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With the rise of social media and digital marketing, more and more people are turning to the internet for their shopping needs. While many types of eCommerce involve creating a website to buy and sell goods and services online, ghost commerce goes a step further, using these channels for marketing and sales without physical inventory.
When thinking about how to start a business, this is a great choice for eCommerce business owners who would prefer to concentrate on branding and marketing rather than logistics. In this article, we will explore what ghost commerce is, how to launch it effectively and the benefits it can bring to your business.
What is ghost commerce?
Ghost commerce is an online retail model where products are promoted and sold without storing physical inventory or running a traditional online store. Instead of owning goods, a promoter uses their online presence, like content marketing, social media or influencer partnerships, to guide their audience to buy from third-party retailers or eCommerce platforms. This approach means the business doesn't handle or manage the products directly.
Here's a breakdown of the key characteristics of ghost commerce:
No inventory: The promoter simply guides potential buyers to where they can purchase the product. This means businesses can save on storage and stocking costs.
Affiliate relationships: Earning opportunities include receiving commissions for sales generated from referrals.
Online presence: Success heavily depends on building a strong online presence by starting a blog, engaging on social media, YouTube or any channel where you can reach a significant audience.
Trust and credibility: Promoters need to cultivate and maintain a trustworthy relationship with their audience for sustained success.
Marketing focused: Ghost commerce businesses can focus on branding and marketing strategies instead of getting caught up in logistical challenges.
Ghost commerce vs. eCommerce
Ghost commerce is sometimes mistaken for traditional eCommerce, but there are key differences between the two. While both involve selling products online, ghost commerce doesn't involve physically handling and storing goods. Instead, it relies on partnerships with retailers or utilizing third-party platforms to facilitate sales.
Another significant difference is that ghost commerce puts more emphasis on marketing and branding rather than inventory management. This approach allows businesses to focus on building strong relationships with their audience and promoting products through various channels.
Learn more about what is eCommerce.
10 steps to set up a ghost commerce business
Understanding how ghost commerce works is crucial for entrepreneurs and marketers aiming to leverage this model. In this section, we'll outline the inner workings of ghost commerce, showing how it smoothly merges marketing strategies with affiliate connections to drive sales without the challenges of inventory management.
01. Choose a niche and audience
The first step in setting up a ghost commerce business is to choose your niche. You want to focus on a specific product or industry that you are passionate about, have knowledge of and can market effectively. Next, identify your target audience and their interests. This will help you tailor your content to appeal to them.
02. Online store setup
To launch a ghost commerce business, you'll want to establish your online presence. Utilize an eCommerce platform like Wix to create a website, add product listings and create a seamless shopping experience for customers.
03. Supplier selection
As a ghost commerce business, you won't handle or stock products directly. Instead, you'll need to form partnerships with suppliers and retailers offering dropshipping services to fulfill orders on your behalf. These suppliers keep stock of the products and handle inventory.
Learn more: What is dropshipping, what is print on demand
04. Product listing and promotion
Once you've got your supplier sorted, you can add product listings to your eCommerce website from their catalog. You have the flexibility to customize product descriptions, images and a product pricing strategy to align with your brand. You can also promote these products through various channels like social media, email marketing or influencer partnerships.
05. Customer orders and fulfillment
When customers shop the online store and make purchases, the website collects all the essential order details, like the customer’s shipping address and online payment info.
Learn more about how to accept payments online.
06. Order forwarding to suppliers
Once the customer places an order on your website, you'll need to forward the order details to your supplier so they can fulfill it. You may also track and monitor orders to ensure timely delivery. This step can be automated through integration between the online store and the supplier’s system, streamlining the process.
07. Supplier fulfillment
The supplier then processes the order, packages the product and ships it directly to the customer. This includes generating shipping labels and handling any required customs documentation for international shipments.
08. Customer delivery
When the customer gets the product, they assume it was sent by the online store. The packaging and branding might or might not show the supplier's name, depending on your agreement.
09. Payment handling
When a customer makes a purchase, you'll get paid through your online store’s pos system, usually receiving the retail price of the product. You then pay the supplier for the wholesale cost of the product and keep any extra profit as your commission.
10. Customer support
You will take on the responsibility of providing customer support, handling inquiries, addressing concerns and overseeing returns or refunds. You might need to communicate with the supplier to resolve any issues.
Pros and cons of ghost commerce
Ghost commerce, like many other business models, comes with a mix of pros and cons that require thoughtful consideration.
