If you aspire to launch an e-commerce business but worry about the costs of making and shipping products, you can explore the ghost commerce model. It involves selling goods online without incurring inventory or shipping costs, making it an excellent choice for entrepreneurs who want to focus on design and marketing while outsourcing logistics.
This guide explains how ghost commerce works, why it’s gaining popularity, and how you can venture into it to build a formidable business.
What is ghost commerce?
Ghost commerce is a form of e-commerce where goods are sold without direct involvement in the manufacturing and shipping processes. Instead, the logistics processes are outsourced to a third party while you focus on marketing.
Many entrepreneurs choose the ghost business model due to its lower upfront costs. It removes the need to risk significant capital on buying and stocking goods that may not sell. It allows you to quickly add or remove new products without incurring substantial financial risk.
Ghost commerce vs. e-commerce
The defining features of ghost commerce over conventional e-commerce are
- Lower startup costs.
- Increased flexibility to expand into new product lines.
- Logistics is outsourced to reliable third-party suppliers.
In traditional e-commerce, business owners directly stock and ship products to buyers. This model requires more capital to get started, unlike ghost commerce, which can be launched with minimal capital.
Conventional e-commerce businesses often lack the flexibility to add new products due to high procurement costs. However, ghost commerce businesses don’t have this issue, making it ideal for new entrepreneurs with smaller capital.
How ghost commerce works
- Product sourcing. You’ll find a reliable supplier whose products you’ll list on your store.
- Store creation. You’ll create an online store with e-commerce platforms like Shopify and WooCommerce.
- Order placement. A customer visits your store and places an order. You’ll receive their funds via a payment gateway.
- Order fulfillment. You’ll forward the order details to the supplier, including the customer’s name, contact information, and shipping address. Then, you’ll pay the supplier to package and ship the order.
Ghost commerce centers on adding markups to the supplier’s price. For example, if a supplier charges $15, you can list the product for $21 on your store. This way, you’ll make a profit after paying the supplier for packaging and shipping.
Benefits and drawbacks of ghost commerce
Ghost commerce has many benefits, but it also has its challenges. Learning what ghost commerce is involves understanding its various benefits and drawbacks.
Benefits of ghost commerce
- Low startup costs. You can start a ghost commerce business with minimal capital, as you don’t have to build your own logistics infrastructure. This is a boon for new entrepreneurs seeking to establish a foothold in their e-commerce niche.
- Flexibility. It’s easy to add new products when relying on third-party fulfillment. You don’t shoulder the burden of buying and stocking these products; the third-party suppliers handle it for you.
- Automation. You can automate many parts of your ghost commerce business, such as product pricing and forwarding order details to suppliers. This reduces costs and improves profit margins.
Drawbacks of ghost commerce
- High competition. Ghost commerce has intense competition because of its low entry barriers. Hence, you’ll need to face off with competitors, especially in pricing. High competition often means a race to the bottom in product prices, eroding profit margins.
- Less control over branding. Depending on third-party suppliers means having less control over product customization and branding. This is a disadvantage when trying to create a unique brand with a loyal customer base.
Step-by-step guide to starting a ghost commerce business
1. Choose a niche and audience
The first step is choosing a niche and target audience for your store. People often follow their passions when choosing niches, which is great, as passion and knowledge enable you to select the right products and promote them effectively.
However, passion isn’t the only consideration. Above all, you need a profitable niche with good prospects. Read news articles, blogs, surveys, and market reports about your desired niche, ensuring it has a large market with significant growth potential.
Understanding your target audience helps you select the right products and promotional points. Research extensively about their challenges and how you can solve them.
For example, adult men often require grooming products. If this is your desired niche, research the common grooming-related issues men face and their corresponding solutions. Then, you’ll understand the best products for your store and how to promote them as solutions to your audience’s pain points.
2. Set up an online store
With your niche and target audience established, you can focus on building your online store. This process may sound tedious, but it isn’t. Platforms like Shopify and WooCommerce have made creating an online store simple. They handle the most complex backend aspects while you focus on the easier frontend tasks.
