Will Small Ecommerce Sites Go the Way of Mom and Pop Stores?
Small e-ecommerce sites that depend upon Google organic traffic for customers are becoming an endangered species.
The top spots in product search results pages are now dominated by manufacturers and large branded retailers. It has become commonplace when searching for a consumer product for the first page of results to be primarily comprised of retail chains with a bricks and clicks presence, eBay, Amazon,and manufacturers.
As Google adds more product information to search result pages, not only do small merchant sites seldom show up on the first page, Google had drastically reduced the role online merchants play in product selection.
Google provides an increased amount of product information which diminishes the online merchants role in product research. It is increasingly common for Google result pages to limit the online merchants’ primary exposure to a consumer during the discovery phase of a product search to simply being a source of pricing.
Example: Bicycle Lights
On an early morning bicycle ride today, the discussion turned to bicycle lights. A number of riders in the group are in the market for new lights as fall approaches and the daylight hours diminish. This discussion led me to do a Google search for bicycle lights.
I found the results to be informative in regard to the challenges faced by small and medium sized e-commerce retailers and the tactics they need to utilize to survive.
It was not all that long ago that a small e-commerce site could thrive simply based on either organic traffic from search engines or pay-per-click advertising. However,
- organic search has become tilted in favor of large branded sites with high levels of domain trust; and
- Pay-per-click advertising has become much more challenging to pay out, as the cost to purchase clicks has escalated dramatically.
Pay Per Click Advertising
The economics of pay-per-click for bicycle lights are extremely challenging for the small online merchant. According to SEMRush, the average cost per click for “bicycle lights” is $0.84. If a 5% click to sale ratio is generated from pay-per-click advertising, this leads to a cost of advertising per sale of $16.80.
From an e-commerce sales standpoint, bicycle lights are not a particularly desirable item. They typically sell for under $40, usually purchased in onesies, are long lasting so limited repeat purchases, and are not an item that leads to additional items being placed in a shopping cart.
It is also a category that is still dominated by retail stores. (For reference, despite the growth in online shopping, Internet Retailer calculates that e-commerce only accounts for 8.4% of total retail sales even after excluding automobiles, fuel and grocery)
A majority of bicycle light sales probably generate less than $15 in net revenue to the merchant. Thus, pay-per-click advertising in this category would often lead to trading dollars at best.
The above calculation may understate the net revenue per sale, as sales of of high end lights and multiple item purchases may bump up the net revenue number. However it still seems unlikely that a new player using pay-per-click marketing as their primary source of visitors could profitably enter this category…
Tactics For Success For The Small E-commerce Merchant
While the number of mom and pop stores has declined dramatically, there are still hundreds of thousands of independent retailers in the U.S and Canada. Similarly, there remain plenty of opportunities for small online retailers.
Your success requires at least one of the following:
- Focus on niche products that do not attract the attention of the major bricks and clicks retailers
- Superior depth of content about the products being sold
- Greater product line assortment depth than other merchants
- Find alternatives to the search engines to deliver traffic to a site
Success in going head to head with the branded retailers may be out of the question for high volume consumer products. However, there are still a huge variety of products that are not as competitive and/or are targeted to commercial customers.
Also, it is still possible to obtain first page positions on search engines if a site contains more and better content about a product line or category than competitive sites. Likewise having superior depth of product assortment can lead to first page rankings.
Finally, finding alternatives to depending on search engine traffic may be the key to success. The use of social media, e-mail marketing, online display advertising, public relations, direct mail, and refer-a-friend programs are among the tactic that can diversity a small e-commerce businesses sources of traffic.
There has already been quite a bit of weeding out of online merchants. But just as has happened with bricks and mortar retail, the smart and creative owners of small e-commerce sites should be able to find opportunities to survive and thrive.
Randy Pickard has been optimizing sites for search engine rankings since 1996. He currently manages SEO and PPC campaigns for clients and proprietary sites. Randy is the author of Internet Marketing Remarks and the General Manager of Shopping Baskets Plus, a supplier of shopping baskets to retail stores.
Leave a Reply
Get the SEP Newsletter
I have noticed this for awhile, but don't find anyone addressing this situation. You are spot on, including your suggestions. Let the creative persistent business person win the day!
Interesting article, Randy. And one which correctly identifies the trend of multi-product vendors increasingly out-competing smaller retailers in ecommerce.
Your list of successful tactics for smaller ecommerce retailers is spot on, but I think the trend we're seeing will continue, and I think it will be especially difficult for new ecommerce entrants to succeed against established multi-product retailers that happen to sell the same products they do.
Unfortunately for smaller retailers, there's a chicken-egg issue with these tactics that are difficult to overcome. Just to take one example, a site that has a more engaged customer base that writes detailed and useful reviews can successfully compete with the big boys. But in order to obtain those reviews, they'll have to be a destination and have a customer base that can support the generation of this content. Amazon, Overstock et al. already have this base, and so – even for niche products – already have an advantage out of the box.
One way or another the old days of building a niche ecommerce site and reaping the benefits of having a niche product available online for purchase are over. Superior marketing and in all ways, as you say, being "smart and creative" are certainly necessary, if not sufficient, conditions for success.
Aaron Bradley recently posted: What Schema.org Means for SEO and Beyond
Aaron – Good points in your comments. I have launched a couple of small e-commerce sites during the past year that have been marginally successful. However, getting customers for low engagement, commercial products to submit reviews or to interact via social media is challenging. A downside of being an online merchant is that often there little interaction with customers. And customers have become accustomed to having their orders shipped quickly, so it becomes hard to wow them.
Randy Pickard recently posted: Why Domain Names Stuffed With Keywords Have Declined in Value