Tuesday, February 13, 2007

The niche is the trick (second part)

In the first part of The niche is the trick I started making my point about why I strongly believe that small businesses should target a very specific market when embarking on an ecommerce project.

I talked about the first reason why I think this makes sense: when you build a store that goes after a niche market that you're an expert in, you're almost automatically gearing yourself up for better search engine rankings (and therefore more visits, customers, and sales). Go back to ONE: Niche = SEO to see if you agree.

Let's keep going. Here is the second reason why I think targeting a niche is key.

TWO: Niche = Your Budget
That is: targeting a niche is likely more compatible with your ecommerce budget. Ok, are we done with these cryptic paragraph titles? Not yet: I like them because they're easy to remember.

Anyway, here the point is that if you are a small business, you typically have a small business budget for your ecommerce store (if your uncle is a billionaire you can stop reading). So don't try to compete with Office Depot, Buy.com, or Macy's. It's much better (and more profitable) to sell 20 products and do it right, than trying to sell 20,000 products and do it poorly.

Why is this a budget matter? Because quite honestly running a store that features 20,000 products can require technology and human resources that are beyond your budget. Don't get me wrong: it can be done. There are many store that use our ProductCart shopping cart software or competing systems like X-Cart, MonsterCommerce, Storefront, etc. to sell thousands of products online. The businesses that do it right typically have years of experience in selling stuff online and find their way around technical limitations. But generally speaking, less is more!

You typically have $10,000 to spend on your online store (maybe less), not $1,000,000. There are many reasons why a small biz ecommerce Web site doesn't cost hundreds of thousands of dollars, and "scalability" (big buzz word) is one of them.

Here are a few thoughts on why targeting a niche (and therefore a limited number of products) is more compatible with your budget:
  • Content, content, content
    If you are a small business it's typically easier to compete on service than on price. Service on the Internet means - among other things - lots of good information for people to make good purchasing decisions. That's what your store visitors are looking for. It's hard for you to have the best price out there... and you don't have to be the cheapest guy around. As mentioned in Part 1, one of the ways to get people to come back to your store is definitely to have great content that they love to read. That is: become the "go to" Web site in your niche. And it's much more doable to write detailed product descriptions, articles, and "how-to's" when you're dealing with a manageable amount of products, rather than with 50,000 SKUs.
  • Store management tools
    At Early Impact we have spent (and keep spending) a ton of time building into our ecommerce software tools that help businesses cut down on repeat tasks and be more productive. For example, in the latest version of our software we added AJAX-driven product search tools to most of the store management features, so you are rarely faced with ugly, long lists of products to sort through (e.g. adding quantity discounts to a product: search -> add discounts; adding product options to 5 products at once: search -> add options; etc.). Many of our competitors have done the same. Still, you should not expect from a small business ecommerce system the same scalability that you find in tools that cost 100 times as much (otherwise we'd charge the big bucks too!). Will your system help you effectively setup and manage cross-selling relationships among 20,000 products? Probably not. Keep that in mind.
  • Performance
    Many small businesses don't have the budget to run their Web store on powerful, dedicated servers. The cost of doing so is coming down (which is great), but we still see the majority of our customers running their stores on shared Web hosting accounts. And, more importantly, on shared database servers where their store database is hanging out with dozens (sometimes hundreds) of other databases. Well, a storefront search against a database of 1,000 products is less demanding on the server than a search against the same database with 30,000 items.
  • Expectations
    Your customers don't expect you to have the inventory found on a huge ecommerce store. If they need Staples, they're going to Staples, they're not coming to your store. They come to your store for other reasons: content, customer service, unique products (not in order of importance). They don't expect you to be Amazon, but they do expect you to be an expert in your field: good information, good advice, good products. It's like when I go buy wine at a small wine shop vs. a big grocery store. I'm looking for a good suggestion on a Napa Valley zinfandel (hey, we're in California), not a huge selection of 100 zinfandels: I don't care that they carry 100, but I do expect them to have picked a few good ones, and know all sorts of interesting details about them.

If you focus on a niche market, typically that means that you are focusing on a somewhat limited amount of products (not outdoor gear, but kayaking gear; not electronics, but smartphone accessories; not furniture, but teak patio furniture; etc.).

A store that carries a manageable amount of products is likely more compatible with the ecommerce tools you can afford and the human resources you can dedicate to running the shop. What "manageable" translates to depends on your experience running an online store and on the kind of products you are selling. My suggestion: start small (up to a few hundred products), then expand your product selection as your sales grow.

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