You can use an AI-based storebuilder to simplify the process even further, creating stores from your text prompts. Then, you’ll make the final touches on the store, cutting the creation time from hours to minutes.
These platforms are flexible and have integrations with hundreds of tools. For example, you can add your supplier’s app and import products into your store at the click of a button.
3. Find reliable suppliers
With your store launched, it’s time to find reliable suppliers for your products. You need suppliers that offer high-quality products and fast shipping to your customers. People have become accustomed to receiving deliveries within a few days, so it is essential to have a supplier with a robust supply chain and a reliable delivery network.
Ideally, choose a supplier with warehouses close to your target market, as this enables faster deliveries. Research third-party opinions or order product samples to evaluate quality.
Zendrop is an ideal supplier to build your ghost commerce business. Our platform lets you discover the best-selling products and ship them to customers at competitive prices. We have a globally distributed fulfillment network that is unmatched by most rivals.
4. List and promote your products
With your suppliers settled, you can start adding and promoting products on your store. Every product should have a precise description that outlines its features and explains how it helps solve customers’ pain points. Products should feature high-quality images or videos that showcase their appearance, quality, and key features.
You can promote products via various means, including social media, email marketing, and display ads.
Search engine optimization (SEO) is another crucial promotional strategy that involves optimizing your site to rank high on search engines. Optimizing involves adding relevant keywords, product descriptions, and alternative text to images, as well as obtaining backlinks from other high-ranking sites.
SEO also involves delivering a positive user experience, with a focus on speed and ease of use. It helps your online store attract significant traffic without incurring high advertising costs.
5. Handle customer orders and fulfillment
After listing and promoting products, customers begin placing orders on your store. Hence, your focus turns towards handling and fulfilling their orders.
A highlight of ghost commerce is that many fulfillment processes can be automated. For instance, when a customer orders an item, their details can be automatically forwarded to the supplier, who also receives the payment. Then, the supplier packages and ships the goods accordingly.
Some suppliers’ apps can be directly integrated with your store’s database. Hence, when a product runs out, it will automatically be delisted from your store to prevent order cancellations for your customers. Likewise, when a supplier changes their prices, your store’s prices can automatically change based on a predefined rule.
6. Manage customer support and branding
Customer support is crucial to retaining and growing your customer base. Offer customers a convenient way to contact you when they encounter issues. It can be via social media, email, live chat, or telephone.
You can create a frequently asked questions (FAQs) page outlining answers to common inquiries. Hence, customers with simple issues can get them resolved quickly while you focus more on complex matters.
Have precise terms and conditions, especially regarding product returns, as many ghost commerce entrepreneurs face issues. You should outline the duration and conditions under which a product qualifies for a return and refund.
Excellent support fosters customer trust and loyalty, ultimately leading to increased long-term revenue. It reduces customer churn and drives repeat business for your store.
Best strategies to succeed in ghost commerce
Learning what ghost commerce entailsб knowing the best strategies to succeed when running your venture. They include:
Optimize for SEO
As mentioned earlier, search engine optimization (SEO) attracts unpaid traffic to your online store, some of which translates into long-term customers. Optimizing your store for higher search rankings is an effective way to obtain new customers affordably.
Note that SEO is a long-term investment, unlike ads, where you’ll see more results in the short term. It’ll take some time to build an organic following from your SEO efforts, so don’t get discouraged in the early stages. You can work on other short-term marketing strategies while implementing your long-term SEO strategies.
Leverage influencer and social media marketing
With billions of users across social media platforms like Instagram and Facebook, they are an effective medium for reaching new customers. These platforms enable you to run targeted campaigns that yield the best results.
For example, if you’re selling men’s T-shirts, you can run an Instagram campaign targeting men aged 18 to 34 who are interested in clothing within a specific city or country. This audience will respond much better to your ads than a general audience.
