There are only two types of ecommerce business seeing strong sales at the moment.
Those with a very focused product range and those which sell everything their customers want.
In one corner we have Lenstore, in the other Amazon or eBay.
The department store ecommerce businesses are great - but there aren't many opportunities to buy, because of their size.
Whereas niche sites tend to be smaller businesses and thus they often make great acquisition targets.
What do we mean by niche product range?
A Niche Product Range (NPR) ecommerce business is one which uses one website to sell one type of product.
We're not talking "electricals", we're talking MP3 players, or iPod accessories, or business books, or tea towels, or perfume. It could be anything - but just that one thing via one website.
So what makes are the NPR businesses a great opportunity?
To put it simply - NPR businesses are perfectly suited to ecommerce:
- The internet enables anyone to trade internationally with relative ease, making lots of niches accessible. That means that niches that used to be too small to viably serve customers both globally and nationally are now big enough.
- The internet is a text-based system. Everything is based on keywords - the reason that department store businesses do so well is that they act as search engines in their own right. So, if your whole website is focused on just one keyword - you're going to do well in search engine results.
- To succeed online - in 2015 and beyond - you need to have great content, be that video, blogs or images. Focusing on a NPR gives a company time to create this content, and also a clear story to focus on. It's not a case of do we talk about the mugs or the key rings this week - it's always the key rings.
- NPR focus also makes it easier to get PR opportunities.
All of this means that a strong NPR website is building a high barrier, preventing anyone else entering their market place. An online business owner can arrive at the point where they 'own' glasses, sheds, or dog shampoo, whatever their NPR is.
Plus, most NPRs are small businesses with strong profits and cost reduction opportunities.
NPR sounds a little small…
Yes many are small. But there are also a growing number of businesses comprising of multiple NPR ecommerce sites.
These businesses are using their understanding of how people behave online to target niches where there is an opportunity and roll out their system to each niche area. This means they get the economies of scale in the backend services (finance, logistics, hosting, and web design) AND still all the benefits of being a NPR.
The best example of this is WorldStores, now the UK's largest home and garden online retailer, with sales over £50m. The business is entirely built on a series of NPR websites - more than 100 in all - selling everything from mattresses to garden sheds.
>But they are not the only ones doing this - there are several other businesses approaching ecommerce in the same way.n>
Niche Product Range online businesses offer lots of opportunities for investors big and small. You could invest in a single NPR business or a business that is a collection of NPRs - there are many different variations out there so you can find the business that suits you!
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