EF Staff

August 20, 2018

Merch by Amazon (MBA) is one of the lesser-known online business models out there, but it is no less profitable, as you will see in this case study.

For those who haven’t heard about this model, Merch by Amazon is Amazon’s print-on-demand service for custom-made shirts. It was originally launched to help indie software developers create merch for their games and physical creations that they can sell in addition to their virtual games. However, this quickly pivoted as marketers rushed in and started leveraging the sheer power of Amazon’s ecosystem.

The prevailing strategy has been to do keyword research for shirts that people are already searching for, create a superior design, and use some basic on-page SEO for shirt listings to game the Amazon algorithm and get all that organic traffic coming in.

When you have hundreds of shirts in your catalogue, even small amounts of purchases can stack up to create a nice monthly revenue that is fairly hands-off when it comes to day-to-day operations.

This business in particular had the owner working about 2-3 hours a day with 400 shirt designs that created an average of $3,324 in net revenue per month. The Seller’s business partner sporadically created the designs. The business was at a tier allowing for 1,000 designs, leaving a large chunk of slots open. The business was listed on our marketplace at a 28x multiple for $93,077, and we immediately started marketing the listing. It was sold for the same amount just 19 days after going live.

Let’s dive into what happened with this Merch by Amazon business and get into the details.

First things first… Let’s take a quick overview of the business and highlights of the sale:

 

Merch by Amazon Case Study

 

Preparing a Merch by Amazon Business for Sale

All of the businesses that entrepreneurs submit to sell with us first have to go through our rigorous vetting process. This is where our team checks in on everything, from traffic to the actual income, before a buyer performs due diligence on it.

While every business has commonalities when it comes to preparing for putting it up for sale, MBA is a little different overall.

The first thing to be aware of is that you’ll be handing over the Merch account to the buyer. At this time of writing, your Amazon Associates email is the same email you’ll be handing over in your Merch account. You’ll want to make sure you have an email that you’re going to be okay with giving to the buyer, preferably one that is only associated with your Merch account versus other Amazon-centric services.

Other than getting the financials and proof of income to us, there isn’t that much else for a Merch business to prepare to sell on our marketplace. Unfortunately, you can’t really see how much traffic each shirt design listing is getting since there are no analytics attached to each product listing, so typically, there are no data screenshots to share here.

It is also worth noting that all shirt sales for this business came from organic traffic, meaning no paid advertising or promotions were being done for the shirts.

After everything was approved by the vetting team, the listing was pushed live on our marketplace during our Monday listings email, and potential buyers were off to the races to see who could scoop up this asset first.

The Action Starts Pouring in with Seven Different Prospective Buyers

Buyers almost immediately started showing interest in the business, asking great due diligence questions:

  • Do you spend any money on PPC?
  • Why the jump in income for April?
  • How much work is put into the designs?
  • What are the details of MBA copyright infringement?
  • What is the process of making sure any new design is not infringing on TM?
  • How do you advertise your shirts/designs?
  • If all 1,000 slots were filled, would that likely raise sales?
  • And if so, why hasn’t that already been done?
  • Why sell the business now? Seems like it’s doing well.

These are the kinds of questions you might get from potential buyers when selling an MBA business, and you should be prepared to answer them.

Of course, once you answer them, our team can start fielding these questions on your behalf so you don’t need to keep repeating yourself.

Let’s go through each question and see how the seller answered.

Paid Traffic

The Seller never ran any PPC ads for shirts on this account. This could have been a huge opportunity for someone who knew how to run and optimize ads to increase the earnings of the account.

Income Jump

The jump in revenue was caused by a few seasonal shirts that did well on Saint Patrick’s Day as well as the 100 days of school. The average monthly net profit on this account was just over $3K per month, and the account was maintaining this average even though the seasonality of those shirts was done.

Frequency of Design Upload

The Seller’s business partner had a decent understanding of Photoshop, so a new design would take less than ten minutes to create. There was really no set amount of time per week, as sometimes the business went months without a single hour being put into the designs at all.

Copyright Infringement

One of the things you have to tread carefully with on Merch is copyright infringement. This can actually be more difficult than you think. Merch Informer can be useful for Merch enthusiasts and will help you determine if there is any copyright infringement with a design you come up with.

In addition to Merch Informer’s software, you can also hunt manually using TMHunt.com to see if your design infringes on any rights.

For Trademark, another way to check is simply by running the phrases on the shirts through the USPTO trademark database here. This will show you which phrases are protected and which are not.

As the owner of an MBA business, it pays to be extra careful here since this is a pretty typical area where Merch sellers find themselves in trouble accidentally.

Advertising Strategy

As mentioned already, this business relied 100% on organic traffic. Amazon has millions of people visiting their website every day. This traffic comes only if you optimize each listing to appear in the top spots for the profitable keywords related to your design.

While each design might only contribute a few sales per week, the real earning power comes as you continue to upload dozens of new designs, all optimized for their keywords. When you have hundreds of shirts, a few of each selling per week, they can add up to some serious income.

Leveling Up to the Next Tier

Merch by Amazon works on a tiering basis. Once you have sold 1K designs (if you are at the 1K tier), Amazon will level you up to the 2K tier. Once you sell 2K designs, Amazon will tier you up to 4K (and so on and so forth).

Filling out all the slots was the number one thing the Seller recommended to increase sales. While only 407 designs were live, there were 964 designs in the Dropbox folder ready for the Buyer to use. Some of these were removed because of the 90 day rule (if a design has not sold in 90 days, Amazon will remove it). This gave the Buyer another chance to put them up and use different keywords in the listing. At the 1K tier, you get 15 uploads per day. As the Seller ran other online businesses, he just did not have the time to max out the uploads each day.

