Rescue Strategies for Faltering Small-Biz Sites

In most cases, small e-tailers and other e-businesses must climb big mountains to reach their goals.

For example, the increasingly cluttered Internet sales channel demands unique and aptly delivered products and services from its sellers, according to analysts.

"If small companies are 'me toos' to the big players, they are in deep trouble," GartnerG2 research director David Schehr told the E-Commerce Times. "They must have something that is truly differentiating."

Analysts suggested the following survival strategies for a small, struggling online business: Pursue mutually beneficial partnerships with brick-and-mortar companies; employ cost-effective marketing tactics; find an industry niche; and keep a tight lid on fixed infrastructure costs.

Big Brothers

One of the steepest challenges facing small e-tailers is how to scale their business efficiently. To gain access to scale, some analysts said, small companies should consider partnering with brick-and-mortar firms or with complementary online companies.

"Small e-tailers should team up with partners that have something that they lack or that is too expensive to offer on their own," Morningstar.com analyst David Kathman told the E-Commerce Times.

Drugstore.com, for instance, has leveraged a partnership with Amazon.com (Nasdaq: AMZN) to gain access to that company's broad and deep existing user base. For its part, Amazon benefits by expanding its product selection to include medicinal and wellness goods.

"These partnerships have to be two-way streets," Kathman noted.

Can the Spam

In addition to bringing scalability to smaller operations, partnerships also can bolster small companies' marketing efforts.

"In the world of the mass-market Internet, small companies can get lost in the clutter," GartnerG2's Schehr said.

But as the burst dot-com bubble illustrates, spending truckloads of money on advertising and promotions does not necessarily lead to consumer awareness and success . Defunct firms like Pets.com would attest -- if they could -- that lavish spending can lead directly to disaster.

"Most companies are now wary of spending a lot on marketing," Kathman noted.

And while low-cost marketing tools like e-mail spam may tempt budget-constrained companies, such methods often backfire and repel potential customers, analysts warned.

Small firms would be better served by weaving creative marketing arrangements into deals with larger partners, according to Kathman.

Find Your Niche

But no amount or configuration of marketing efforts can guarantee the survival of small firms in large industry segments. That is why some analysts urge firms to focus on underserved niches.

"Small online retailers selling books and CDs will be in a world of hurt, compared to Amazon, BarnesandNoble.com or CDNow," Schehr said.

As specialty e-tailer eHobbies no doubt would testify, word-of-mouth and inexpensive trade publication advertising can keep marketing costs low in many industry niches, he added.

What is more, Kathman suggested, in narrow industry segments, smaller and more personalized operations actually may wield an advantage over bigger firms.

"A huge behemoth might not have the same sense of community [as a smaller site]," he said.

Lean and Mean

An advantage that large firms have over smaller ones is that they can afford richer infrastructures.

But Schehr said that to stay above water, smaller firms must keep most of their costs variable and maintain lean underlying infrastructures.

Giant Amazon has spent liberally on warehouses and information systems to hone its logistics processes and has perfected its customer service operation, Kathman noted. But, he said, "It would be hard for smaller companies to efficiently recreate this [kind of infrastructure]."