Stay with Your Niche(s)?
Many brick and mortar stores were put out of business by the eCommerce evolution of the last 10 years. A competitive advantage the online stores had was being able to target a very specific market (like gemstone beads for us) with a wide selection of items, informative content and a well designed site. Beyond that, we were able to sell our items at far lower prices than the brick and mortar bead stores because of our purchasing power, sales volume, and wider distribution potential.
For the most part, we did not worry about competition from Ebay, Amazon.com, or Overstock.com. We really focused on competitive websites selling similar merchandise to the same target market. The marketplaces like Ebay tended to carry lower end items from very small resellers that appealed to a slightly different target market, or simply did not have the means to deliver good content (images, descriptions, related content) and such.
As with many of your stores, our sites have good traffic and our overall growth has been steady with the exception of 2008-09. We've been able to leverage good reach through PPC ads, search engines, Google Base, and to some degree other comparison shopping engines. I always felt that if you were searching on "gemstone beads", or "glass beads", or "beading supplies", we would be found by most serious buyers.
Based on research I've engaged in doing other projects recently, I'm concerned that smaller, niche focused websites like ours may be threatened by the marketplaces much as the brick and mortar stores were and still are in our industry.
Not only are the marketplaces like Amazon and Ebay loading up with a huge inventory of "niche" items like the ones we sell, they are beginning to completely dominate the search results in comparison shopping engines and organic search results (think "Shopping Results" in Google). It's becoming harder, or at least much more expensive, to be "found". Even if we are found, the marketplaces are now able to present a HUGE selection of competitive goods from dozens of our direct competitors in very their very sophisticated websites. The incentive to look deeper in search results is becoming much smaller.
What's a small-mid size eCommerce vendor do?
Join the Marketplace Party?
We have a couple of competitors who started their businesses as Ebay vendors and eventually added their own websites, Amazon stores, Buy.com stores, and such. They are looking pretty smart right now as they are far more visible in search engines and especially comparison shopping engines than the rest of us. Why? Because Amazon and Ebay are paying for their marketing and they are not.
How is that? Essentially, Amazon (and others) are winning the top space in the PPC comparison shopping sites. The items that appear in the top positions are the best selling items from their marketplace, which just happen to be items from our competitors' marketplace stores. In one instance on Become.com, I had to go about 4 pages deep in the results to find an item that was not from Amazon.com. These were not items that Amazon "stocks and sells". These were items from my competitors Amazon stores that are very similar in many cases to our top products. We are not going to try and "out bid" Amazon and Ebay in a comparison shopping engine, so we just passed on that marketing venue for now.
The same thing is happening with Google Shopping Results. Amazon currently completely dominates the results for many items in our business. A year ago we had a pretty good chance of appear 1-3 in that list. But, our referrals from Google Shopping Results are more than 30% less than a year ago, and most of that is because of the strength of Amazon feeds to Google. Now that Amazon is starting to show Shopping Results first in the organic search results, clickthroughs for our websites with good content are going to be tougher to come by.
We made a decision in July that we had to try the marketplace game. We opened an Amazon Marketplace store and are seeing very good results for something that's only been running for 2 months. We are getting a steady stream of orders, starting to see many more page views on our products, and finally being shown in the shopping engines as a result of Amazon's marketing budget and clout. That's not to say we are ready to declare the store a success quite yet. There are high commissions to Amazon and infrastructure costs to integrate Amazon.com to Netsuite that make the profits a bit thin so far. Orders tend to for only one or two inexpensive items. But, we expect to see continued growth as we operate the store over time.
I realize the thought of opening an Amazon store is very divisive for many e-tailers. That was very apparent in the comments of an earlier posting I did back in January about Amazon. We are fortunate because I don't think they will ever enter the bead and jewelry component market themselves because our supply chain is far too broken. So, our risk is somewhat less that they will eventually stock their own items than many of you.
It may worth looking at the other market forces and evaluating the risk joining the marketplace party by selling your products in one or more of them. At the current pace of change, it's very possible that when you search on Google, Bing, Shopping.com, Shopzilla.com, or Buy.com in a year or two that all you'll find in the top rankings will be Amazon, Ebay, Buy.com or Overstock.com listings. Doomsday for small e-retailers? Not really - but it will cause some of us lost sales, profits, and in some cases our businesses if we don't react to the change.
Sometime in the future, we will evaluate adding more marketplaces like Ebay and Buy.com if they ever add a "craft supplies" category. We'll still continue to operate and market our standalone stores. We'll continue to target specific markets and deliver a better buying experience for our products than customers will find elsewhere. So, I guess we are both "Staying with Our Niche", and "Going Mass Market" for the time being.
Miglena Nedelcheva says:
We are a newcomer in comparison shopping and the big sites mentioned dominate in the search results already. It's a big challenge to try in so competitive field. I think when you find a slightly different approach, you should use this advantage. $earch rely on a new conception, but only future will show if it's good enough to compete with the big names.