The future of Small ECommerce

Over the past ten years ECommerce has really become part of the mainstream but only in the last five has the technology matured and become widely accepted by the public. In this time hundreds of thousands of businesses have launched websites or started selling on the Internet.

As the market matures what will happen in the ECommerce market? - Will we end up having on-line shopping resembling the high street with only 20 brands dominating every place on the street and offering the same bland, identikit products and services or will we benefit from a diverse shopping experience with many many exciting shops catering to every taste and need.

I must confess to having a vested interest I run a small website www.laughingbeartoys.co.uk which caters for a small (but growing) niche market. So I am fascinated by how this ECommerce sector will develop.

At present there are four main groups of players.

1 Big League
The first are the major league on-line players (www.amazon.com, www.figleaves.com etc) These are pure online businesses who have grown and developed brands that in some cases are inextricably linked to their products. Where else would you start to look for books?

These brands will continue to grow and develop and will do everything they can to expand their ranges and backward integrate like crazy to reduce their (frankly scary) costs.

2 The Catch-ups
The second group are the big high street players who initially ignored the Internet then have started to panic and now are attempting to shoehorn the Internet into their business model. Many have had difficulties getting used to the intricacies of picking and packing individual units and shipping out to customers let alone the problems of remote customer support, returns etc etc. it is possible that these businesses will 'partner' up with the Amazons of the world who will use their experience of personal shipments and act as warehousing and dropshipping agents for them. This will benefit both parties. The Amazons will leverage their investment and reduce their costs, the high street will outsource the hassle of customer service.

The risk the highstreet players will face is when the products they are selling are available to both their stores and Amazon. Amazon can use the highstreet as market researchers and then move into the sectors it sees as profitable. Don't believe chinese walls -they simply don't exist!

3 EBay
The third 'group' are the millions of 'mom and pop' businesses selling on EBay and the other auction houses. This is a cheap and easy way to get started on ECommerce but it does have risks.

Firstly you are acting as a dropshipper for the EBay brand. in the vast majority of cases your customers will be buying off Ebay not off you. If a sale goes well then 'EBay is great' if a sale goes badly its the sellers fault.

Secondly everyone knows your business and everyone thinks they can do it cheaper. For every seller trying to make decent margins their will alsway be two idiots willing to make 1p in the £1 'profit' just to be the cheapest.

Thirdly you are paying a success fee to EBay and a failure fee - if you make money they make lots, if you don't make money then they still make money. many people have given up working for a faceless business to sell on EBay only to find they're now working for a faceless EBay.

Finally you are at the mercy of another company's changes in strategy and the whims of a USA company beholden not to you but to a bunch of corporate shareholders.

4 The Independents

With all the other players where do the independents fit? They can't win on price, they can't win on visibility, they can't lower their cost base to the per unit level of the big guys so how can they compete?

The answer seems to be to not compete. To find products and services that the others can't or won't take on, to offer ultra personal customer service, to be the specialist in whatever sector needs specialists and to develop their brand and their business in the gaps left by the others.

The skills these guys need is gap analysis and a willingness to take the risks associated with 'going off piste'.

The danger is of course that a gap exists not because the big guys missed out but because there is simply not a market there to capture. And this will be the subject of the next post!!!!!