OK so all the big guys (with the big guns) are selling online. But what about the small players? And what about the future new players, the eCommerce entrepreneurs? Do they stand a chance? How do the Davids of this eCommerce era fair?
Something interesting (even surprising to some perhaps) happened in 2006 in the US eCommerce market:
“The 100 smallest retailers in the Internet Retailer 2007 Top 500 Guide outperformed the Top 100 in web sales increases, growing by 23% and 19% respectively. The industry average growth rate remained at 25%, compared to growth for all Top 500 companies at 21.3%. “
See “Smaller retailers boast biggest growth in 2007 Top 500” article for more info.
What does this really mean?
It basically says that smaller businesses are selling online and are competing with the big boys. More than that, they’re outperforming them! And if they’re competing, that means that they’re taking market shares, and we’re talking shares of a $100+ billion market.
Unfortunately for Canadians, there is no Top 500 or Top 100 online Canadian businesses (yet). The closest things I could find was Canada’s Profit 100 listed buy CanadiaBusiness.com where I’m sure I could find a few impressively performing small online businesses.
Here’s one: ranked #17 with a revenue of $8.4 million in 2006 is Communicate.com who owns a wide range of eCommerce websites such as perfume.com. They had a staff of 11 people in 2006. They are obviously good at what they do.
Here are 3 major factors that come to my mind to explain what I like to call the “eCommerce David” phenomenon:
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the entry costs to such a competitive market are extremely low compared to let’s say 5 years ago. You can basically start selling anything you want online through websites like eBay or Amazon or by using shopping cart systems like Paypal. This would cost you just a few hours of your time to setup and a low percentage fee on your sales. You can always spend more to have more features and a better design, but even there, Yahoo Small Business eCommerce gives you all you need, from $40 to $299 / month depending on your volume of sales.
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the “democratization” of the Internet brings in thousands of new connected customers every month, who are more and more at ease with the Internet and who have more and more choice in finding the best deals online.
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the phenomenon called “the Long Tail” which is a theory described by Chris Anderson (editor-in-chief of Wired Magazine) that says that “products that are in low demand or have low sales volume can collectively make up a market share that rivals or exceeds the relatively few current bestsellers and blockbusters, if the store or distribution channel is large enough.” You can read more here in an article published by Wired Magazine.
This basically states that there will be more and more niche markets and that the sum of these niches can generate more revenue than the mainstream markets.
So in case you were wondering if you stood a chance in taking the eCommerce route, even though not everybody reaches the highest peaks, there is still a lot room for growth and revenue opportunities. There is also, in many cases, a smaller risk to start selling online than to open a “brick and mortar real world” store. For one, the rent is cheaper, for two, it probably costs less to setup and, for three it sure costs less to maintain (think wages and insurance).
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