Big Trouble for Little Online Stores

As brick-and-mortar retail chains and long-established catalog players grab a growing share of e-commerce sales, operators of smaller online stores are finding themselves hard-pressed to stake and hold their claim to shoppers' dollars.

But small stores still have a role to play. Experts said they can stay in the game if, like the big-time players, they master such niceties as promotion and placement on the right online venues.

Analysts also pointed out that smaller players have an advantage that many bigger stores do not: They can make money by carefully targeting niche buyers for their goods and services, even if their niche consists only of people in their own geographic area.

"The big challenge is drawing traffic to their site," Meta Group senior program director Gene Alvarez told the E-Commerce Times.

Attracting Traffic

Alvarez noted that many small-store operators are not savvy enough to use the Web effectively. In addition, they often cannot afford to hire expert site designers or consultants to map out an online strategy.

Sometimes, the result is that a store owner treats a Web presence like a print advertisement, expecting visitors will come upon it by chance.

"It's not like putting an ad in the paper, where you pick a publication with a high circulation and hope that a lot of people see it," Alvarez said.

He noted that services available to the big players are also available to small stores, but operators may not be aware of them. One of the best ways for small businesses to use the Web, he added, is to register with search engines and get placement on sites that allow specific targeting by geographic area.

Small stores are often better off targeting customers in their own state or community -- who might not know about them but could easily pay them a visit at their physical location -- rather than getting lost in the crowd on high-traffic, generalized portal sites, according to Alvarez.

"You have to register with the right places based on your geography," Alvarez said. He noted that sites touting local and regional interests, such as travel and tourism, are a good bet.

Listings on sites that target specific interest groups, such as cigar aficionados, also can make local customers aware of a small business that caters to a specific group, he added.

Lost at the Mall

Experts noted that online malls on high-traffic sites like Yahoo! (Nasdaq: YHOO) and Amazon (Nasdaq: AMZN) provide good exposure for retailers during holiday shopping seasons. In general, though, they do not do much for small businesses.

GartnerG2 research director David Schehr told the E-Commerce Times that small online stores cannot count on the walk-by effect they would get in a brick-and-mortar mall, where traffic from large anchor stores spills over into neighboring retailers.

"It's a challenge for the smaller stores simply due to the volume of information on the Web as a whole," Schehr said.

He said targeting is especially important for companies selling items like niche collectibles or hobby items, which they often can do more efficiently than larger retail chains.

Small stores that snag placement on specialized malls and hobby sites frequently do quite well for themselves, and can attract local customers by allowing them to locate items they could not find at a major retailer.

Schehr noted, however, that the Web is not a panacea for most small stores that have a brick-and-mortar location. He said some businesses might do well to focus their marketing dollars elsewhere.

"Unless you have something that's extremely unique or specialized, being online won't necessarily help you stand out," Schehr said. "Sometimes you're probably better off using traditional advertising methods."

Old Is New Online

Traditional marketing includes such venues as the local phone company Yellow Pages. According to experts, these outlets now give small businesses a Web presence in addition to a print directory listing, often with little extra effort on the part of the store owner.

For example, Yankee Group analyst Helen Chan pointed to Verizon's SuperPages site, which is akin to a Web extension of the Yellow Pages. Each online listing, which is similar to a print display ad, includes business hours and locations and sometimes links to the store's own site if one exists.

Chan told the E-Commerce Times that phone company sites can be effective because they are designed specifically to increase local and regional exposure for small and mid-sized businesses that have physical stores.

"These smaller businesses do better in their own geographical areas in terms of sales," she said.

Using the Tools

Chan added that small stores can implement many software programs that are also used by big companies to increase online and walk-in traffic. One example of such a program is targeted e-mail service.

In addition, because services can help small businesses with shipping processes, Chan said it has become worthwhile for small businesses to seek out faraway customers via a presence on high-traffic auction sites like EBay (Nasdaq: EBAY).

"EBay has built up a good-sized customer base of small and medium-sized businesses," she said.

Just One Weapon

Like bigger retailers, Chan noted, small stores should view an online presence as just one part of their overall marketing strategy. "No one method is going to capture all the eyeballs you want," she said.

Because the Web tends to have an equalizing effect, giving small stores the same chance for exposure as their larger competitors, Meta Group's Alvarez said effective tactics are often a bigger factor than size when it comes to closing sales online.

"On the Web, how well you execute your strategy will have a direct correlation with the kind of response you get," he said.