What Is Ghost Commerce? Benefits and Drawbacks (2024)

If you’re curious about starting your own ecommerce business but worried about the upfront costs of manufacturing, storing, and shipping products, consider exploring a simpler ecommerce business model like ghost commerce. Learn more about what ghost commerce is, what unique opportunities and challenges it offers, and tips for running a successful ghost commerce venture for yourself.

What is ghost commerce?

Ghost commerce refers to the practice of running an online business with no physical storefront for shoppers to visit or physical inventory you have to store. You sell products or services online without investing upfront in product development or establishing an order fulfillment process for shipping products to customers.

Key characteristics of ghost commerce businesses include:

1. Having an online store

2. Featuring products from third-party manufacturers

3. Making a slim profit margin

This makes ghost commerce very similar to affiliate marketing, or the practice of promoting third-party products and earning a commission on attributable sales.

Ghost commerce vs. ecommerce

Ghost commerce is a type of ecommerce that involves marketing an online store without developing, manufacturing, storing, or shipping the actual products. Traditional ecommerce merchants produce their own products, handle warehouse logistics, and fulfill orders by packaging and shipping products to customers.

Ghost commerce involves fewer logistics and less overhead, while a traditional ecommerce business lets merchants take more control over the unique products and services they offer online.

Benefits of ghost commerce

There are several advantages to running a ghost commerce company, including:

Low barrier to entry

You can run a ghost commerce business without worrying about product development, warehouse management, inventory management, or order fulfillment logistics. Since you don’t have to manufacture, store, or manage inventory, you can start a ghost commerce company with lower overhead and upfront costs than a traditional ecommerce business.

Flexibility

Ghost commerce business models give merchants the freedom to quickly rotate products and scale up their offerings based on customer responses. For example, imagine your ghost commerce business sells cosmetic products that a third-party vendor sources and ships. If you notice your target audience buys more lip balm than mascara, you can easily adjust what your online store offers to cater to your customer base.

Automation opportunities

With the rise of ecommerce automation tools, you can set up a ghost commerce business that earns money and requires little day-to-day maintenance. You’ll still have to launch and manage marketing campaigns for your online store, but you can use software to automate the process of passing order information on to your partners, who will pick, pack, and ship those orders on your behalf.

Drawbacks of ghost commerce

There are also disadvantages to the ghost commerce business model:

Lack of control

Without control over the quality of your products or the process of shipping products to customers, the success of your ghost commerce business relies largely on your ability to partner with companies you can trust. This arrangement can result in a lack of quality control, which can negatively impact the customer experience.

Competitive market

Since ghost commerce companies have to choose products already on the market through a manufacturer or wholesaler, there is limited opportunity for standing out in the market with a creative or innovative product. Ghost commerce merchants can face fierce competition in a crowded marketplace with several other merchants selling similar products.

Low profit margins

Without control over the production and distribution of products, merchants using the ghost commerce model can only charge a small markup on top of the cost of goods. While a merchant with an innovative, self-made product can use premium pricing strategies to earn a high profit margin, ghost commerce merchants are subject to market conditions and must keep their pricing competitive to earn sales from customers in a crowded market.

Tips for a successful ghost commerce strategy

Here are some tips for running an effective ghost commerce operation:

Choose a niche

Identify a niche your target audience will love to help your ghost commerce business stand out in the marketplace. Whether it’s a distinct brand identity or an uncommon use for a product, a particular niche will help your ghost commerce company reach customers searching for a specific kind of product or brand online. Leverage your own expertise and interests to find unique ways to build a recognizable brand offering valuable products.

Optimize your online store

Prioritize your online store setup to make your offerings as attractive as possible. Research dependable ecommerce platforms like Shopify that you can use to set up a high-quality online store with minimal effort.

Look for a platform with a variety of customizable store themes, secure and efficient payment processing, and built-in analytics so you can track sales and customer behavior. Since ghost commerce businesses don’t manufacture or ship products, it’s possible to focus more energy on creating a distinct and exciting online store that attracts potential customers.

Find reliable partners

Research high-quality dropshipping suppliers, manufacturers, wholesalers, or retailers, and choose partners with good reputations and reliable customer service reviews. When considering partnering with a particular company, gather as much feedback as you can from clients and businesses that have worked with them in the past. Examine product samples, compare prices, review certifications, and choose partners who communicate promptly and handle potential product or shipping problems quickly.

Focus on targeted marketing campaigns

Develop a strong online presence through digital marketing strategies like search engine optimization (SEO), content marketing, email marketing, and influencer marketing. Since ghost commerce merchants need to develop a unique brand to stand out in a competitive market, they can prioritize creating compelling ads for digital marketing channels that work for their target audience.

For example, a ghost commerce retailer who notices that social media accounts are generating a majority of their sales could use an influencer marketing platform to find influencers who can leverage their audience to drive more traffic to their online store.

Prioritize customer service

The success of a ghost commerce business relies heavily on the quality of the customer experience during and post-purchase. Focus on reputation management by encouraging and interacting with customer reviews, offering online surveys, and partnering with brand ambassadors who can leverage their own reputations for your company.

Improve customer satisfaction by keeping your messaging consistent, communicating with your customers promptly, and providing customer support through multiple support channels (like a live chat option on your website).