Ecommerce

Thought I’d give another excerpt (#2) from the book “Ecommerce Well” which covers a number of topics on ecommerce.

Micro Niche Production

Another trend fueled by technological changes is the increasing demand for micro niche content. Strong continuing trends are likely to drop the costs of making online content available to the consumer. Current extrapolations of trends can give some insights on how this micro content will be produced. Because micro niches are likely to be serviced by specialized individuals, small companies may play a very important role in this area.

However, these small companies are likely to outsource numerous tasks to large companies. For example, many ebay “mom and pop” businesses in highly specialized niches use paypal for their method of receiving credit card payments from customers. Paypal is able to offer low transaction rates to startups since they have huge economies of scale. Building payment transaction systems is expensive, but they are able to distribute overhead costs across a large number of clients, thus lowering the actual costs for their clients. A market is likely to develop in services for micro businesses. Services that lend themselves to economies of scale and automation are likely to be dominated by large companies.

The Quick Assembly Block Model of Business

As the internet is rapidly reorganizing itself, interesting trends for entrepreneurs are emerging. The micro entrepreneur now has the ability to create entire new businesses very rapidly and cheaply by using “off the shelf” building blocks provided by the internet.

One example mentioned previously is paypal. An online business does not need to build an entire complex software system to handle the credit card transactions for his or her store. Instead, the entrepreneur can just add the paypal modular “building block” to her website to accept credit cards. Similar modules exist for website design, mailing lists, and other marketing tools. Use of pluggable business components should be a big help to small and micro businesses.

Instead of reinventing the wheel by building common modules of an ecommerce website the task for the new entrepreneur is much simpler. Identify the commodity or targeted parts of one’s business and their corresponding “off the shelf” building blocks. Then just rapidly assemble the ebusiness. (Due to economies of scale it is likely many of these “blocking blocks” will be dominated by larger businesses. ) Then concentrate on the part of the business that is unique and adds the most value.

In this modular, “building block” world, who is likely to profit? Certainly, the “building block” or “black box” builders will profit, but also the creative individuals who know to build the economy by combining the building blocks while adding their unique ideas to the mix.

This entry was posted on Saturday, December 2nd, 2006 at 11:48 am and is filed under Business and Internet. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.