Invest in an FBA Business within the party supplies niche

Welcome to Webistes Insider for March 14th, 2022 – FREE Edition.

We analyze deals and use Moneyball tactics to discover undervalued, mispriced, and hidden gem ecommerce websites for sale.

We’re trying something new this week – we’ve rolled all the website-related subscription types (Ecommerce, Domain Names, Social Media Accounts and Websites) into one, to make this newsletter called Websites Insider.

Today, we’re looking at an FBA website in the kitchen & party niche, available to buy on Empire Flippers. Let’s go!

But first, check out our podcast

In this episode, Horacio sat down with Nick Mathews, Co-founder and CEO of Mainvest – an investment platform that aims to support small businesses in communities across the country. Nick talks about the disparity in access to private equity, helping small businesses beyond the debt instrument, working with city councils and more.

Introduction

For this opportunity, we looked at Empire Flippers, one of our favorite places to find solid online businesses, and from what we can gather, this is a party supplies business. 🎉

FBA stands for “fulfillment by Amazon,” which means all the owner needs to do is order inventory to send to Amazon, and they will handle shipping it out to the consumer.

FBA is a hands-off e-commerce business model, attractive for many operators. In fact, in the listing, it says that the current owner spends just 3hrs a week maintaining stock, managing ad campaigns and dealing with customer queries.

FBA isn’t all cookies and cream, though. There are significant risks to the model. The business is five years old and hosted on Amazon.

So, why the kitchen & party niche?

Well, the niche is evergreen; everyone celebrates something. Birthdays, Halloween, Easter…

You can throw a party for pretty much anything.

Surprisingly, we see consistent growth over the past two years, despite COVID. The niche will be active for as long as possible and is fairly consistent throughout the year, save for dips in November and December, according to Google Trends:

Having a birthday every year is certainly good for business.

Other party products haven’t seen the same growth but are still quite consistent. Unsurprisingly, the following search term did see a little more of a dip during the past two years, but it has rebounded nicely:

I guess tea parties aren’t as frequent as birthdays…

What’s the site about?

This FBA Business sells various party supplies for children.

As mentioned in the beginning, this business is five years old, launched during the height of COVID, and has performed consistently, despite the unfavorable odds.

I wondered if COVID-themed party supplies are a thing. It turns out they are. Maybe that’s how the business overcame the low sales that typically come with a pandemic.

The site earned $2,773 in average monthly profit over the past 12 months. The starting price is $127,541, representing a 46x multiple on average monthly yield.

The site also has five active SKUs, all with ratings above four stars.

Details

  • Age: 5 years
  • Gross profit/month: $2,773
  • Gross revenue/month: $16,092
  • Users/month: 4,770
  • Orders/month: Over 1,200 monthly orders in 2021
  • Asking price: $127,541
  • Link

Strengths, Weaknesses, and Opportunities

Strengths

  • Aged site – Over five years old, older than most eCommerce sites
  • Hands off – the FBA business model requires minimal owner involvement
  • Great reputation – Products have great reviews, with multiple having more than 100+ reviews and ratings.
Great reviews, and lots of ’em
  • Consistent performance – The site has performed well over the past few years and has seen significant growth over the past 12 months.
  • Trademarked – Having a trademark helps protect the brand from copycats.
  • Four suppliers – depending on more than one supplier makes for a solid safety net in case of a supplier issue.
  • Two traffic sources – organic Amazon search and paid Amazon ads as traffic sources aren’t the most diverse traffic sources, but it’s much better than just relying on one.

Weaknesses

  • Sales Channels – most of the sales happen through one main channel, and Amazon is a particularly fickle partner. Recently, the seller has listed products on Etsy, which has brought in an additional 5% in sales. This revenue has not been included in the P&L or valuation. It might give the buyer an option for growth post-sale.
  • Customer data – there is no customer data available at the moment. No emails, phone numbers, etc., to retain or reach out to past/current customers.
  • Social Channels – low social media presence – no social media channels listed.

Social Media must not be underestimated.

Opportunities

  • Launch more products – The products are easy to duplicate with different text for FBA, making expansion easy.
  • Launch social media channels – The site can do well on social media, which can be used to diversify customer acquisition channels and build more of a moat around the business. Pinterest, in particular, would do well.
  • Launch website – Having its own website will open up more advertising and sales channels, allowing the business to retain valuable customer data.
  • Improve social proof – Display more reviews, register with BBB, and more, to improve potential customers’ trust.
  • Create affiliate program There aren’t a lot of affiliate programs in this space, so having a private affiliate program can recruit affiliates to generate sales.
  • Explore Influencer marketing – influencer marketing can do extremely well in this niche, particularly in the mom blogosphere.

The first thing that comes up when you search for Party Supplies on Pinterest is a bunch of stores you can buy themed decoration sets from. This is certainly a good place to advertise.

Inferred Value: $110,920

The Inferred value for this site is $110,920, which represents an implied multiple of 40x monthly net profit of $2,773.

With strong performance over the past year and well-liked products, we think this brand can continue to do well.

Our View

[INSIDERS ONLY]

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Author

Colin Ma

Colin Ma

Colin Ma is an Alts contributor. He has bought, managed and sold multiple digital businesses across various sizes, including high 5 and 6 figure deals, and is active in crypto communities. In the past he has worked with investing.io, Domain Magnate, and founded Makujin Media, a digital marketing and asset holding company. His strengths lie in analyzing various market opportunities and growing businesses with several different models, including ad-based websites, affiliate marketing blogs, and successful e-commerce brands across a variety of niches. In his spare time, Colin can be found breakdancing around Southern California and cooking up a storm in the kitchen.

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