Influencers command significant social media followings and reputations in various niches. Hence, you can partner with them to promote your products in exchange for upfront fees or commissions. Influencer recommendations can significantly boost your sales.
Use data analytics to improve sales
Constant analytics and improvements are crucial to running a successful ghost commerce business. You should observe key metrics and make decisions based on them over time.
For instance, if a product isn’t selling, you can tweak its description and price to boost sales. If it still doesn’t sell well after multiple tweaks, it indicates that the product may not meet your customers’ needs.
You can conduct surveys to ask customers about their experiences with your product quality, checkout process, shipping times, and other aspects. Improve your operations based on customer feedback to win hearts and minds.
Implement email marketing for customer retention
Email marketing is central to retaining customers. For instance, when a customer makes a first-time purchase, you can send them an appreciation email to make them feel valued. You can sneak in advertisements for related products in this appreciation email.
You can set up an abandoned cart email system to notify visitors about the items they left in their cart. Some visitors will purchase the items after this nudging.
You can also use emails to promote discounts, new arrivals, bundles, and other relevant information to your customers. Email marketing generates a healthy return on investment (ROI) when done right.
Is ghost commerce profitable?
Yes, ghost commerce can be lucrative when done right. Many entrepreneurs have built impressive businesses, making thousands to millions of dollars annually via ghost commerce. However, it’s not a get-rich-easy model. Profitability depends on several factors, including
- Effective marketing. Your marketing strategies determine how well your products sell. The more creative and targeted your campaigns are, the more your target audience will patronize your products, thereby boosting sales and profits.
- Product selection. You need a proper product selection to attract long-term customers. The best products are durable and solve customer problems.
- Shipping times. The faster a product is shipped, the better it is for your customers. Buyers appreciate quick shipping and are likely to share their positive experience with others, promoting your brand in the process.
- Supplier choice. Your chosen supplier is critical to your profitability. The best suppliers offer consistently high-quality products at competitive prices, leaving more room for your profit margins.
Ghost commerce vs. dropshipping: Key differences
Many people confuse ghost commerce and dropshipping, but they are not the same thing. They share similar dynamics of running online stores without keeping physical inventory. However, ghost commerce dwells more on branding and marketing, often via white labeling, private labeling, and print-on-demand services.
Ghost commerce is also a more strategic model, focusing on building long-term customer loyalty, whereas dropshipping tends to prioritize short-term market penetration and sales. Broadly speaking, dropshipping is a subset of ghost commerce.
Conclusion
This guide has provided a detailed answer to a common question: “What is ghost commerce, and how does it work?” The summary is that ghost commerce involves focusing on branding while outsourcing fulfillment to third parties. It’s a convenient business model for e-commerce entrepreneurs.
Zendrop is an ideal partner for launching your ghost commerce business. We offer access to well-vetted suppliers with high-quality products and a robust logistics network. Sign up today and build your successful ghost commerce business with Zendrop.
Frequently asked questions (FAQs)
Is ghost commerce legal?
Yes, ghost commerce is a legal business model. You have nothing to worry about if you are transparent with your customers and follow the jurisdictional regulations regarding your product niche.
Can I start ghost commerce with no money?
Starting with no money at all might be a stretch, but you can start ghost commerce with minimal funds. There’s no need to invest in inventory, and many e-commerce platforms offer free trials to set up your store. You can start with limited funds and scale your operational and marketing budgets as your business grows.
What is the best niche for ghost commerce?
There’s no single best niche for ghost commerce. However, some top profitable niches include fashion, electronics, pet products, and home decor.
Can ghost commerce be done worldwide?
One of the advantages of ghost commerce is that you can easily sell products to a global customer base. Your third-party supplier and fulfillment provider will handle global shipping, saving you considerable time and money.
Is ghost commerce just another form of affiliate marketing?
Ghost commerce is a broad business model that includes dropshipping, affiliate marketing, and print-on-demand as its subsets. It’s not another form of affiliate marketing, but instead, an encompassing business model that offers higher profit margins and more control over outcomes than traditional affiliate marketing.
