OpenStore - one of the larger Shopify aggregators - has launched a new offering which to me looks like a pipeline for his aggregator business. Here are some things we learned about the offering from the reading:
- The management fee claims to be 10%, but it’s unclear what that is based on. The website says that there is a 10% management fee, and that is of the payouts to the entrepreneur.
The Business Insider artlcle says it’s 10% of profits, which is not the case.
A store owner signs a 12 month contract which pays them a guaranteed fixed monthly income for 12 months. It’s not known how OpenStore calculates that payment but OpenStore keeps 10 percent of those payments.
The services offered are customer service, marketing, fulfillment, and inventory management.
OpenStore keeps all the upside in case the store does better.
Everyone wants to think DTC is a passive business. It is not. Unfortunately, this is preying on founders who don’t know that. There’s no such thing as a free lunch.
This is for entrepreneurs who could probably be profitable with some work, but don’t know how to make the company consistently profitable.
This is one step removed from grift.
The fact that OpenStore is adding a new model means there aren’t good enough companies to buy, or they are looking for a new self-selecting group of suckers.
If you give your business to OpenStore for 12 months, you are basically never getting it back… You will be forced to sell it to the company that has just changed out all your back-end systems to do that.
@vinny mentioned that there is a player in the UK called eComplete which does something similar.
eComplete go the other way. They were born from a due diligence house for VC and PE firms. Their approach is 3 stages:
- Perform full marketing and performance due diligence. Includes in category market opportunity for you - expansion plans ranked in the same way. Benchmarked against their database of 5,000 or so customers.
- Operational review - investigate and evaluation of all costs in your business. They compare them to rates on the market - everyhing from first to last mile. Production if you like.
The process takes 3 - 5 months and costs north of £65K
- You can deliver your growth plan yourself and do the hiring or hire us to achieve this quicker
Fee agree on agreed statement of works - but is digestible (IMO).
Very strong trading mentality
Commercially menaged with profitable growth front and centre
They acquire - so during the process they want to get you fir for acquiring or for someone else to do it
Sales team needs work - super people and highly intelligent but the cognisant approach requires some classical sales too.
They currently have approx £700M under their teams mgmt. Have made some acquisitions.
Spin offs from their inception - Conjura Analytics - Recently partnered with Brightpearl and a little unicorn named Wayflyer
So they can show you the path and charge
Deliver the path and charge
Fund it along the way - and charge
It is a tight knit model ! Not perfect, but interesting and worth watching. 2 ex CEOs from THG set this up.
I read this as OpenStore struggling to find $500k businesses that will drive their business. Its a pipeline but also can be operating expenses be split with smaller businesses who need these services.
Next stop is that OpenStore will turn into a kind of marketplace similar to Flippa.