E-BUSINESS SPECIAL REPORTAre Small E-Tailers Finished?
In online malls, small businesses selling the same products as larger e-tailers may find themselves marginalized unless they can afford to purchase good placement.
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In the early days of e-commerce, small businesses flocked to the Web with grandiose visions of transforming mom-and-pop shops into mega retailers. Those visions turned out to be pipe dreams for most merchants, and the dawn of reality convinced many early adopters to retreat to the brick-and-mortar world.
But small e-tailers are not finished, according to analysts. In fact, they are just beginning to gain momentum in a Web world that finally offers the necessary technology infrastructure to help them get off the ground. And the savvy ones have come to understand the real value of the Internet: It is a cost-effective means of supplementing sales by reaching customers who may have been inaccessible offline.
Of course, small e-businesses still face challenges, including daunting competition from e-tail giants and well-known multichannel retailers.
Acknowledging Advantages
Online shopping malls like Yahoo! Shopping and Web-based auctioneers like eBay (Nasdaq: EBAY) are flourishing, and small e-tailers can gain an edge in this climate. To do so, they must leverage such sites to their benefit, Forrester Research analyst Carrie Johnson told the E-Commerce Times. "Large companies are hindered by all sorts of organizational and even acknowledged technological issues that prevent them from experimenting with auctions," she said.
Another factor in favor of small e-tailers, Johnson added, is that it is less daunting to get up and running in today's e-commerce environment. "It's easier for small merchants to succeed now, because there's no more pressure to become the next Amazon," she said. "It's pretty well understood that no one is going to make it really big as a small merchant online anymore."
In addition, merchants need not make significant investments in technology to play the game.
"In the past, people had to build their own Web pages, and the billing systems were horrid," Giga Information Group research fellow Rob Enderle told the E-Commerce Times. "Now you can use a service like PayPal for billing and collection."
Debating Disadvantages
Small e-tailers enjoyed an advantage in the early days, as brick-and-mortar stores tried to figure out the Web and build online infrastructure, but large e-tailers now understand e-commerce, making the competition much stiffer.
According to Enderle, small businesses are at a disadvantage in online shopping malls that also include large companies. Much like the situation in brick-and-mortar malls, the anchor tenant gets the best position and the most traffic. Therefore, small businesses selling the same products as larger e-tailers may find themselves marginalized unless they can shell out cash to secure good placement.
"If there is one vendor that can sell the same products cheaper than you can, then there's a good chance they can get better placement," he said. "That means the little guy can't compete."
Plenty of Room
Even so, there is plenty of room online for small merchants that understand their own strengths and weaknesses.
"There will always be a place for small e-tailers that can operate on low overhead with high gross margins," Yankee Group analyst Paul Ritter told the E-Commerce Times. The key for such e-tailers, Ritter added, is to maintain strength and traction in a niche space with hard-to-find products. For example, he cited online furnishings company Bellacor as a firm that has done well because it has high gross margins, low overhead and high-quality customer service.
Steps to Success
According to Enderle, the first step toward success is differentiation. If small businesses sell the same items as large competitors, he said, they are out of business already. They just may not know it yet.
The next step is providing a customer experience that is more customized and better targeted. "If you get to know your customers on a one-to-one basis -- like buyers of artwork or even high-end electronic equipment -- there's a chance that the user will come back on a regular basis and pay a premium to maintain that experience," Enderle said. "But it has to be a personal experience."
Johnson agreed, noting that big retailers have the same customer service goals as small businesses, but with more automated processes and less incentive to impress customers.
Take the Time
Lastly, small e-tailers have something that large companies lack: more time. According to Johnson, small businesses can gain an advantage by dedicating time to determine which products sell well through auctions. In fact, he said, such research is one of the most cost-effective methods of increasing online sales.
"Really look at product categories, what other items are for sale, and what reserve prices need to be to ensure your items sell at the highest possible closing price," Johnson said. "That's the best way for small merchants to go about it right now."
15 comments:
Smaller on-line retailers do need to take more time and do more research. They need to look into what is already offered and what the prices of whats out there.
As for asking if small e-tailers have the chance.... I don't think its a very big one. With Amazon and Ebay out there I really don't think anyone will resort to a smaller service. Plus people already go to those larger service sites to find cheaper prices and more variety of products.
I agree with ths article because of the fact that when it come to smaller buisnesses starting up on the internet they already know that they will not be as big and make as much as the bigger on-line companies like amazon who are able to sell items for a lower cost.
Smaller businesses just have to be able to find that niche that hasn't been tapped into yet. They need a way to entice people to go to their site and not the bigger ones that are well known
I agree with the report. Most of the "big" online retail giants are now facing competition from small online retail stores, long gone are famous quotes that said, can you trust anything else besides Ebay for your online shopping?
These days the number of online retails thats doing good business is increasing with such speed that the only next thing that could stop them would be another e-tailer!
Finally, online retailing may not be easy to score good revenues BUT its definitely the way to go if small businesses are looking for cost-effective means to conduct business.
