Shopify Exchange Marketplace CLOSED: Why It Happened And What Shopify Owners Can Do Now to Sell
Over 2M people use Shopify to fuel their ecommerce business. Many thousands of those people aimed to complete their entrepreneurial journey by selling their businesses on the Shopify Exchange Marketplace.
However, on November 1st, 2022 Shopify shut down its Exchange Marketplace five years after its launch in 2017. Now users will no longer be able to use the service to sell their Shopify stores. But at Empire Flippers, we have a solution.
In the spirit of the holidays, we’re offering 25% OFF of our brokerage fees for you to sell your Shopify store with us before December 31st, 2022 (submit your Shopify store for sale here.)
We’ve written this article for those curious as to what the Shopify Exchange Marketplace was and why it was shut down. By the end, you’ll understand the truth behind what goes into running an online business marketplace and why we recommend you buy or sell with a professional broker, regardless of whether you’re a first-timer or a seasoned pro.
What Was The Shopify Exchange Marketplace?
Shopify’s Exchange Marketplace opened in 2017. It was advertised as a platform for selling Shopify-based businesses from as low as $200 USD up to the six-figure range.
Since the Exchange was built on Shopify, all of the information about businesses was already integrated into the Shopify platform, making it easy to list a business for sale. Users were able to connect their business performance and financial data to the Exchange and create their own public business listing that any buyers could view.
Since Shopify closed down the marketplace, all of the thousands of business listings have been taken down.
Why Shopify’s Marketplace Shut Down
Shopify is a fantastic company with one of the industry-leading products; the website and online store builder have been revolutionary in making online business ownership more accessible to everyday people. We share the ethos of supporting small business creation and the life-changing impact it can have on those involved.
While their core product is still loved by customers around the world, what made those same users hesitant to use Shopify’s Exchange Marketplace?
The best place to turn to for this answer is the customers themselves.
What Users Were Saying About The Service
Multiple Youtube videos surfaced that shine light on the issues with the service, particularly stemming from the quality of businesses listed on the marketplace.
In one Youtube video, an experienced online business owner reviewed different businesses on Shopify Exchange: “They’re trying to basically sell you the inventory plus $5000 for the website that’s making $81/month.”
The first business they came across was the one listed above, which made just $81 per month in net profit but was listed at a valuation well above higher quality businesses listed on other brokerages.
To put this valuation inflation into perspective, the average value of Shopify businesses on our marketplace is in the 25-35X range. The business listed above was valued at a 308X multiple.
After reviewing this listing, the hosts concluded “Some people may not be familiar with how websites are sold, and I think that’s really the downfall of the Exchange Marketplace, is that it kind of preys on people who may not necessarily know what they’re getting into.”
No company wants to establish this kind of sentiment around their product; being known for trust is crucial in the online business brokerage space where there are people who try to scam business owners and sellers. This is why building trust through accurate valuations and protecting both buyer and seller interests throughout the deal is deeply ingrained throughout the fiber of Empire Flippers and all of our departments.
In fact, the hosts of this video go on to recommend more formal online business brokerages like Empire Flippers, as we vet or qualify businesses according to specific criteria that indicate whether a business is of high enough quality to be listed on our marketplace. We also verify buyer identity and liquidity to confirm their legitimacy.
High Volatility and Misleading Profit Figures
Several businesses listed on the marketplace showed a monthly profit average that was mathematically accurate but skewed by a handful of outlier months that didn’t represent the baseline level of profit a buyer could expect to make after acquiring the business.
While we have businesses on the Empire Flippers marketplace that have volatility or seasonality, we account for this when valuing businesses and our buyers have the opportunity to discuss any concerns regarding spikes or dips with sellers.
We have specific quality expectations and requirements that any business listed on our marketplace must meet, so the majority of online businesses that are submitted to us don’t meet this standard. In fact, 91% of businesses don’t pass our vetting process.
While this reduces the number of businesses that make it on our marketplace, the benefits of maintaining trust with our buyer and seller community far outweigh any advantage gained from listing a high volume of businesses.
Being known as having a marketplace of high-quality businesses has allowed us to attract a serious buyer pool, which at this point collectively brings over $7,000,000,000,000 in deployable capital that they are ready to invest in our marketplace, which has ultimately led to quick sales at high business valuations, including one seven-figure business that sold within a matter of hours of being listed on our marketplace—this doesn’t happen all of the time, but we have processes and teams in place to create a high chance of a business being found by the right buyer at the right time.
We’ve talked a lot about ensuring buyers are being taken care of with accurate valuations, but this is only one side of the equation to maintaining a healthy marketplace—the other side is protecting the sellers.
Lack of Seller Protection
In the nail and beauty business example listed above, you’ll notice the name of the business is publicly visible. This means anyone could use the platform as a research tool to determine what type of business they want to copy and build themselves.
Sellers who want to list their businesses for sale understandably want to feel like they aren’t putting their entire business at risk just by listing.
At Empire Flippers, all of our buyers go through an identity and liquidity verification process, after which point they can unlock listings to view more detailed information about the business. This extra layer of protection reduces the risk of people accessing sensitive business information for competitive analysis.
Running An Online Business Marketplace Takes A Lot of Hands-On Work
While it made sense for Shopify to create a marketplace within its platform, Shopify is a professional software company, not a business broker.
Running a trustworthy marketplace where business buyers and sellers can do safe transactions requires years of experience, complex and ever-evolving processes, and deep involvement from professional teams of experts.
There are so many moving parts running in the background of a brokerage required for this system to run successfully that most buyers and sellers aren’t even aware of them until they go through the process.
This is where buyers and sellers got caught out on the Shopify Exchange Marketplace; without any experience buying or selling online businesses, they weren’t able to safely and effectively handle transactions on their own.
At Empire Flippers, we have built teams and processes dedicated to each step of the business acquisition process to support buyers and sellers fully:
- Our sales advisors work with buyers and sellers to find the right match and negotiate sales terms
- Our vetting team works with sellers to compile their financial data and assign business valuations
- Our customer support team communicates with buyers and sellers and maintains listings
- Our migrations team transfers the business to the buyer
Without that infrastructure in place, the acquisition process can be overwhelming and unsustainable, even for a company of Shopify’s caliber.
How Shopify Store Owners Can Sell Before The Year’s End
While Shopify’s exchange marketplace didn’t work out, this doesn’t mark the end for Shopify store owners’ dreams of a life-changing exit. It just means moving to other options.
During this holiday season, we want to help you, our Shopify store owner community, make the transition to another brokerage easy and help you potentially achieve a truly life-changing exit by giving you 25% off of our fees from now until December 31st, 2022 (submit your business for sale here.)
If you’re ready to make that exit, submit your business to our vetting team to start the listing process—it only takes a few minutes and you don’t need to commit to the sale until you accept the final valuation we provide for you.