A Profitero study showed Target’s online prices were 25% more expensive than Wal-Mart’s, which were just slightly more expensive than prices on Amazon.
With the right technology at the right price, even a niche e-retailer can look as slick and run as smoothly as the big guys.
East West Bookstore of Mountain View, Calif., will never overtake Amazon.com. The mind-body-spirit-focused book shop carries titles within a specific range of new-age, spiritual and health topics. It doesn`t span the breadth of Amazon`s categories, and it doesn`t drive the volume that allows Amazon to secure and pass along big price breaks from publishers.
But when it comes to the online customer who wants books, music and videos within the category East West serves, chances are it can fill the order with no trouble. That`s thanks to its relationship with e-commerce solutions provider Muze Inc., which wraps an e-commerce platform and fulfillment services around a huge content database of product information in the entertainment categories of books, music, videos and games.
Not every online retailer is an Amazon.com or a LandsEnd.com. In fact, in the 2004 Merchant Survey of Chicago-based consultants The E-Tailing Group Inc., 48% of its e-retailer sample of 350 were companies with five or fewer employees. Given a more equal playing field, the Internet offers opportunity for small players, too, and East West is one of a growing number of small retailers that are proving that new technology priced for smaller operations can help level the competitive field online, even against online retail`s giants. With the cost of some off-the-shelf e-commerce solutions coming down and their functionality going up, niche retailers are establishing a presence on the web, enjoying the same access to infinite shelf space and a geographically far-flung customer base that loads up shopping carts at their bigger competitors.
Technology has put the merchandising and marketing power of the web within reach of small businesses as never before. Innovations include such technology as order management systems that tie together multi-channel operations, customer support and service functions, providing the cross-channel customer view as well as web hosting and e-commerce functions. Small retailers are discovering they can afford to launch and grow serious businesses online that don`t need to look as though they are still operating out of someone`s garage-all without the $100,000 to $200,000 technology investment that many initially had feared.
There are many approaches to creating low-cost, high-impact web sites. Here are three:
EastWest.com: Leveraging store presence and an outside database
For a minimal set-up fee and $75 per month, EastWest.com plugs into a storefront, created for it on the Muze platform. The hosted storefront, indistinguishable by shoppers from East West`s own site, offers book, music and video titles East West has selected from Muze`s Body Mind & Spirit database, available in the inventory of Muze`s distribution partners. The Muze platform handles all e-commerce functions such as order entry, payments processing and fulfillment, which is actually executed by distribution partners that procure inventory and handle shipping. New York-based Muze takes a percentage of each sale and charges a fee for shipping and handling orders.
East West, whose retail store has been a Bay-area fixture for more than two decades, had a web site that was purely informational before it plugged into the Muze platform earlier this year. "We had really wanted an e-commerce capability, but we weren`t about to foot the bill to put it all together and hire the necessary staff to do that," says James Conti, store manager. East West had tried that four years earlier, going to considerable expense and effort to build its own e-commerce site from scratch. "There was never really the infrastructure in place, and the effort coincided to some extent with the dot-com collapse," says Conti. "There was little success and it went down in about six months."
Meanwhile sales at brick-and mortar bookstores started dipping in relation to Internet sales of books that started climbing. "Time was, when Amazon and Barnes & Noble didn`t carry the kinds of books we do. Now they do. They are absolutely our competition," says Conti.
That competition can`t be won on the basis of price, Conti grants, pointing out that his average margin on book sales is only about 40% to begin with, and that book mega-sites that deal in high volume may offer discounts of as much as 30% off the regular retail price.
"We give a small discount, but we will never be able to compete on price," he says. "Fortunately, though, there are a lot of people out there who just don`t want to buy from these large Internet companies. For a dollar or two, or even $5 more, many people prefer to do business with us."
Where EastWest does compete successfully with the likes of an Amazon is on personal service and loyalty, Conti adds, and Muze`s platform has allowed it to leverage its 25-year Bay-area store presence into an online offering for the convenience of its loyal customers, at a price it can afford. Tapping into Muze and the inventory of its distribution partners also has doubled online the book, music and video offering it carries in its 6,000-square-foot store.
Noting that the new online store has only been live for a few months so far, Conti says the relationship with Muze gives EastWest a web capability that he expects to grow over time. "Frankly, there doesn`t seem to be a way for it not to work," he says. "It costs us $75 a month and it expands our customer base enormously."
WineAccents.com: Getting serious with a small operation
The story of Chicago-based WineAccents.com is a dot-com-classic. The wine accessories business launched in the second bedroom of a business partner`s home and expanded into a garage before relocating to a dedicated office and inventory space in January of this year.
CEO Henry Coleman, a former stock trader, saw online retail opportunity somewhere between online mega-stores and the amateur efforts of online mom-and-pops. His goal was to create an online store that, as he defines it, is run by "serious business people who have a niche market, but treat it with business processes and technology to make the site look more like the companies that got $5 million in VC or came from established brick-and-mortar companies."