In its second-largest acquisition, Amazon buys the company for $970 million.
Can retailing get much more Biblical than it does on the Internet? Tiny dot-coms go toe-to-toe in the same arena with giants. And the giants fall, usually more through their own doing than because of rock-slinging David.coms. In fact, many of those smaller dot-coms are not looking to topple the giant, but merely to avoid getting squashed under foot.
Small companies selling online in categories dominated by giants such as Amazon.com focus on unique products, niche items they believe are better than those provided by the big players. These smaller companies pay close attention to cost, largely by keeping a check on advertising and marketing. And, these companies look for business-to-business customers, often selling to those they may compete against for retail sales.
Survival for a niche player, says Jill Frankle, director of retail e-commerce for Gomez Advisors, Lincoln, Mass., “is about smart marketing and being smart about leveraging core competencies.”
At the heart of those core competencies is the product. U.S. Wings, Stow, Ohio, sells authentic military aviation apparel-leather bomber jackets being its mainstay-from its one storefront shop and its web site. And sales are booming says owner Ret. Army Sgt. David Hack. Although he doesn’t divulge sales figures, the site gets more than 500,000 unique visitors per week and Hack’s client list runs deep. He is an aviation gear supplier to all branches of the U.S. military. Companies such as Microsoft, Disney and Amazon buy his jackets by the hundreds to give away as incentives or gifts. And movie companies have bought his jackets for props in films such as in the latest Arnold Schwarzenegger movie, “The 6th Day” and HBO’s film “The Tuskegee Airmen” about the Flying Tigers.
What separates U.S. Wings from the hoard of online leather jacket sellers? Quality, says Hack. Everything Wings sells is U.S. made; no cheap imports, he says. His customers don’t mind paying extra for the jackets (anywhere from $100-$200 more than one would pay for a similar-style jacket at an online apparel site) because the jackets will last more than 30 years, he says. Wings boasts a return rate of only 0.25%.
Quality and availability are what separates Rockingtoy.com’s offering of hand-carved, hand-painted rocking toys and figurines. Terra Stratton, owner of the Albany, N.Y.-based pure-play, says her items are unique-looking and there are only a few other retailers buying from her supplier-and there is an informal agreement that they won’t go on the Interet. Stratton started the company in the summer of 1999 with a $50,000 investment. She has a 2,000-square-foot warehouse and an office. She answers phones and packs most orders herself. Although there is no shortage of online rocking horses and rocking chairs for children, Stratton says her product falls in the middle of the other offerings. “I’m very specialized, I don’t think I’m competing against toy or rocking toy retailers,” she says. That, she adds, is because her items are more expensive than those from toy makers yet less expensive than those from English rocking horse companies.
Similarly, Alibris, an online rare and used bookseller, has found its unique product niche, but does not limit its product offering. Whereas Rockingtoy has only 18 items and is considering adding about five more and Wings has about 100 jacket styles and about 100 other items, Alibris says it carries more than 1 million titles. The strength of its offering is the large inventory and those items’ obscurity in the marketplace.
Hilo Hattie, a click-and-mortar Hawaiian apparel and gift retailer, believes authenticity and market focus set it apart. Other apparel companies may sell Hawaiian shirts, but it is usually seasonal, says Bret Hause, vice president of e-commerce. But the site’s breadth of offering, such as Hawaiian music, videos and art, and its products’ authenticity provides its edge. Hilo Hattie, based in Honolulu, began in 1965 as a storefront retailer. It now has 11 stores, 650 employees and is a $700 million business. Like Alibris, Hilo Hattie does not limit its offering; the site carries about 1,000 items.
“Many of those (smaller) companies won’t drive sales like Amazon,” Frankle says. “But, they can have a very successful business.” How a niche dot-com spends its money to sell its goods plays a large role in its success or failure. And marketing with a shoestring budget can be like battling a giant in its own right. “Getting noticed is very challenging,” says Frankle. There are several approaches to niche marketing, but penny-pinching is the common denominator. “Smaller sites must watch their cash closely and find ways to bring traffic,” says Ido Ganor, president and CEO of ShopServe.com, a Northvale, N.J.-based e-retail evaluating company.
U.S. Wings’ web site generates about 90% of its sales; word-of-mouth to drive the lion’s share of those sales. “These customers just tell one another about us,” Hack says. The company does not run banner, print or broadcast media ads. It maintains no affiliate agreements. It relies exclusively on word-of-mouth, search engine results and press coverage to bring customers to its site. “Even the military came to us,” he says. The product’s reputation is strong enough to drive sales without using conventional advertising, Hack says.
Wings did get a shot in the arm when it first went online six years ago. “We were the first online retailer to partner with MasterCard,” Hack says. “They did a major promotion featuring us.” That, of course, was free, he adds.
Stratton, on the other hand, has made affiliate agreements the center of her marketing strategy. She tried paid advertising in the beginning, but quickly abandoned it because of the cost. She now has about 2,000 affiliate agreements and hopes to expand to more than 10,000 within three years. “I negotiate coupons or give-aways to get free advertising,” Stratton says. “Everything I do is commission based. You never know what you’re going to get from Internet advertising, so if they won’t work on commission, I go elsewhere.”