Reaching local markets online, Part 1
Challenging the online business model
We tend to assume we
cannot efficiently reach local markets online.
Things are changing and this assumption is being challenged...
Say you want to open a store to
sell widgets, and let's pretend you have a choice. You can either open
a bricks and mortar retail store on Main Street, or you can open a web
store and ship widgets from your garage.
Some of the differences seem
obvious. At first blush, it would seem that your bricks and
mortar store would probably cater to a local market with
walk-in traffic, whereas your
web store would focus on a non-local market. In turn, this would have
an influence on how you define your service. Perhaps your physical
store would focus on low prices and speedy installation, whereas your
cyber-store would carve out a relatively narrow niche catering to a specialty market.
What this clearly suggests is that you do NOT try to reach local
markets online. You use more traditional marketing strategies.
This gets us thinking in terms of
these two alternative models:
| Bricks and
Mortar Store |
Online Store |
| Local Market |
Non-local market |
Products tend to be general in
nature
with broad enough appeal
to find enough local buyers |
Products tend to be more
specialized
catering to a "niche" market spread out geographically.
|
| Delivery is either manageable
because of lack of distances, or not an issue because customers
pick goods up. |
Goods are either digital or
can be delivered economically
"at a distance". |
Clearly, a web
store selling to a non-local market will have to address various shipping issues.
For instance, selling fast food to a non-local market looks like a
non-starter. You can't ship pizzas more than about 15 or 20 minutes
from their point of origin. Or trying to sell bulky or very fragile items "at
a distance" would result in excessive cost and/or damage. You
need a product that will ship without too much trouble or cost, and
one that doesn't have to be shipped inside a restrictive time frame
(like pizzas or fried chicken). The ultimate is the digital item that
can be downloaded. But things like books, CDs, bottles of pills,
clothing, jewelry, computer parts, electronic components, etc., etc.
all qualify as well.
Online Stores and Local Markets
Might it be possible to have an
online store catering primarily to a local market?
In other words, can we reach local markets online?
Ken Evoy of
Sitesell.com certainly thinks so.
I think we have trouble with this
concept because of promotional or marketing considerations.
We assume that either there are not enough local prospects to build a
viable business, or promotional efforts can't be adequately focused on a
local market without the use of other very expensive advertising media
(traditional media).
But why is this? Why couldn't we
open a pizza restaurant, or chain of pizza restaurants and build our
marketing and communication systems (promotion, order taking, payment
taking) and reach our local markets online. In other words, instead of people looking
up phone numbers in the "yellow pages", they would go to a local
online source (search engine, online mall or community directory) find
their restaurant of choice, order via email or web-based forms, make
their payment online, etc.
In fact, this model doesn't even require
online ordering. In my world, a store would be reaching its local markets
online as long as it has a web site that generates leads and inquiries,
and that serves as the focal point for its product information. Take your
pizza restaurant, for instance. Imagine that it generates its leads from a
search engine, online mall or directory, and it has no yellow pages ad(s) at
all. People look up the website, find what they want, and then call a local
number to place their order. That would clearly be an online store — a store
reaching local markets online.
The local web store model
With the current state of the web, the
online pizza restaurant is an unlikely candidate for success. The fact is, there are
very few reliable, up-to-date online directories you can trust — especially at
the local level. This is compounded by the tendency for web businesses to pop
up as experiments and quickly fade away. Yesterday's community web directory is
full of businesses that no longer exist.
In the world of traditional media, this
problem is overcome by the relatively steep entry costs, and the relatively
long lead times — you don't buy a yellow pages ad unless you have something
worth selling, have a few dollars to invest in it, and are likely to be around
in six months when it eventually gets printed in the book. None of these
things apply to websites.
But there may be other services which have
a better chance of online success — services which don't require instant "findability",
which would not require up-to-the-minute directories or listings, but rather
could survive off of something more "traditional" like good search engine
ranking. So let's say, for instance, you are interested in finding a real
estate agent in your local community, or a dentist, or a swimming pool
maintenance company. Being able to find local suppliers like this online would
be a tremendous advantage. You do a search for "Dentists Cambridge", and up
pops a list of websites for dentists in Cambridge.
Of course the yellow pages people want you
to think they will continue to be the definitive source for this kind of
information. That's why we have "yellowpages.com". But in fact they have a built-in reason NOT to supply information
of this sort online — because it cuts into their lucrative printed book
advertising. As with so many older technologies, you cannot rely on the
providers of those older technologies to provide you with more efficient, less
costly alternatives, because that would cut into their real business. In fact
they usually put up these services to slow down the development of
alternatives and keep their old businesses alive longer. The
less efficient the alternatives are, the better they do with their "must have"
print ads, and clunky old environmentally unfriendly 20 pound books.
Conclusion
My conclusion is that a "local web store
model" may already be feasible for certain types of businesses. And it would
most certainly be feasible for a wider range of businesses with the
development of slightly better online search engine and local directory
services. What form these are likely to take, and what sorts of businesses are
likely to benefit from them will be the subject of Part 2 of this article,
called "Changes in Search Engine
Technology". There we further discuss how to reach local markets
online.
Richard J. Hendershot,
www.small-business-online.com
This article is called "Reaching Local Markets Online, Part 1. Challenging the Online Business Model".
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