Small and Steady Could Win the E-Commerce Race

In January, amid some of the heaviest shaking out to date in the e-commerce world, a Web site by the name of JustBalls.com quietly landed a US$13 million round of venture funding.

The e-tail site has since shed the dot-com part of its name, as is the latest trend for attracting capital investment. However, the good news for JustBalls came as many big-name e-tail sites were struggling with a changing economic environment. eToys was rapidly approaching shutdown, while Amazon was preparing to announce its first large-scale layoffs.

If there is a lesson in the way that JustBalls bounced, it might be that it is good to be small and specialized on the Internet these days, especially because the all-things-to-everyone sites are dropping off the map one after another.

While being a niche player is not for every type of online businesses, focusing on a niche can keep a business running long term.

Flying Low

There are hundreds of niche sites plying e-commerce in their own ways. By definition, these sites are not bound for initial public offerings (IPOs) any time soon.

But many of them are making money — or at least have the real prospect of doing so fairly quickly.

The key, say these specialty e-tailers, is that they recognize their place in the e-commerce Web of life. While it once might have been tempting to think that explosive overnight growth would be a possibility, realistic expectations have since set in.

Many do not even have their page views or revenue counted toward the totals that onlineanalysts regularly report on.

Know Your Place

However, unlike many e-tailers, which were forced to cancel ambitious expansions and then pare down to a more suitable size, niche e-tailers were the right size all along.

“We are not attempting to be all things to all people,” said Michael Harp, the president of CookSource.com. CookSource, which now has a presence on the Yahoo! Shopping site, specializes in high-quality cookware.

Other niche e-tailers echo CookSource.com’s strategy of focused and sound business practices. In some cases, the niche e-tailers actually benefited from being passed over during the e-commerce boom.

Stretching it Out

That’s certainly true for Raymonde Lemire, the founder of FlyingNoodle.com, which is now approaching its sixth year as an Internet business.

Being in a niche does not necessarily mean having a limited customer base or a small playing field. FlyingNoodle sells to customers in 24 countries, from Israel to Sweden. And, unlike many other niche e-tailers, Lemire has benefited from some national publicity. An appearance on NBC’s “The Today Show” prompted scores of orders within hours for the site.

In fact, Lemire said free publicity is a key part of his strategy. Because he’s a small e-tailer targeting a niche, he believes that widespread advertising is not the right path for his company. Instead, he relies primarily on customer service and word of mouth.

“Free is good,” Lemire told the E-Commerce Times. “Someone else telling a potential customer that we’re cool is even better.”

Trampled Underfoot

There remains a risk of niche sites being trampled, especially if they are competing for customers with the powerhouse e-tailers.

However, many niche sites have carved out markets so narrowly defined that they are likely to be the dominant — if not the only — players in their space.

JustBalls might seem specific, but it is downright general in scope compared to a Canadian site called JustGolfBalls.net. Another Yahoo! shopping partner, FootCandy.com, deals only in toe rings and pedicure products.

No Market Too Narrow?

Watches are probably not a niche themselves, but Watchbands.com has found a way around that problem. It sells only replacement bands, both brand-name and generic.

Not all of the niche sites will succeed, of course, indeed, many smaller sites have let it be known they are for sale if the price is right.

Yet the bottom line is that niche sites are more than just a lucky find for shoppers searching for speciality items. They are a thriving part of the e-commerce ecosystem.

11 Comments

  • We are a small internet-only company and cannot say that our sales have been anything spectacular. I wonder if the authors would share where they advertise their websites? Does the search engine route really work? Other than the deluge of email promotions we get as a result of listing on search engines, I can’t really tell…

    • In total agreement. As online business begins to take a hard look at the model upon which it was built, it becomes clearly apparent that the areas of needed focus continue to be the provision of a high level of service within a defined marketplace. To attempt to provide “everything to everyone” puts an incredible burden on the ability of any company to appropriately serve its visitors to a level that will garner a return visit, and the almighty purchase. Niche markets allow for that type of knowledgable focus, which ensures stability for those organizations that know their products, and their relation to the needs of their customers.

      • To Ben Horn,
        Hello,
        I AM student in Helsinki, Finland and I AM studying how an exisiting firm could establish an e-business strategy. We are a group students working for this course and as the firm, we chose Iittala. That is why I would like to know if you have a special agreement with Iittala and other brands you sell on your website to sell their products by Internet. Then how do you advertise your website because I was wondering how well people know Iittala and Marimekko? I will be very glad if you could answer my questions.
        Thanks in advance.
        Regards,
        Claire Nicolas

  • In response to one question on the topic of affordable niche marketing:

    1. Affordable is a challenge at all times online.

    2. Correct on pay per clicks – reasonably effective, but growing in expense. The key to affordability is hitting some of the newer pay per click sites before they hit the “GO TO” prices.

