Rescue Strategies for Faltering Small-Biz Sites

In most cases, small e-tailers and other e-businessesmust climb big mountains to reach their goals.

For example, the increasingly cluttered Internet sales channeldemands unique and aptly delivered products andservices from its sellers, according to analysts.

“If small companies are ‘me toos’ to the big players,they are in deep trouble,” GartnerG2 research director David Schehr told the E-Commerce Times. “They musthave something that is truly differentiating.”

Analysts suggested the following survivalstrategies for a small, struggling online business: Pursue mutually beneficial partnerships with brick-and-mortar companies; employ cost-effective marketing tactics; find an industry niche; and keep a tight lid on fixed infrastructure costs.

Big Brothers

One of the steepest challenges facing smalle-tailers is how to scale their businessefficiently. To gain access to scale, some analystssaid, small companies should consider partneringwith brick-and-mortar firms or with complementaryonline companies.

“Small e-tailers should team up with partners thathave something that they lack or that is too expensiveto offer on their own,” Morningstar.com analyst DavidKathman told the E-Commerce Times.

Drugstore.com, for instance, has leveraged apartnership with Amazon.com to gain access to that company’s broad and deep existing user base. For its part, Amazonbenefits by expanding its product selection toinclude medicinal and wellness goods.

“These partnerships have to be two-way streets,” Kathman noted.

Can the Spam

In addition to bringing scalability to smalleroperations, partnerships also can bolster small companies’marketing efforts.

“In the world of the mass-market Internet, smallcompanies can get lost in the clutter,” GartnerG2’s Schehr said.

But as the burst dot-com bubble illustrates, spendingtruckloads of money on advertising and promotions does notnecessarily lead to consumer awareness and success. Defunct firms like Pets.com would attest — if they could — that lavish spending can lead directly to disaster.

“Most companies are now wary of spending a lot onmarketing,” Kathman noted.

And while low-cost marketing tools like e-mail spam maytempt budget-constrained companies, such methodsoften backfire and repel potential customers, analysts warned.

Small firms would be better served by weaving creativemarketing arrangements into deals with larger partners,according to Kathman.

Find Your Niche

But no amount or configuration of marketing efforts can guarantee the survival of small firms in large industry segments. That is why some analysts urge firms to focus on underserved niches.

“Small online retailers selling books and CDs will bein a world of hurt, compared to Amazon, BarnesandNoble.com or CDNow,” Schehr said.

As specialty e-tailer eHobbies no doubt would testify,word-of-mouth and inexpensive trade publicationadvertising can keep marketing costs low in many industryniches, he added.

What is more, Kathman suggested, in narrow industry segments, smaller and more personalized operations actually may wield an advantage over bigger firms.

“A huge behemoth might not have the same sense ofcommunity [as a smaller site],” he said.

Lean and Mean

An advantage that large firms have over smaller onesis that they can afford richer infrastructures.

But Schehr said that to stay above water, smaller firms must keep most of their costs variable and maintain lean underlying infrastructures.

Giant Amazon has spent liberally on warehousesand information systems to hone its logisticsprocesses and has perfected its customer serviceoperation, Kathman noted. But, he said, “It would be hard for smaller companies to efficientlyrecreate this [kind of infrastructure].”

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