Are There Any E-Commerce Niches Left?

E-commerce has notched some notable successes when it comes to selling books(Amazon), auctioning items (EBay) and helping customers make travel plans (Travelocity and others). But numerous dot-com implosions also shone a spotlighton e-commerce ideas that did not go over quite as well.

With online commerce maturing and its highlights and lowlights well documented, a clear picture has emerged of what works and what does not.

“We’ve seen a ruthless winnowing out of the good ideas from the bad ideas,” Giga Information Group e-business analyst Andrew Bartels told the E-Commerce Times.

That said, experts noted that some niches remain unexplored by established players as well as startups — untapped methods for selling products or just rethinking the way the Internet is used.

Targeting Is Key

At a time when venture capital is no longer gushing and the market is keen on seeing tangible results, e-commerce companies making new uses of the Web must finely target both their tactics and their audiences.

“Many ideas have failed because they tried to fill a niche that wasn’t there, or they failed to fill it profitably,” GartnerG2 research director David Schehr told the E-Commerce Times.

Schehr said many niche products with built-in audiences — such as specialized collectible and hobby items — could be marketed more effectively on the Web, since it often is not feasible to carry them in physical stores.

Location, Location, Location

Schehr added that another potential e-commerce growth area is location-specific selling, which should take off as wireless Internet service becomes more prevalent. The idea is to move beyond PCs to sell things to on-the-go consumers via laptops, PDAs and other mobile devices.

According to Schehr, a prime example is a person who wants to meet friends at a movie but does not have time first to go home and check theater listings, then drive to the correct theater.

The idea of finding information and buying a ticket online without having to use a PC is a concept that can be applied to other businesses, such as restaurants and travel companies, he added.

Channel Management

Gene Alvarez, senior program director for e-business strategies at Meta Group, predicted that future exploration in e-commerce will involve more channel relationship management efforts as manufacturers try to establish a direct link with consumers.

Alvarez told the E-Commerce Times that home-appliance manufacturers and other makers of big-ticket items will look for Web opportunities to sell directly to shoppers, sometimes bypassing retail middlemen.

For example, Alvarez said, a company like Maytag could market special features and pricing for washing machines on its Web site. A buyer could choose specificoptions, finalize the purchase on the site, then make arrangements to have the product shipped directly to the home by Maytag or by a designated retail partner.

Bypassing Middlemen

Currently, appliance store shoppers are exposed to several brands, and retailers have little incentive to push one particular brand. Alvarez said makers of appliances and other household fixtures potentially could use the Web to seal deals and deliver goods at lower prices to consumers, much as auto and consumers electronics companies already are doing.

“Anybody who sells their products through multiple channels will be into this type of technology,” Alvarez said. “The manufacturer gets direct interaction with the consumer.”

He said he expects to see wider user of such manufacturer-initiated programs by 2005.

However, analysts noted that consumers still prefer to try out items like clothing and furniture in person at retail stores.

Old Is New Again

As the economy recovers, some “old” ideas likely will resurface as new niches in e-commerce, analysts said.

One such idea is home grocery delivery, for which Bartels said there is still sizeable demand and profit potential, even though companies like Webvan went bankrupt trying to serve that market.

“The Webvan model still has a lot of logic behind it,” Bartels said, noting that Webvan’s failure was due to internal cash problems rather than lack of demand.

Bartels added that peer-to-peer entertainment services — such as Napster, which was plagued by legal problems — also have yet to be exploited efficiently. He said other companies could turn peer-to-peer into an important niche method of selling music and other services.

“Some variation around that model could take off,” he said, although such systems are still in the evolutionary phase.

Many Still Risk-Averse

Despite the possibilities, analysts noted it is tough to find significant growth opportunities at this stage of the Web’s development. Bartels said the current economy is not encouraging great risk-taking, with venture capitalists and other investors still feeling burned by past experiences.

For now, at least, companies are not rushing headlong into new niche areas.

“We’re in an environment right now where even if a great idea came along, it wouldn’t get funding,” Bartels said.

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