Why Sell Now?

We get this question quite often at Empire Flippers. The answer is always just a slight variation of the same idea: the Seller is ready to move on. In this case, the Seller had created a software that they wanted to gain capital to fund further.

The First Offer: “Let’s do it.”

After getting his questions answered and having a great buyer-seller conference call with a Business Advisor on to help things run smoothly, Potential Buyer #1 was sold on the business. Just a little over a week after listing, Buyer #1 made arrangements to send payment, and it looked like the Seller was going to get a full offer on the first go.

However, as we always say, “The deal is not done till the money is in the bank!”

This was particularly true in this scenario, since Buyer #1 had a big case of buyer’s remorse and the deal was reversed the next day with no room for negotiation to save the deal.

Potential Buyer #2 Gets Lucky

Buyer #2 had actually viewed the business before Buyer #1. Yet, she had scheduled the call for a few days later, and Buyer #1 had then swooped in. This is a great example of how timing plays into these deals, and why you want to be quick on your toes to make sure a deal doesn’t get swept out from under you.

From the perspective of Buyer #2, it was quite a roller coaster ride:

  • It took a day for her deposit to clear
  • She scheduled a buyer-seller conference call for a few days later
  • The next day, she received an alert letting her know the business had been sold
  • She very quickly received another alert saying the original call could continue as scheduled

That’s right; this all happened so fast that the original buyer-seller conference call didn’t even need to be rescheduled!

The Clock Ticks

When multiple buyers are looking at a business, and the buyers know this, it can provide a bit of that scarcity mentality on that buying side. Only one business with several buyers can be a motivating factor to move quickly on a deal.

That is exactly what happened here.

The call went well and the Buyer wanted to lock in this deal before someone else snatched up the opportunity first. Instead of doing an earn-out, the Buyer sent in the full list price for the offer to get the business off the marketplace and into migrations.

A wire was sent in for the full list price on the same day of the buyer-seller call, and the business moved to our migrations team to help hand off the “keys”, so to speak, to the new owner.

The Migration of a Merch By Amazon Business

The migration process for Merch accounts are pretty straightforward. As mentioned earlier, your Merch login email is the same email you use for the rest of your Amazon services. We have the sellers reach out to Merch support to notify them of the changes.

Overall, these kind of migrations go very smoothly and are pretty straightforward.

One thing to note is that when you send in your email to Merch support to alert them of the sale of an asset, customer service will often misunderstand what you’re saying. Merch’s priority is to make sure that the person logging into the account is actually YOU and not someone else. They might tell you at first that it is against their Terms of Service to hand over the account to someone else, but this is mainly a security measure since Amazon cannot legally prevent an asset sale (which is what we do here at Empire Flippers).

Don’t worry if your first email from Merch comes back citing their terms. Just escalate it to one of their customer service managers, and they will solve it from there.

Because of the nature of Amazon’s support, this process can take a bit of time before you get an actual response. However, this is still the best route to take as opposed to switching over all the credentials to the new owner without alerting Amazon. If you go this route, you risk flagging their security system, which could lead to an actual account ban.

While alerting Amazon is a bit slower, it is far less risky because you’ve kept them in the loop of what is happening with the account.

Once Amazon has given approval, the seller meets with the buyer to change over all the credentials.

The Seller in this case also uploaded almost 1,000 designs, in addition to the designs that were already live on Amazon, to a Dropbox folder that the Buyer could then use to start uploading new designs to the Merch account from day one.

After the Buyer verified the earnings and gave the green light, we paid the Seller the $93,077 minus our 15% commission, netting him $79,116 to invest in his new business venture.

Why Scaled MBA Businesses are Attractive to Buyers

One of the reasons why buyers are interested in buying a Merch business in the first place is the fact that Amazon tiers the accounts. This means Amazon only upgrades new accounts if they are able to sell the designs in their store, allowing the store to scale up easily.

As mentioned earlier, the more designs a Merch account sells,, the more slots that open to the point where an account could have thousands of slots to upload new designs.

This kind of quality control is important for Amazon, and it also creates a built-in value for the buyer of an aged MBA account. Since the predominant way that people make money with Merch is by having hundreds of designs where each design sells just a few shirts per week, it makes sense that a buyer would put so much value on an account that has a lot of open slots.

It is important to mention that not everyone gets approved for a Merch account when they apply for it. By buying a Merch account that’s already making money, you shortcut a lot of the journey:

  • You already have an account producing a fairly reliable income.
  • You’ll learn the Seller’s process of creating new designs, how the Seller sourced those designs, and how the Seller successfully optimized their listing descriptions to draw organic traffic.
  • Your account will likely have a ton of open slots for new designs you can use to aggressively grow the account (in this case, only 400 slots were used out of the 1,000 open slots).
  • The extra 1,000 designs will allow the buyer to fill up those slots super quickly, and hopefully, scale the business to even higher revenue numbers.

While buying a business can be a volatile experience, it can also be incredibly lucrative, considering how fast you can get things up and running and working at scale, versus building a business from scratch.

At the end of the day, you must decide which path is the right one for you. Often both paths appeal to people, and it is not uncommon for us to see a seller become a buyer (after all, one of the best times to buy a business is right after you sell one since you have so much liquidity at that point).

Whether you’re looking to buy a revenue-producing business or looking to sell one, we’ll be there to help you.


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