June 7, 2007, 12:00 AM

Niche e-retailers capitalize on innovation and market opportunities

Niche e-retailers take different routes to their specialties. NetShops.com started with one web site and built up to 150. Ritz Interactive was formed by a former Kodak film processing lab executive after the bottom dropped out of the photo industry.

The Internet created an opening for niche marketing and e-retailers like NetShops.com were quick through the door, Doug Nielsen, president and CEO, told his general session audience yesterday at the Internet Retailer 2007 Conference & Exhibition in San Jose, CA. Key factors that changed the niche marketing world included the ability to stay open 24 hours a day, establish an aggregate point for consumer demand, and the growth of search as a way to connect customers and merchandise, he said.

NetShops started with a single-minded focus: Hammocks. A garage-based business became Hammocks.com, whose byline is “Accomplish Nothing.” NetShops, however, has accomplished much with 150 owned and operated specialty stores including BarStools.com and Dartboards.com. NetShops.com is No. 120 in the Internet Retailer Top 500 Guide, and had online sales of $115 million in 2006.

“The NetShops model is to own and operate stores where we can add value. We want to be best place in world to buy a product. We try to approach each market with a new view and make it easy to buy those products,” Nielsen said.

Also on the dais with Nielsen was Fred Lerner, CEO of Ritz Interactive, No. 114 in the Internet Retailer Top 500 Guide. Lerner took a more perilous route to niche retailing, surviving the steep decline of the photography industry in the 1990s as photo equipment and processing went digital.

Formerly president and CEO of Kodak Processing Labs, Lerner in 1999 co-founded Ritz Interactive, which is a specialty e-retailer that offers branded lifestyle products through more than 15 retail web sites. Products are loosely linked, their origins driven more by research than kinship, Lerner said.

In addition to RitzCamera.com, WolfCamera.com and PhotoAlley.com, the company owns and operates retail sites including BoatersWorld.com and a site for fishing enthusiasts, eAngler.com.

Niche marketing requires equal parts of foresight and nerve, Lerner said. “We identified a new channel for selling digital cameras in 1999: the Internet,” he said. “We acquired exclusive rights and licenses to RitzCamera.com. At the time, the business was non-existent.”

From almost nowhere in 1999, digital camera sales took off and expanded exponentially. “Last year we did $100 million in sales, and yes, we make money,” he added.

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