Selling online in 2015: the landscape

I love business and I am glad I am often asked for business advice especially about internet retail. I got a request for advice earlier this week about a website and it prompted me to write this post because what I told him might be helpful to a lot of other people too.

This post is going to be my thoughts about the current landscape of internet retail at the start of 2015. The landscape changes very quickly but there are certain trends in place that I have been observing for fifteen years and I feel more strongly about them than ever.

The biggest trend of all is sobering but you need to know it going in: there is consolidation happening in every product category. The big sites are getting more of the business and the little ones are shrinking and going out of business. That makes it very hard for the little guys and startups and if you fall into that category, you are going to have to be very smart.

I have thoughts on how you can overcome that trend though so here we go….

You have to be out of the commodity business

When I say “commodities,” I am referring to anything that is widely available at numerous stores in exactly the same form. For example, iPads are commodities. LG TVs are commodities. Keurig coffee makers are commodities.

If you are starting an online business and you plan to sell commodities, you will almost certainly fail. There are several reasons why. First, you will be competing with Amazon. You may not like Amazon but you are not going to beat Amazon. Amazon rules that kind of retail for all kinds of reasons. And regardless of the product category, there will be a few other major players you will be competing with (for example, in office supplies, Staples and in shoes, Zappos).

You might think that you can beat those guys by providing better service. You can’t. They already provide impeccable service and their infrastructure enables them to always kill you in service. For example, they have warehouses all over the US that allows them to deliver faster than you can.

You might think you can beat them on price. You almost certainly can’t and if you could, your margins would be so low that you would not survive. The larger companies buy at a lower price, process orders more efficiently, and ship cheaper. And if they can beat you on the price, you lose in today’s world. Today’s consumer is ultra-savvy about getting the lowest price and they are price sensitive. When selling commodities, price is the only thing that really matters.

You have to be in a niche

The advantage of a niche is that the competition is low and possibly non-existent. The disadvantage of a niche is that the number of potential customers is low and possibly non-existent. The key to finding a niche is to find one where there is decent demand and low competition.

Make no mistake about it; finding an underserved niche is the single most critical problem you have to solve when you start out. When I started in 1999, niches were everywhere. Today, they are not so prevalent. It is sort of like the gold rush in Alaska. A century ago, you could make $10,000 with a shovel of dirt. Today, all the easy money is long gone. You see how hard those guys on the show Gold Rush work to find an ounce of gold. That is where we are online.

The reason niches work is that you don’t have to compete with the really big guys. For example, let’s say you have a website that sells curtains.  You have access to a huge variety of curtains. You don’t have to worry about competing with Amazon because they will certainly not carry the variety you can nor provide the customized support that is needed to help people buy curtains. Amazon is good at selling commodities but as soon as things get specialized, they are out of the game.

Remember though that niches have to be big enough to have a real customer base. If you have no competition, that might be a bad sign. For example, if you open a web site that only sells diamond-encrusted paper clips, you will not have one competitor but you will not have one customer either.

You have to be an expert

Today, if you want to be a niche internet marketer, it is not enough to throw up a site selling stuff. You have to demonstrate expertise and you have to offer a quality buying experience.

Going back to the curtain website idea for a second, it is not enough to have a website selling 10,000 styles of curtains. You need ways to help people buy curtains. You need quality information and tools to help them figure out what they need.

One of the ways you can demonstrate expertise and provide a quality experience is by giving quality information away. You may have noticed that I like to do that a lot here. As a matter of fact, this site is a case study for all the things I am talking about in this post.

It stands to reason that it makes sense to open a website in something you are already an expert in and passionate about. I am thankful that I get to do that here. But the truth is that some of you may not have that luxury. If you don’t have expertise in a viable niche, go find a niche and then become an expert in it as you go.

You have to buy smart

There is an old adage in business that goes like this: it is more important to buy smart than to sell smart. Buying at the right price is likely going to be critical to your success. It is the only way to have viable margins.

If you are buying products at a published wholesale price, you will probably not succeed. You have to find ways to get products cheaper than other companies or better yet, find ways to get products that other companies cannot even get.

Let’s talk about ways you can be a sole distributor of products online. The most obvious way is to make your own products or if that is not possible, buy products and label them with your own brand. On this site, I produce my own products but my former company Vitabase did not make products at all. All products were manufactured elsewhere but labeled with the Vitabase brand. Neither I nor Vitabase have to worry about other companies buying our products cheaper than we do because we are the originator of the products. We completely control that aspect of the business.

There are other ways to do it though. For example, a few years ago, I bought a high end stereo receiver that was refurbished. The company I bought it from had worked out a deal with the manufacturer to be the sole online retailer of their refurbished goods. Those opportunities for an exclusive distributorship are rare but available. Another thing you can do to find someone who has created a great niche product and offer to partner with them and be in charge of marketing.

I could tell you story after story of ways we have had to be creative in buying things to sell through the years. Some of them are pretty crazy and some of them were risky. I actually did give you one story in a post a few months ago that sort of demonstrates what I mean.

You have to market creatively

The world of advertising has completely changed over the past fifteen years. The traditional strategies are not working so well. Even the traditional strategies in internet retail don’t work so well now.

Obviously social marketing is huge and I have noticed something that I want to pass on to you. If you can find a product that is visually-oriented, you have a big advantage today. Companies that sell beautiful stuff get incredible marketing exposure through social media because pictures are so widely shared. I believe in this so strongly that I evaluate opportunities today with a lot of weight on how easy it would be to promote them visually on social media.

You will have to be creative because paid advertising online is almost always a loser and SEO is so unpredictable. If you start a business, from the very beginning, you have to be thinking about how you can attract people through social marketing.

In general, I spend no money on marketing on this site but I invest a good deal of time into marketing. For example, I see this post as a marketing piece. The free arrangements are marketing pieces as are the other free things. That is what I mean by creative marketing. Good marketing is a two way street. I get to help people and it helps me too.

I will stop there for the time being but let me do a quick promo. If you really want some insight into how I view online business, get my book Professional Music Strategies. Even if you are not a musician, you will get a huge slice of my philosophy of internet retail in that book.