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In the rapidly evolving landscape of ecommerce, new trends and terms are constantly emerging. One term gaining traction, ghost commerce—which is often used interchangeably with affiliate marketing—encompasses a range of online selling methods where sellers don’t manage their own inventory.
To break down the concept, we’re diving into the basics of ghost commerce, its advantages and disadvantages, and providing a clear step-by-step guide if you might be interested in trying it for yourself.
The basics of ghost commerce
Ghost commerce refers to various online selling models where the seller doesn’t actually handle or manage the physical inventory of the products they’re selling. This concept primarily revolves around two aspects—leveraging the power of brand-building and focusing on audience engagement to drive sales.
Some examples of different types ghost commerce can include:
Affiliate marketing: The concept of affiliate marketing centers around promoting products that come from other companies and earning a commission for each sale that is made through your referral link.
Dropshipping: Dropshipping involves selling products that are shipped directly from a third-party supplier to the customer, which bypasses the need for the seller to hold any inventory.
White labeling: White labeling refers to rebranding products produced by another company and selling them under your own brand name.
Wholesaling: Wholesaling involves selling products in bulk at a discounted rate without having to manage the inventory yourself.
Key characteristics of a ghost commerce business
While some of the operations might differ, a ghost commerce business typically features the following key characteristics:
Minimal inventory management: Ghost commerce sellers don’t hold or manage any inventory. Instead, they source products from third-party suppliers or partners.
Focusing on marketing and brand-building: The success of a ghost commerce seller relies heavily on creating a strong brand presence and building a loyal audience.
Flexible business model: Sellers have a lot of options. They’re able to choose from various products and suppliers to keep up with trends and customer interests.
Ghost commerce vs. traditional ecommerce
While traditional ecommerce involves managing production, inventory, warehousing, and shipping, ghost commerce outsources—and therefore simplifies—the process.
In traditional ecommerce, the seller manages the inventory and often creates it themselves—like a ceramics shop or online jewelry store. With ghost commerce, inventory and production is outsourced to a third-party supplier.
That means that with traditional ecommerce, there can be a high overhead cost and a significant initial investment to stock your store. With ghost commerce, there’s a lower overhead cost and a more minimal initial investment. Essentially, as a ghost commerce seller the financial risk is lower, but it’s possible to receive a similar reward in profit.
The pros and cons of ghost commerce
Ghost commerce isn’t all positive, though. Like any business model, it comes with advantages and disadvantages. Your preferences and skillset can help you decide whether it fits how you want to sell online.
Pros of ghost commerce
Low startup costs: Since you don’t need to focus on investing in inventory, warehouses, or shipping with ghost commerce, the initial investment is much lower compared to traditional ecommerce models.
Easy to scale: Without having to worry about managing physical stock for products, ghost commerce allows you to add or change your products for easy scaling.
Flexible: Since you don’t design your products, it’s easier to change up your inventory based on what works best for your audience.
Time savings: Not worrying about inventory management is super helpful when it comes to marketing, too. Taking this off of your plate will give you more time to concentrate on building your brand, which will ultimately set you up for success.
Cons of ghost commerce
Depending on third parties: As a ghost commerce seller, your business will rely on suppliers and shipping partners, which can be stressful if stock or pricing changes unexpectedly, for example.
Lower profit margins: Profit margins can be lower due to the commissions element of being an affiliate seller or supplier costs.
Regulatory considerations: Depending on where you’re located—and the business models you choose to implement—you might run into specific regulations pertaining to advertising, affiliate marketing disclosures, and consumer protection laws.
Limited control over products: With less control over the quality of your products, shipping times, and customer service, your customer satisfaction might take a hit and force you to find new suppliers.
How to start a ghost commerce business
Ghost commerce is likely a better fit if you have an established brand or feel confident in your marketing capabilities, or if you want to limit your investment in your online store.
Starting a ghost commerce business involves several steps, but once you’re on a roll, you’ll be good to go. Here's a brief guide to get you started.
1. Choose your niche
Before diving into the logistics of starting a ghost commerce business, identify a niche that interests you and has a viable market. Since ghost commerce depends heavily on branding and marketing, consider a niche where you have experience or an existing audience. From there, research potential products and suppliers, and analyze your target audience.
2. Select a realistic business model
Decide whether you want to focus on affiliate marketing, dropshipping, white labeling or wholesaling. Each model has its own set of advantages and challenges, so choose one that aligns with your goals and resources.
For example, if you’re a content creator, affiliate marketing may be a good way to earn money from your content since you already have a following who trusts your point of view. If you want to build up your own ecommerce brand, dropshipping or white labeling might make sense.
3. Build your platform
Create a website or choose an ecommerce platform that will ultimately host your products. Make sure your website is user-friendly, optimized for mobile, and visually appealing.
Consider what potential customers will want to see to trust you and your brand. For example, an online clothing store might need photos of people wearing the products or a skincare brand might benefit from sharing more about ingredients. For affiliate marketers, it’s more about ensuring your website makes it easy to find the products you’re pointing your audience to.
4. Source products
If you're opting for dropshipping or white labeling, find reliable suppliers you can work with. For affiliate marketing, sign up for affiliate programs that offer products that are relevant to your niche.
Test out the products you’d get from suppliers or brands before stocking or recommending them if possible. This gives you an opportunity to see what the buying process is like from the customer side and make a more informed decision. Your customers’ experience is key to building your brand’s reputation, so it’s worth spending some time on this.
5. Develop a marketing strategy
Invest your time, energy, and resources in building a strong online presence through social media, content marketing, email marketing, and SEO. Your goal is to attract and engage your target audience.
It’s OK to start small—try one blog post per month and one social media platform to start. Narrow it down by focusing on where your target audience is most likely to spend their time online and start by engaging there.
Read our guide to creating a marketing strategy
6. Build credibility and trust
Establishing trust is crucial in the world of ghost commerce. Provide valuable content, honest reviews, and transparent information about the products you’re selling. It’s also important to engage with your audience through social media or newsletters. Putting a human voice behind the brand or content builds trust, which translates into trust in what you’re selling.
7. Monitor and optimize
Track your performance using analytics tools. Monitor sales, website traffic, and customer feedback to optimize your strategy and improve your sales.
Sales and feedback or reviews naturally tell you a lot about what your customers want. But site traffic or engagements on social media can too. For example, if customers tend to look at a page and exit without buying or get through to checkout and then exit without buying, that can indicate that your pricing or shipping costs are too high. If you get more engagement on a type of social media content, consider leaning into that in your marketing plans.
Building credibility and trust
Building credibility and trust with your audience is essential in ghost commerce. It’s important to remember that this takes time, just like building trust with a new acquaintance. Here are some tips to keep in mind.
Be transparent: Make sure you clearly disclose your affiliate relationships and the nature of your business.
Provide value: Offer valuable content, tips, and advice that relate to the niche your products fall under. This positions you as an authority and helps build confidence in your products or recommendations.
Engage with your audience: Respond to comments, messages, and emails promptly. Foster a sense of community around your brand.
Showcase testimonials and reviews: We’re all more likely to trust a recommendation from a person over a brand—also known as social proof. Highlight positive feedback from customers to build social proof for your business.
Ensure quality: Partner with reliable suppliers and promote high-quality products to maintain your reputation.
Ghost commerce offers sellers a flexible and cost-effective way to start an online business without the hassle and stress of managing inventory. By focusing on brand-building and audience engagement, you can create a successful and scalable business. While there are challenges and regulatory considerations to keep in mind, the potential rewards make ghost commerce an exciting opportunity to start a brand or start earning.