Today most eTailers thrive by being niche. The web is a wonderful place to find a store that sells only bonsais, or a site that only deals in bird products. People who shop online today are early adopters and so this marketplace structure works. But the truth is that this year offline sales were the lowest in 5 years and online sales were the best they have ever been. It would seem to me that the mass consumer is now shifting online. This exodus presents a problem for niche retailers – a big problem. With larger offline retailers following their customers online, niche retailers will start getting pushed back in Google search rankings – both organic and paid. As a result no one will find them, as a result they will die out. I don’t think a beauty manufacturer with a product line of 6 items could sell online for much longer. The same goes for the other 98% of companies that have managed to make money online so far.
Mass consumers are very different from early adopters. Early adopters don’t have to be told about what they need because they do their own research. They are also far more motivated to find products for their needs, so they tend to look beyond page 5 on Google results and use a healthy array of search terms. An ugly, non-user-friendly site with little product description but the right product will do. Mass consumers will never fall for that.
To survive, niche retailers need to do 2 things well- Expand their product lines and improve customer retention. As search gets taken over by the big boys, niche retailers can forget about getting too many new customers. So they need to focus on their existing customer base and use them to promote their brand. At the same time they need to expand their product-line to better satisfy customer needs.
Unfortunately, for most etailers even this will not suffice and most will die a slow, painful death in or around 2012. My personal prediction is that someone is going to set up a department store online, and while its possible that Macy’s, Kohls or any one of their offline competitors does this I suspect the idea will be launched by someone entirely new. Comparison shopping and social shopping engines do have a head start but unless they start building a personality I think their days are numbered.