Pros
Passive income: Once properly set up, ghost commerce businesses can generate passive income streams as most of the processes are automated. This makes it a good side gig for individuals skilled in influencer marketing.
Low overhead: Ghost commerce businesses don't require physical storage facilities, managing inventory or handling products. This means lower operating costs compared to traditional eCommerce, leading to quicker profit generation.
Flexibility: Promoters can switch products or niches, adapting to trends and audience preferences. After setting up your store, feature as many products as you like if it aligns with your store's goals. List items for sale on your site if your suppliers have them in stock, at no cost.
Scalability: Easily adjust scale to meet demand, thanks to the absence of physical inventory and storefronts. This flexibility lets you swiftly respond to market shifts and customer needs, ensuring your business stays competitive.
Cons
Thin profit margins: As a ghost commerce retailer, your income is typically limited to a fraction of the profits from each item sold. This means your earnings may be lower compared to running your own store and selling your own products. Since you're not involved in handling the product, you have little opportunity for upselling, offering discount bundles or conducting sales campaigns.
Dependence on third parties: When using ghost commerce, your inventory control is limited as you rely on suppliers or manufacturers for product delivery. This means you are subject to their reliability and delivery timelines, which can affect customer satisfaction.
Reputation management: As the face of your ghost commerce business, you are responsible for maintaining your brand's reputation despite not having direct control over product quality or delivery. This means you must carefully choose reliable and trustworthy suppliers to maintain customer trust and loyalty.
Highly competitive: If you're not in a very specific niche, it's likely the market is overcrowded. Your products will need to compete against many others selling similar items, making it challenging to stand out when you have limited control over your product.
Is ghost commerce profitable?
If you are considering starting a ghost commerce business, it is important to do your research and make sure that you have a good understanding of the factors that can affect its profitability. While it may offer lower overhead costs and less effort in inventory management, the thin eCommerce profit margins and reliance on third parties can affect overall profitability.
Here are some tips for increasing the profitability of your ghost commerce business:
Product selection: Certain products demonstrate higher profitability than others. Consider luxury goods like designer handbags and watches, for example; they typically yield greater profits compared to lower-margin items, like household appliances.
Marketing strategy: A solid marketing strategy is key for any eCommerce business, but it's especially crucial for ghost commerce businesses. Your goal is to connect with your target audience and persuade them to purchase your products.
Cost management: Consider the expenses of your products, marketing and fulfillment. Save money by negotiating discounts with suppliers, utilizing free or low-cost marketing tools and handling shipping in-house.
Tips to create a ghost commerce strategy
To succeed in ghost commerce, it's key to boost your online presence to build trust with your audience and show them the value you offer. By using content marketing and SEO features, you can increase customer engagement with affiliate links and product recommendations.
Here are some ways that businesses can leverage this trend.
Establish a strong online presence
Build an eCommerce site that is user-friendly, visually appealing and easy to navigate. Share engaging, high-quality content on your site, social media and other online channels to boost brand awareness and foster a community. This approach will draw in potential customers and cultivate trust with your audience.
Focus on customer experience
Provide excellent eCommerce customer service to set your ghost commerce business apart from the competition. Ensure reliable and timely delivery of products, offer a flexible return policy and be responsive to customer inquiries and concerns. This will help build a loyal customer base and increase the likelihood of repeat purchases.
Leverage data analytics
Use web analytics to track customer behavior and preferences, allowing you to tailor your product offerings and marketing strategies. This will help you identify trends, optimize your business website for better conversions and make informed business decisions.
Collaborate with influencers
Partnering with influential figures in your niche can help increase brand visibility and credibility. Influencer marketing can also drive traffic to your website and boost sales. Make sure to choose influencers who align with your brand values and have a strong following of engaged followers.
Use email marketing
Email marketing tools are valuable for connecting with potential and existing customers. Send targeted promotions, product recommendations and personalized content to subscribers. Encourage newsletter sign-ups by offering incentives like complimentary downloads or exclusive discount codes.
Optimize for SEO
Ensure your website and content are optimized for search engines to increase visibility and attract potential customers. Use relevant keywords, create high-quality content and optimize meta descriptions and tags. This will improve your chances of appearing in search engine results pages and driving organic traffic to your site.
Ghost commerce FAQ
Can anyone start using ghost commerce?
Yes, anyone can start using ghost commerce as long as they have access to an online platform and are able to partner with suppliers or manufacturers for their products. However, it's important to carefully consider the pros and cons of this business model before getting started.