MOM-AND-POP retailers have helplessly stood by over the last decade as big-box merchants steamrolled over them. Online, though, small merchants are not going down without a fight.
The number of small- and medium-size retailers selling online has swelled in the last two years, from 21 percent to 32 percent, according to a survey by IDC, a consulting firm. Aided by less expensive and more sophisticated technology, stores likeRealmDekor.com, CleanAirGardening.com andSitStay.com are competing with retailers as well as bigger sites like Amazon.
These businesses lack the huge marketing budgets of their bigger peers, of course, but they are unearthing cheap advertising methods that, in some cases, help them compete with million-dollar promotions.
The retailer of quirky home goods, RealmDekor.com, has experienced occasional sales increases not because of catalog shipments or television commercials, but because it formed relationships with bloggers and posted its products on new “social shopping sites” like ThisNext.com and StyleHive.com.
“People started posting about my goods and it snowballed from there,” said Lisa Mathisen, RealmDekor’s owner. “I know people think these sites are new and underground, but they’re becoming more mainstream. Even my mother checks them out to find gifts.”
Social shopping sites emerged last year as places for dedicated shoppers to exchange tips on popular items or designers. Tens of thousands of users list their raves and vie for trendsetter supremacy, while the site owners collect dollars for referring customers to retailers.
Gordon Gould, chief executive of ThisNext.com, said the site features more than one hundred thousand products, with a majority of the items coming from smaller retailers. “Social shopping sites help the smaller retailers surface their products and open people up to their specific point of view,” he said.
CleanAirGardening.com, an online retailer of environmentally friendly gardening supplies based in Dallas, recently began posting product demonstration videos on YouTube and other sites, along with links to the site. According to Lars Hundley, the company’s owner, visitors who arrive from video-sharing sites purchase goods 20 percent more often than those who come from elsewhere.
Most online shoppers are so experienced that they feel safer venturing away from Amazon to buy from lesser-known sites, said Ray Boggs, an IDC analyst. Part of the reason, perhaps, is that the Web sites now built by many small merchants lack the amateurish feel of a few years ago.
Companies like Yahoo, Amazon and thousands of independent Web developers have become considerably better at building slick sites for merchants, sometimes within a few minutes, for less than $100. Yahoo Store merchants, for instance, pay $40 to $300 a month, and a commission of 0.75 percent to 1 percent on each sale. Merchants on the Amazon WebStore pay $60 monthly, along with a 7 percent commission.
Jimmy Duvall, who oversees the Yahoo Stores service for Yahoo’s small business division, said the company recently introduced a series of enhancements, intended to simplify the site-building process and improve merchandising.
For instance, Yahoo merchants can now automatically offer a shirt to match a pair of slacks a customer bought previously, or a tablecloth to complement silverware a customer placed into the shopping cart. (In retail parlance, these techniques are called cross-selling or up-selling.)
“They can do some pretty advanced merchandising now, without having to dedicate staff to picking items,” Mr. Duvall said.
In some respects, Yahoo’s cross-selling improvements are a response to Amazon’s entry into the market last year. The Amazon WebStore service began with technology that mimics Amazon.com’s recommendation feature, which displays the purchases of customers who searched for items similar to those on a given page.
In Amazon’s latest quarterly results, 32 percent of the goods sold on Amazon’s sites were offered by other merchants.
Those numbers could climb after a technology failure by Yahoo last week left its 45,000 merchants without functioning Web sites for much of the big Cyber Monday holiday shopping day. Matt Williams, who oversees the Amazon WebStore division, said his company had calls from Yahoo clients who were looking to transfer their stores quickly to his service.
Like Yahoo, Amazon helps its clients attract customers by listing its products on the site, and by helping ensure the stores appear on search engines. Such help is critical for beginners, but for more seasoned merchants hoping to reach the upper tiers of online retailing, it is not enough.
SitStay.com, an online retailer of goods for dog owners, grew steadily since its began in 1996. It now operates from a 20,000-square-foot facility in Lincoln, Neb. The owners of the 13-employee company, Darcie and Kent Krueger, invested slightly less than $100,000 in new Web site technology from I.B.M. that, starting last month, allowed them to more quickly post sales and product recommendations, among other things.
But because the new technology required SitStay to replace all of its old Web pages with new ones, search engines no longer rank the site’s products near the top of the results. Because few consumers click to the second or third page of search results, the effect was significant. Bigger merchants like Petco and Petsmart, meanwhile, can easily outbid SitStay for prominent ads.
“And more and more sites are coming out all the time, some with a lot of money they can invest in their search ads,” Mr. Krueger said. “So we’ve got everything in place to handle a lot more customers. Now, we’ve just got to find ways to bring them to us.”