    3. An additional successful means that we have utilized is the sponsoring of sites that share, or are complementary to our niche. This can be effective when using sites that are small in scale, but with a growing traffic base. You can achieve reasonable rates of sponsorship, resulting in traffic costs similar to that garnered from pay per click sites. We often find that this tactic achieves visits from a focused clientelle who are genuinely interested in our products at A World of Good Health.

    The bottom line is this:

    Free is good, but not always easy to find.

    Expensive is easy to do, but potentially disastrous to your bottom line.

    Affordable is an ongoing challenge, but one that must be achieved when the end goal is survival of your business in the long term.

    Keep your eyes open for low cost opportunities, and always do your homework before committing!

    Michael

    http://www.aworldofgoodhealth.com

  • Thanks For this wonderful article. I AM the owner of a small company jwproducts.com and we are a small business that specializes in embroidery and embroidery design which has been profitable since it was opened online in 1999. It is refreshing to see articles that applaude small business and the importance that they will play in the future when doing business online. We see the potential of increased business from our brick and mortar to adding online business and staying up to speed with competition.

    We have a niche in the market and of course that niche changes all the time in which a business needs to change to meet those customer needs. Specialization is the key and in small business people need to embrace that.

    I also like the comment that the gentleman from flyingnoodle.com mentioned that the best advertising is free: he is so right.

    Thanks for the wonderful article and keep up the good work

    J. Whitley

    CEO of jwproducts.com

  • I agree! I’m a mini-business, but have been growing steadily since I went online about 3 years ago! — a good 35% increase in sales each year! My niche? Imports mostly from Germany in wooden Christmas/holiday decorations. And I’ve learned which item is my particular niche, pyramids! They make up almost 1/3 of my total sales!

  • My business is truly a niche, Sports Videos. I have been on the internet just one year.

    I have tried most forms of advertising so far, and find that most don’t produce results.

    I AM constantly bombarded with sales pitches to improve my “Hits” but even most of

    these are very iffy. They seem more intended to increase someone else’s revenue

    and decrease mine.

    So far, Pay-per-click has sent the most traffic my way, but it can become quite

    expensive due to the nature of the beast. Someone always wanting to be higher

    on the scale than me, then forces my hand. Sounds like a “Ponzi Scheme”.

    What are you finding that works?

  • I agree with the article.

    My first e-commerce venture, http://www.FinnishGifts.com, started in Feb 2000. The site’s scope is very narrow, only carrying glassware made by one Finnish manufacturer, iittala. It’s exceeded my expectations in sales and profits. I’ve already served over 1,000 customers at this site!

    I started my second site, http://www.Aalto.com, in March 2001. This site also has a very narrow scope, also related to Finland: designs by architects Aino and Alvar Aalto. This site has also been exceeding my expectations: fewer transactions, but much higher average sale. Best of all: almost no additional overhead for the second site.

    Ben Horn, Owner

    http://www.FinnishGifts.com

    http://www.aalto.com

  • Spot on! We are morija plc, a wholesale and promotional clothing company based in London.

    Our web site was built and developed to sell clothing at wholesale as well as single items.

    However, the intention of the site was always to compliment our business NOT replace it,

    which is what a lot of companies have failed to realise.

    The sales alone via the internet would never be enough to keep the company running,

    but the follow up response by phone etc is huge. This has resulted in major contracts

    from big name companies that we may have lost out on otherwise had we not encourage

    clients to phone with their queries etc (most dotcom companies present 20 different

    emails for this!) and presenting the online buying process as just one options of

    rather than promoting it as the best option.

  • Spot on! We are morija plc, a wholesale and promotional clothing company based in London.

    Our web site was built and developed to sell clothing at wholesale as well as single items.

    However, the intention of the site was always to compliment our business NOT replace it,

    which is what a lot of companies have failed to realise.

    The sales alone via the internet would never be enough to keep the company running,

    but the follow up response by phone etc is huge. This has resulted in major contracts

    from big name companies that we may have lost out on otherwise had we not encourage

    clients to phone with their queries etc (most dotcom companies present 20 different

    emails for this!) and presenting the online buying process as just one options of

    rather than promoting it as the best option.

  • This article is right on the mark. Our small company’s web site sells personal hygiene supplies to women. Another company in our area sells hot sauce on their web site. Both of our companies are profitable, have been in business over three years, manufacture our own products and sell exclusively over the internet.

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