Profile: eCommerce Owner on Benefits of Niche Retailing
Many ecommerce merchants occupy niches within a general industry. Spotlight Retail is one of those merchants, but in Spotlight’s case, it occupies 20 separate niches around one corporate umbrella. The entrepreneur behind Spotlight Retail is John Montague, the company’s owner and day-to-day manager. We recently spoke with Montague about his company and about the merits of niche selling.
PeC: Spotlight Retail focuses on many different niche ecommerce sites. How many separate sites do you operate?
Montague: We currently operate 20 specialty ecommerce sites that are completed and launched. We have about five more in development. Our more long-term goal, or at least in the next year, is to hit about 50 sites by the end of 2009.
PeC: You’ve chosen to operate different sites versus, say, Amazon.com, that has many products under a single site. Tell us why you chose the niche site route versus a single, larger site.
Montague: We try to appeal the very nature and core of Internet searching. Everything is very keyword specific and if you just think of Google’s home page for instance, it’s really nothing more than just a logo and a text field. So, we try to develop sites around that specific concept and that’s proven to be pretty beneficial for us for all the obvious reasons and even sometimes the not-so-obvious reasons. For instance, it’s easier in the long term to achieve a higher organic placement. When you think about the search engines, it’s really simply just to generate the most relevant search results for the end user and there isn’t going to be an ecommerce site that’s going to be more relevant for that specific search query than ecommerce site specializing in that exact niche.
So, breaking everything up into separate sites, we look at it from different angles, but certainly from the organic side of things, it certainly helps and although organic placement takes time, we feel like we’ll be better positioned as we grow and populate through the Internet than a larger mall-type site such as Amazon. From the [pay per] click side of things, this is again in a particular niche, we believe it definitely pops out of the page and stands out to the searchers when matched up against other advertisers. When you think about it, you could essentially trump a massive retailer who spent fortunes over the years in branding themselves by just isolating your products into a niche-specific website, making yourself look more like the authority on the product than this massive retailer.
When you talk about Amazon.com, I mean these are sites that have a SKU count in the seven, if not eight, figures. These sites become more and more impossible we believe to navigate and offer very little specialization in one specific category. I would probably say just along those same lines, I guess the only shortcoming we would have with our type of business model is that we definitely don’t cast a very wide net. We don’t appeal to a large portion of Internet searchers because our sites are so specific. However, when we do catch a lead and all the leads that do get caught in that net are very, very highly qualified because they know exactly what they want and they click on our site. So, after doing a lot of analysis on our end of things, we believe that we would sooner have 100 highly qualified leads that result in our site than even 100,000 generic unqualified and even randomly generated leads.
PeC: Tell us a little bit about your own background. How did you get involved with ecommerce? When did you launch Spotlight Retail?
Montague: I graduated from Fordham University in New York, moved down to Florida. . . to work for a resort company in the hospitality industry, which proved to be extremely valuable to me in the ecommerce world because of how attentive they are to customer service. While still working for this resort company, I developed the first website selling water sports equipment. It was 100% a part-time, garage style operation at that point and then one thing quickly led to another.
We started adding more and more products to that one site and this is where we decided to expand and have a little bit more vision in the company moving forward into the future and that’s where we developed Spotlight Retail. A lot of the relationships that we developed early on opened up more and more doors with products that are completely unrelated to the water sports category. That’s when we really even back then saw the importance of providing simplified niche-specific ecommerce sites. So, again, we incorporated the Spotlight Retail name and we started branching off into individual sites, but it all started several years ago with just one water sports site.
PeC: What year was that?
Montague: The water sports site was launched in the summer of 2003.
PeC: Your growth is amazing. You mentioned that you operate currently 20 different sites, niche sites, with more likely to come. Roughly how many products do you run across those 20 different sites?
Montague: Total individual SKUs between all the sites are probably close to 10,000 at this point and every site is different. That’s the collective sum of all the sites, but we have sites with less than 50 SKUs and we have sites with several thousand SKUs. I always believed it’s not really a question of SKU count. I mean you see a lot of other e-tailers out there just throwing as much as they can at the wall and see what sticks.
I think there’s a real loss of quality there which is unfortunate. Although more SKUs I guess result in more lines in the water that could potentially lead to sales, there’s a real fine line there to cross between putting together a quality site and accurately representing these SKUs and just mass uploading whatever you can, however you can and hoping for the best. We don’t stress too much on our SKU count, but I believe at this point we’re probably right around 10,000.
PeC: With all of those SKUs and with all of the sites, you must have given a fair amount of thought to the platform that you’re operating on, to help with the back-end logistical issues of your business.
Montague: The shopping cart itself is called Product Cart and it’s published by Early Impact. We did months and months of research in analyzing which solution was going to be the best fit. Now, we could have spent a tremendous amount of money in the seven figures, millions of dollars, to have a customized solution put together for us and then we just started looking at the pre-packaged solutions out there on the market and it wasn’t long after discovering Product Cart that we realized that, one, it pretty much served as a complete substitute to having to pay that type of money for a custom solution and two, the back-end tools that it offers far outperformed any other solution that we’d researched along the way. So, Product Cart is the shopping cart software that we use. As I said earlier, the logistics of our business model is a little bit more challenging, but with having every one of our sites operate on the same platform, they can very easily talk to one another and we’ve been able to centralize all of our back-end processes.
PeC: Speaking of logistics, do you fulfill everything yourself?
Montague: We’re probably right now on a 70/30 split. We inventory about 70% of our sales and we drop-ship about 30%. Much of the drop ship, however, is re-drop-shipped with vendors that we actually inventory products from and it may just be at that given time or out of stock, so we have it shipped directly from the manufacturer. An overwhelming majority of our shipments come directly from our warehouse.
PeC: Do you have any advice for smaller retailers?
Montague: I think there are definitely a few undeniable factors that allow an ecommerce merchant to thrive and succeed or unfortunately to die of a quick death. In my opinion, customer support is definitely number one and not too far behind it would be cost controlling. Those would be the two top things that I would advise ecommerce merchant business owners to really be at the forefront of their efforts. With regards to customer support, at the end of the day, the only thing you really have left is your word and the customer support that you’re able to offer. I’ve really seen a lot of these e-tailers come and go along the way and I’m shocked at how business owners allow this side of their business to slip away.
From the cost controlling side of things, I think it’s probably one of the biggest common denominator that puts people out of business as well. I mean you need to be constantly aware of your operating expenses at all times. You’ve got to understand the meters that are constantly running and you have to be aware of every single one of them. So, it’s really controlling those costs because they add up very, very quickly.