The real success stories of e-commerce will not be the global retailing giants but countless numbers of small, highly specialist, niche market retailers. The Internet allows such retailers to be found with relative ease by potential customers, it allows such retailers to become truly global in their scope, and the odds are that if the niche is small, the competition will be just as small. Finding that niche depends upon careful planning and market research.
The first step in planning any business enterprise is to define what it is that you intend to do:
- what products and services you wish to sell, try and identify a specialist niche market.
- what geographical areas you wish to sell to.
- what type of customer you will be selling to.
- what you will need to do to service those customers.
- what size of customer base can you handle.
A great deal of careful thought should go into this definition since every decision you make about your Internet based operation will depend on this definition. Carefully write your definition in a concise manner, on a single sheet of paper, and have it available for reference at all times
The next step is to do some market research, you need to look at what other companies are doing in similar areas to those outlined in your business definition. Market research is relatively easy on the Internet, since you can use the net to find most of the information you need to:
- study the e-commerce related news, and statistics relating to the market and areas you intend to cover, use these to try and work out your potential market size.
- identify some keywords associated with the products or services you wish to sell.
- use these keywords to search for sites using an Internet directory covering your chosen geographical area. visit as many of the sites found in the search as possible, not what they do, and how they do it.
- use this analysis to define how many potential competitors you are likely to have, and how serious their competition is likely to prove.
- if the search reveals that there is a lot of competition then narrow your search terms, in other words find a smaller niche, amend your business definition, and identify new keywords, then go back and perform the search and analysis loop again.
Go through this loop as many times as necessary until you have found a niche market where you do not have a great deal of competition, and where you think that you can supply the needs of that market in the geographical area stated in your definition. Remember that once you have set up a site and attracted visitors from that niche interest area you will be able to sell other related products and services, in other words broaden the niche.
An example of how this process might work.
To examine more closely how the niche market definition process might work lets look at a hypothetical case.
Jimmy White runs a fishing tackle shop in Scotland. Prompted by his teenage offspring and constant talk about e-commerce in the papers and on TV he has decided to take the plunge and go online. He has an existing business selling everything from fishhooks to waders and thinks that there is an online market across the UK for the products which he stocks. He knows that most of his customers are male and aged between eight and eighty.
However, a look at the statistics for Internet usage shows that the majority of current Internet users are aged between 20 and 45, about 58% are male, and their average income is about £32,000. These statistics made him redefine his target market, and narrow the range of products he could sell profitably online. His experience of the market told him that it would be best to concentrate on fly and sports fishing.
By removing heavy low cost items from the proposed online catalogue, and concentrating on light weight high value items, he felt that he could expand the area which he could supply beyond the confines of the UK, to certainly Europe, and perhaps even worldwide. He could use the postal service for delivery of items, and could use his existing shop as the basis for supplying goods.
But on looking through Yahoo he found quite a few companies around the world were already targeting the same market. There were over 1500 listed under fly fishing, so he narrowed the search to look at flyfishing tackle and equipment, there were still over 140 companies listed. Refining the search to just look for companies selling flies, revealed just 26 companies, nearly all of whom were in the US.
Jimmy had found his niche market, he would set up a site selling fishing flies and lures, small items which could easily be sent by post to customers anywhere in the world. A niche market which would also allow him to sell rods, reels, lines, even specialist clothing. His business definition was thus defined as:
- Selling fishing flies and lures.
- Supplying products to a worldwide market.
- Main customers being affluent sports and fly fishermen.
- Goods will be dispatched by post from existing premises.
- Easy potential expansion of the online business with multiple product lines and supply sources.