Net retailers' days may be numbered, according to a recent
report by the Los Angeles Times. It reported that the amount of
venture capital funding going to e-tail businesses has
plummeted to about one-fourth of what it was six to eight
months ago.
As companies continue to suffer deeper losses with little hope
of turning a profit soon, some e-commerce experts and venture
capitalists are beginning to question whether costly promotions
and business-building in the name of building Web traffic was
worth the hit to profits.
As a result, industry experts believe that many e-tailers will
soon run out of capital and throw in the towel. "Many of those
that do not will be snapped up by Web conglomerates such as
Microsoft, Yahoo! or America Online, which have the financial
muscle and cross-selling ability to create a profitable Web
merchant," it reported.
The last statement hinted at the importance of building a large
online community, or more commonly known as a web portal, to
support e-retailing in the long runs.
Both Yahoo! and America Online started out as an information
portal providing value-added information and resources to
millions of users who flock to their sites every month. Online
shopping was offered at a later stage to capitalize on their
ability to reach out to a large group of online citizens.
The logic is simple. People want to belong to a community, and
commerce will flourish in places where a community settles in,
regardless of whether these places exist in cyberspace or in
the real world. So, contrary to the business models adopted by
most e-tail businesses, we should first focus our effort on
developing an online community before taking the plunge into e-
retailing.
An ideal community or web portal should cater to a particular
lifestyle or appeal to a specific age or social group. We can
offer free services, information, games and entertainment as
well as an avenue for members to participate in community's
events and social activities. The list can change all the
times, as long as it achieves our main objective of getting
members to return to our site regularly.
E-commerce should only be introduced when we meet two
conditions. First, we succeed in attracting a regular flow of
traffic to our website. Second, our website has evolved into an
effective medium for reaching out to a specific target audience
and many advertisers are keen to tap this market. There are
several advantages in taking this approach:
We can start small without incurring a sizeable amount of
investment in human resources, inventories and logistics
support.
We can use our advertising revenue to help finance our e-
tail operations.
We can market our products to an existing market without
having to rely on aggressive advertising and promotion to bring
in the traffic.
An online community dedicated to a specific target audience can
play a very important role in arousing its members' awareness
and interest in specific products and services. These highly
qualified prospects will then be more receptive to seek
information about related products and make purchases
subsequently.
Most people refrain from shopping and will consciously avoid
visiting a shop unless they have unlimited money to spend. They
buy on impulse when something catches their fancy
unintentionally. If this observation is correct, then a sole e-
tail business is less appealing than an online community with
an e-tail operations.
As you can see, the development of a vibrant online community
is a very important prelude to the success of e-retailing. It
is no wonder then that large corporations are now spending
millions of dollars to develop huge portal websites. These mega-
portals offer almost everything under the sun to appeal to
every possible Internet user in cyberspace.
Nevertheless, there are still plenty of rooms for niche players
despite the onslaught of the mega-portals. We can specialize in
a specific market niche and fine-tune our information, services
and product offerings to serve our target audience better. In
other words, size does not matter if you have the right
strategy and business model in place.
Patrick Tan, a former journalist and entrepreneur, offers a
complete range of services and resources to help you build a
successful career online. Visit his site at http://www.aloha-city.com
for more information. He publishes a free newsletter
to share his experience and business know-how. Subscribe Now!
Mailto: basics@aloha-city.com.