I purchase a lot of things online and most come from small e-tailers. While I find that places such as Amazon.ca and Ebay have a wide variety of products, I am the type of person who prefers to buy these "general" types of items locally - just for convenience, as I don't like waiting for items that I can easily go out and buy. For more unique, harder to find items, I often choose small e-tailers. From my experience, I find that customer service and communication is often above average, when dealing with a small e-tailer, which I appreciate. I agree that with specialized products, and good customer relations, a small e-tailer will develop a loyal customer base which will keep them in business.
Whilst I love the assortment that is offered by the large e-tailers, I do think that there is a place for smaller businesses online.
I love smaller businesses, both brick & mortar, and e-tailers because they fit into the niche categories that the big guys can't...offering goods of distinct nature - vintage, rare, foreign, kitsch, et cetera, et cetera. Whilst they may not be able to compete on price, they distinguish themselves through high levels of customer service, knowledge and know-how.
If anything I'd say that it's vital that the little guys take the time to develop a decent website, keep it updated, and have someone that has some sort of experience or knowledge in e-tailing...the last thing that I want to see, regardless of the size of business, is an amateur webpage...a decent website is cheap enough to create, and well worth the effort.
I definately agree with this article. The smaller businesses do have more problems when starting a business on the internet. As much as small businesses are starting on the internet, the bigger businesses don't really have to worry about these businesses as a threat since they will probally never be able to beat the prices of e-Bay and Amazon. These smaller businesses will probally be able to last but will not be as good as a larger company. They will probally keep the same cliental.
I agree the smaller e-tailers have problems when they start up because they need to work harder to get their sites more known and do a lot more research to find out how much competition there is out there for their products and services.
I think they also need be more unique with what they offer and try not to have the same things as ebay or amazon. If they do have the same products to try and offer a service or promotion better than ebay or amazon, because obviously sites like ebay or amazon are going to win because they can offer a more competitive price. But if the smaller e-tailer can offer a specific service or promotion they can retain a customer base.
I agree that small etailers have to work harder to compete because with etailers like ebay and amazon, they dont have to impress their customers anymore. They already know they are the biggest online companies out there.
Smaller etailers would have to offer something totally different and have to meet their customers on a personal level in order to get business. Doing so could generate a loyal customer base but may never be able to compete on the same level as a larger company.
I agree with this article because smaller on-line retailers have way more problems to face. I think more people who want to start a small on-line store should consider the cost over the risk of it lasting.
A small e-tailer has time to do research therefore allowing them to investigate what other big businesses are offering. Bigger businesses can't offer that personal touch and good communication. A smaller e-tailer would be able to offer more unique items that you may not find from amazon or ebay. If you have a problem with a item, you can contact the e-tailer that you purchased it from and talk to the person who took the order rather than someone at a call center. Customers will return to the place where they were treated the best.
I totally agree with what this article have to say. If smaller on-line retailers do not put the amount of effort required in research, product differentiation, customer satisfaction and service; they will fail.
However, I still think that smaller e-tailers can be successfull. For example, if they are offering a product that is out of the norm, or if they can find themselves a market niche or a target market, They could increase the amount of potential buyers by putting forth research, good customer service, reliability, and appropriate pricing. In other words, they will have to establish themselves. it's not really a formula that will work overnight.
Smaller on-line retailers are definatley losing ground in the on-line shopping industry. However I feel that the people that have been using the on-line retailers are going to remain faithful to their source.
These smaller retailers don't have a chance at any new markets however because bigger retailers are attracting all potential customers. In order for small retailers to last they need to find a way to attract new consumers.
It's incredible how technology and the internet today have made such an impact on small retailers all over the world. With basic knowledge of web design anyone can build their own basic webpage. I have used ebay a bit and I really enjoy how many retailers have their own websites to visit. This way small companies can put their own mark on their merchandise and show their own personal style. Sometimes with smaller companies it is easier to contact the company and get information from them. This is due to the fact that they just don't have the same amount of customer base as other larger companies. So I do agree with the article and think that if small retailers want to be successful that they need to know what they are doing and have a plan in place. And who knows, your small idea may turn into a big successful idea, just like what happened to Amazon. Having a strong e-business that stands out among the competitors will only benefit the company in the long run.
I agree that it can be more challenging for small e-tailers. They have to deal with competition, try to bring awareness and go through many obstacles. I think they have to try very hard to become successful because many people trust the bigger services because they are all already know for what they can provide and their quality. They like to do their shopping at one place and not have to go back and forth from the small e-tailers. They want to use trusted services. Small e-taile3rs usually just focus on a specific lines or items.
I agree and disagree with this article because most small e-tailers do not compare on any level with large e-tailers but then again there are some unique small e-tailers that are fantastic. It all depends on what kind of market they are getting themselves into; for example, opening a unique online business in South Africa is a good idea because we are an entrepreneur based country where unique ideas are welcomed by all industries pertaining to online activities.
Here in Canada, more companies need to enter the online market because of the younger generations becoming so computer literate. For example, most people these days do not use a phone book to find a number but they either google it, look it up on the online phone book or just plain look for the company website. These are the growing trends in the market; therefore, if smaller e-tailers are willing to take the plunge and get some financial backing to expand their business to go online they would do great because I believe that a business needs some online presence as to get more exposure in the cluttered world today. Do not misinterpret me, I do not mean that all companies should go online right now I just think that having an updated working website that is user-friendly to their consumer with a means of contacting the business is a good idea.
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