Table of Contents
- John Chen has bought and sold a number of e-commerce sites using Flippa.
- He bought his first business for $7,500 and resold it for $550,000 two years later.
- “It’s almost like what people do in the housing market,” said Blake Hutchison, Flippa’s CEO.
John Chen, 31, has taken an unconventional approach to e-commerce entrepreneurship. Rather than start a direct-to-consumer brand from scratch, he’s acquired small online businesses, grown their sales, and then resold them.
About four years ago, he used Flippa, a marketplace for buying and selling online businesses, to buy a jewelry business called Blush and Bar for about $7,500. Two years later, Chen said, he’d grown sales to about $1 million in revenue, and he sold the company for $550,000, again using Flippa to complete the transaction.
He used those proceeds to buy a wedding-gifts business, which he bought for $20,000 and then resold for $40,000, and then Posh Shoppe, an apparel store for plus-size women that he purchased for $60,000. Posh Shoppe did almost $2 million in sales in 2021, which Insider verified using screenshots that Chen provided. Chen said the store was doing about $10,000 to $20,000 a month in revenue when he bought it in the summer of 2020. Chen has also hired six people to run the business.
Chen said he became interested in flipping e-commerce storefronts after working as an investment analyst at a hedge fund. Part of his job was investing in search funds, which give money to entrepreneurs to acquire small businesses and grow them.
He decided he wanted to do the same thing but on a smaller scale. That’s when he turned to Flippa to find a business to buy.
“I didn’t have an MBA. I didn’t have investors. I didn’t have any of that,” Chen said.
So far, all of the businesses he’s acquired run on Shopify. His main method for boosting sales was through Facebook advertising, but he’s also explored email, SMS, and
“It was just a big learning process of e-commerce,” he said. “There’s tons of ways to grow e-commerce businesses, lots of different channels. And we tried a lot of them.”
‘It’s almost like what people do in the housing market’
Founded in 2009, Flippa is an online marketplace where people can buy and sell online businesses. This includes e-commerce apps and Amazon sellers as well as online stores powered by Shopify, BigCommerce, Wix, WooCommerce, and the like.
Flippa is in Australia, but 50% of its business is in the US. Shopify stores account for about half of Flippa’s transactions, said Blake Hutchison, the company’s CEO. The typical Shopify store for sale on Flippa is about three to five years old and generates about $250,000 in annual sales.
Flippa isn’t the only marketplace where Shopify store owners can look to cash in. Shopify has its own exchange for buying and selling stores, and companies such as MicroAcquire and Empire Flippers offer similar services.
Flippa sees almost 20,000 new buyers on its platform each month, Hutchison said. He said he sees different kinds of buyers on Flippa.
Some are serial entrepreneurs who want to take on the challenge of building up a business before ultimately reselling it.
“It’s a classic case of buying, investing, renovating, and then selling it back,” Hutchison said. “It’s almost like what people do in the housing market, although obviously the operations of a business are slightly more nuanced.”
Companies such as Thrasio, which acquire and roll up Amazon sellers, also sometimes use Flippa to find acquisition targets, Hutchison said.
Though Thrasio has faced its own struggles in recent months, the Amazon aggregator space is crowded, with some players raising billions in funding to acquire third-party Amazon sellers.
There aren’t as many companies targeting Shopify stores, but activity in the space is heating up. OpenStore, a startup that makes algorithm-generated offers to acquire Shopify stores, has raised more than $100 million since launching last year. It has acquired 40 brands so far and plans to keep up the pace.
‘Instead of starting from zero and growing to one, you’re starting at 5 and growing to 10’
For Chen, using Flippa to buy and sell online businesses gave him an entry into the world of entrepreneurship. He’d tried starting DTC brands before but had struggled to get them off the ground. Buying an existing business helped him avoid having to figure out a clear product-market fit, he said.
“It gets really discouraging if you don’t have any sales or you don’t get any traction,” he said. “When you buy a business, you already have something that’s there, so it’s much easier to believe that you can do it.”
Hutchison said that’s a common draw for Flippa buyers.
“Instead of starting from zero and growing to one, you’re starting at five and growing to 10,” Hutchison said. “You’ve got all of the traction, all of the energy and enthusiasm that’s come from building that brand before your time.”
When it comes to deciding what stores he wants to buy, Chen said he looks for products that provoke an emotional response from customers — and avoids commodity items.
“The example I always use is a stapler,” he said. “If you wanted to buy something that was like a chair or a stapler, you would just go on Amazon and search for it. I wanted to be more in the business of something that didn’t lend itself to search.”
But Chen said he was no longer looking for a “quick flip” and wanted to hold on to Posh Shoppe for now.
“I think in the beginning, I got into it — like a lot of entrepreneurs do — to get personal freedom or to generate wealth,” Chen said. “I’ve learned that it’s going to be a slow process and a hard process no matter what, so you might as well enjoy it and create value for other people in the long term.”
“I think it’s just better to focus on building a sustainable business that people love, that customers rave about, and that people will tell their friends about.”