What is Ghost Commerce and How Does It Work?

Imagine having an online business where you need not handle any product, inventory, or shipping. Sounds interesting? Well, this trend, known as ghost commerce, is becoming popular among entrepreneurs and established businesses in the growing eCommerce market.

Ghost commerce: An explanation

Ghost commerce is an online retail strategy used to promote and sell products and services without handling physical inventory or managing a traditional online store.

Instead, you can use your online presence to lead your customers to third-party sellers or eCommerce platforms. Or you can buy the product from these sellers or platforms and have it delivered to the customer.

This means that you are essentially a middleman between the source and the buyer and that you may never see or handle the product yourself. You merely promote the product, manage the online store, and offer customer service.

Main features, pros, and cons of ghost commerce

Ghost commerce has many unique characteristics, which may have their pros and cons.

Minimal overhead costs

Pros: You need not own a physical store or inventory. This means that you do not incur any costs related to rent, utilities, products, and logistics. You also need not worry about the various aspects of inventory management, such as purchasing, storing, or stocking. You can start generating income without a large initial investment. All that you need to do is to guide your customers to places where they can buy products.

Cons: Since you do not handle products or services directly, you will not have control over their manufacturing, pricing, or supply. You will not be able to set their base prices. So, your earnings per item may be lower than traditional businesses. Similarly, you will not be able to run sales campaigns, offer discounts, or upsell them.

Flexibility in location

Pros: Ghost commerce can be operated from anywhere with an internet connection.

Cons: Your customers may find it hard to trust you if you don’t have a permanent storefront. Moreover, your success may depend on having a reliable, engaging online presence via which you can reach them.

Focus on marketing and customer service

Pros: With others responsible for inventory management, logistics, and order fulfillment, you can focus on activities, such as marketing, eCommerce personalization, customer service, and business growth.      

Cons: As you rely on suppliers or manufacturers for product and service quality and delivery, you may be unable to ensure reliability and delivery timelines. You may also find addressing customer queries or complaints slightly challenging. This may potentially affect customer experiences and your business reputation.     

Swift and easy market entry

Pros: Entering new markets or trying new product arrays could be easy and quick as you do not need a substantial investment.

Cons: This easy and quick entry attracts many players. If you do not operate in a niche, you may find the market highly crowded with competitors trying to sell similar offerings.

Low risk and high scalability

Pros: You have no limitations related to physical storage. So, you can offer a vast selection of products and try out many different niches, according to the latest trends and customer preferences.

You will not be stuck with unsold items. You can also easily adjust the scale according to demand as you need not worry about storage space or inventory volumes.

Passive income

Pros:  If you automate all your processes and focus on marketing, your ghost commerce business may be a source of passive income.

Anonymity and privacy

Pros: Your business transactions will remain private and anonymous. So, customer data and other sensitive information will be confidential. This will appeal to customers who wish that their online activities remain private.

Lack of brand identity

Cons: You may find it difficult to create a unique brand because your offerings are sourced from different suppliers, and manufacturing and packaging are not under your control.

Possibility of shortages

Cons: Your customers may be disappointed if suppliers run out of popular items and you cannot fulfill their orders.

Trust and credibility

Cons: Despite having no control over quality or delivery, you may be held accountable for them. Your customers may not trust you because your business does not have a physical storefront.

You will have to work hard to build trust and sustain a good relationship with your customers. You will also need to choose dependable suppliers to maintain that trust and loyalty.

You may need to opt for a peer-to-peer (P2P) or customer-to-customer (C2C) marketplace model to help initiate interactions between your customers and suppliers and create trust among them.

Ghost commerce vs. eCommerce

Although ghost commerce falls under the broad classification of eCommerce, they have many differences.For instance, ghost commerce simplifies quick commerce operations by cutting out physical handling entirely.

Setting up a ghost commerce business

Ghost commerce is a highly convenient, effective, and affordable way to generate income online. The following are some essential steps to set up a ghost commerce business.

Choose a niche and audience

Before embarking on a ghost commerce business, choose a niche—a product, service, or industry you are knowledgeable and passionate about. Identify your target audience and their preferences so that you can customize your offerings and market them accordingly.

Conduct in-depth market research about the different product categories, profit margins, trends, and competitors in your niche.

Set up an online store

Establish a user-friendly, easy-to-navigate, visually attractive online store. Share high-quality content on all online avenues to draw in your target customers and instill trust in them.Consider platform like Shopify Plus for seamless store development and management.

Select reliable suppliers 

In ghost commerce, you will not handle products or services directly. You merely collaborate with third-party suppliers or manufacturers who manage inventory and delivery. So, choose dependable suppliers who offer high-quality products and shipping, a wide product range, reasonable prices, and excellent customer service.

List products and services

Identify the products and services you wish to offer from the catalogs of your chosen suppliers and list them on your online store, with clear and compelling product descriptions and images. Set competitive prices that will bring you good profit margins. Promote the listed products through channels, such as social media, email marketing, and influencer partnerships.

Make your business legal

Register your business according to the local rules. Acquire the requisite permits and licenses. Open a business bank account and set up a secure payment processing system.

Create an order processing system

Ensure that when customers visit your store and place orders, it captures all the necessary details. The store should forward this information to the suppliers. Automate this process by connecting your store and the suppliers’ systems to avoid manual work and glitches.

Monitor order fulfillment by suppliers

When they receive the order information, suppliers pack and ship the product directly to the customers. They also handle shipping labels and official documentation. Your role here is to monitor and track the orders to guarantee timely delivery.

Develop a suitable marketing strategy

Identify the best channels, such as social media marketing, content marketing, and email marketing, to reach your target audience. Implement SEO strategies to raise visibility in search results and attract customers. Partner with influential figures in your niche to promote brand visibility and boost sales.

Confirm delivery to customers 

The orders may or may not have suppliers’ details on the packaging and branding, depending on your agreement with them. When customers receive orders, they may assume it was sent by your store. So, confirm that they   received them on time and that they are satisfied with it.

Handle payments efficiently

Collect the retail price of products from your customers and pay suppliers the wholesale price, keeping the difference as your profit.

Provide support to customers

Establish clear and easy communication methods to address customer queries and concerns. Create FAQ pages and return policies. Arrange returns or refunds as needed.

Launch your store

· Launch your store after all the aforementioned are set up and functional. 

· Monitor customer behavior, preferences, feedback, and market trends.

· Track sales and supplier performance.

· Identify areas that need improvement.

· Customize your offerings and marketing approach.

· Test new offerings and marketing techniques.

· Expand your product/service portfolio and enter new markets.

Final thoughts

Ghost commerce is a game changer in the e-commerce landscape as it democratizes business ownership and simplifies online selling with its low-risk, low-investment, flexible, and scalable nature. In today’s mobile commerce era, launching an online business with such ease is quite appealing.