MARKETS
Internet stores have a distinct advantage over brick and mortar stores: The cost of doing business is less. Leasing space in a viable location and staffing that space are major expenses for the brick and mortar merchant. On the other hand, the Internet store is frequently comprised of one person with a desk top computer.
To make money though, one needs to offer products that are suited to Internet sales. This doesn’t exclude much. For instance, you might not think selling pizzas over the Internet is a viable option. But, one could offer special discount coupons and, if the pizzeria is not a national chain, link the store from a community web site. So there isn’t much that can’t be promoted and/or sold on the Internet. The trick for the small business is determining which products will succeed.
There are two market factors that will affect your Internet selling success: Competition and Availability
The degree to which competition will affect your chances of success is related to the amount of money you can budget toward sales and marketing. Since this newsletter is directed toward serving the small to mid-sized business and the entrepreneurial merchant, the chances are that you don’t have a marketing budget. Your operation or the one you’re thinking about starting will probably be started like ours was: Try it and see what happens and do what’s needed and what you can afford as you go along.
Why is Amazon so successful? According to a recent Nielson report, in the fourth quarter of 2002 Amazon racked up 12.2 billion ad impressions…. that’s billion. With just their ad budget for one week, you would probably retire to a south sea island.
Naturally, if you have a unique product, there are no alternatives and consequently no competition for the item. This doesn’t mean you’re home free. While there may be no competition for the item, there is plenty of competition for the consumer’s money. So, while product competition won’t be an issue, having a product that people want bad enough to spend their money with you instead of on something else, will be.
Availability is the second issue that will effect your on-line success. Just because your product isn’t unique, doesn’t mean that it will be widely available. This is where the Internet store is the consumer’s best friend and the merchant’s best opportunity.
There is often a good reason a product isn’t widely available. It usually belongs to a category considered a niche market. Niche markets are characterized by products that have a limited general public appeal, are not widely distributed and not readily available to the consumer, and are not especially price sensitive.
It is often easier to determine what products do not fall into the niche market category. Go to your local shopping mall. The chances are that any product you find there does not fit the niche market category. Neither do most items found in the major chain stores like a Sears or Kmart.
For the small merchant to go up against the big retailers, even on-line, is to court disaster. Today, nearly all of the big retailers have an on-line presence, a marketing budget, and brand recognition. You won’t stand a chance of competing across the board with these guys.
This doesn’t mean that you can’t sell any items that the big chains stock. They sometimes stock one or two of something just to satisfy the occasional customer. However, the chains will not stock niche market items in any depth. For instance, you may be able to go to Sears and buy a mountain bike but, your selection will be limited and you probably won’t find just the brakes you want nor the riding outfit you’ll need. The niche marketer can take advantage of this deficiency by offering a broad range of their speciality products.
Because niche markets are defined, in a sense, by a lack of customers, the Internet store is the ideal way to address that market. By a lack of customers, we mean a lack of sufficient customers within local geographic area to support the overhead of a brick and mortar store. This is why the Internet offers the small, niche market merchant a great opportunity. The overhead is low and the market is global.
Mel Davey is the creator of ImagineNation (http://imaginenation.com/), a full service E-Commerce Application Service Provider, offering Storefronts, Order Management Utilities, and 3rd party credit card processing.
