
  10. Insaint

    Insaint Member

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    The risk is very small because the dedicated server is serious overkill. The VPS I'm using is comparable to one of the top hosting plans offered by the CMS creators. So I doubt I will run into any trouble and in case I do I can scale the VPS without any issues.

    In other news another reason the migration is failing is because there is a 12GB cache folder with over 3 million files. Apparently they left on a compile check and every page request generates a new cache file. Now to figure out how to delete it all without removing important files or crashing the server..
     
  11. emp

    emp Senior Member

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    Love knownhost for that reason. Just Great support.
    (yep, I am also on 30$ per month)

    ::emp::
     
  12. emp

    emp Senior Member

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    A cache should be just that. Keep a copy of the backup, then try restoring without the cache.

    Little known secret: in a lot of CMS systems, the clear cache button simply deletes all files in a caching folder.

    ::emp::
     
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  13. Insaint

    Insaint Member

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    Yes there's a clear cache button, but the sheer size is causing timeouts unfortunately. I'm deleting the folder in cPanel right now, but it is taking a very long time. I don't have root access unfortunately, but I might have to ask for it if this keeps up.
     
  14. cardine

    cardine Administrator Staff Member

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    That's a good question. If you changed the URLs would all of the original dynamic URLs 301 to the new SEO URLs?

    That's one of those things that should theoretically work but seems really dangerous.
     
  15. Insaint

    Insaint Member

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    I think they will be 301'd, but I'm not 100% on that. I haven't been able to find a definitive answer on that yet.

    Yeah it really does seem dangerous. 2 years in and I still haven't changed it on the forum I bought. It is a very attractive option though, increase the SEO value and click-through rates with a single click.
     
  16. Insaint

    Insaint Member

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    After removing (what turned out to be) 5.5 million files from a single folder it was finally possible to migrate the site. Support then ran into issues with the database names being claimed by the earlier failed migration and had to call in cPanel support to fix everything. All in all it took Knownhost support 3 days just to move the site. I think it will take some time before they start turning a profit on me again..

    Anyway, in the meantime I got 2 other suppliers on board, changed the ads, got a second Stripe account, fixed the contact pages/email accounts and earmarked 7k (roughly 50%) of the products for removal.

    After some testing: Yes, they will be 301'd. So I will most likely do that once I've trimmed a lot of products.

    Now, my mistake was to do all the testing on the copy that I moved to my own server. The domain was still pointing to the old server. It turns out that the previous owners really did not want to pay their server bill and their account got suspended.

    The problem is that the domain is in a domain holding transaction on Escrow.com and any DNS changes have to be emailed to them and they will make the changes. 4 hours later and all I've found out is that they keep their domains at GoDaddy (who does that?) and that they can't point to a standard ns1.mydomain.com nameserver because GoDaddy uses the same 'ns' prefixes. And now support is closed.

    So yeah, this should be fun.

    Edit: Turns out it is ridiculously easy to add private nameservers to a GoDaddy domain. Very strange that they didn't make the changes when I provided them with the nameservers and IP addresses in my first mail.
     
    Last edited: Jan 19, 2016
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  17. Insaint

    Insaint Member

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    Not a whole lot happened over the past two weeks on this site. I bought a house (great timing, but the financing came through sooner than expected) and this has been taking up a lot of my free time.

    The site recovered from the server suspension/DNS shenanigans mentioned above and traffic is almost back at pre-downtime levels.

    Getting back to this. The average page load time in January on my $35/month VPS was 20% lower than on their dedicated server in the previous months. The only thing I did for speed so far was replace 10k+ 301 lines in the .htaccess file by a few lines of code.

    On another note I bought back a site I sold about two years ago. I kept an eye on it because it was my first site and I noticed that more and more database errors appeared. So I contacted the buyer to point out some of the problems. He said that he just didn't have the time for it anymore and asked if I wanted to buy it back. We agreed on a price that was 1/3 of what he paid back then even though the site now has double the content and 25% more traffic. I spend a day moving the site and fixing the database errors. It's early days, but the stats are looking good.

    [​IMG]
     
  18. ...

    ... Established Member

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    What does Goal Conversion % look like? Those all look good but that number is the most important I think.
     
  19. Insaint

    Insaint Member

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    Those stats were for the (small) site I bought back. It's a content site and right now it only runs ads and no conversions are tracked.
     
  20. ...

    ... Established Member

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    Oh ok I thought that was the drop shipping site.

    So he basically rented the site for two years for 2/3 the value of the site?