As I built RobbinsSports.com and consulted with other online store owners, I noticed two distinct schools of thought with regard to how store owners approach adding "inventory" to their online stores. The first approach (I call it the megastore) is to focus on adding as many products as you can from as many suppliers as you can find. The second approach (I call it niche domination) involves adding enough products to your store to have a legitimate selection of inventory, then focusing on getting rankings for the terms related to what's in your store. I'll explain more about these two schools of thought.
The Megastore Approach
During the second year of operating my online business, I was approached by a manufacturers representative for one of the companies whose products we were carrying. Manufacturers reps typically market many different companies in the same product niche. This is especially true in the sporting goods industry. The rep stopped by our home office as part of his regular visit schedule to his clients. He asked me if we'd be interested in carrying any of the other lines he represented, and I told him we would be glad to try them out. One of the suppliers manufactured sports uniforms. We quickly set up an account and began listing their products on our website.
It wasn't long (within one week) before we started getting orders for the new products we added to our site. Especially because our online business was somewhat established, Google and the other search engines picked up our new products quickly. We were obviously happy with the growth, and it gave me an idea.
At the time, we had about 2,500 products listed for sale on our website, and we were on pace to make about $75,000 - $90,000 in profit for the year. My reasoning was this: if we double the number of products in our database, wouldn't that effectively double the amount of profit we make? Well, we tried it, and it did. We added more than 2,500 new products to our online store over the next year and a half, and we saw our profit totals double proportionally.
The Niche Domination Approach
With more than 5,000 products listed on my online store, I had a much larger inventory than any of my brothers'. They chose an alternative approach to growing their businesses. My brother who owns OuterSports.com instead focused on owning search terms related to thermal underwear. Instead of adding more and more products to his site, he focused his attention on getting the links he needed to rank his site for that term and for similar terms. The decision to go that route probably came packaged with his decision to carry a significant inventory of the products he was selling. It makes sense that if you have thousands of dollars invested in products, you want to have those products moved as quickly as possible, so you make that your focus. If all your inventory is on the shelf of one of your suppliers, you're not so concerned about which products you sell.
The niche domination approach has worked well for those I've seen use it. Obviously there is a spectrum involved when you talk about either of these approaches. Most retail stores are somewhere in the middle of, on one end, having one product on a website while dominating the search engines for several terms used to find that product; and, on the other end, having thousands of products in their store, but no major keyword phrase for which their store ranks well. When considering where that spectrum you want your business to fall, you'll be constrained by the market conditions and competitiveness of the products you want to sell, your access to good suppliers, and other factors that may push you to one side or the other.
Comparing the Two Approaches
There are some benefits and drawbacks to both of these approaches. With the megastore approach, consider that each product you add to your store complicates your operation by some amount. For example, you really should have some knowledge about how your products work. Each product you add to your site broadens what is required of you and whoever you might hire to take customer calls. Also, as your list of suppliers grows, there is more complication in your entire fulfillment process. Our list had grown to over 30 suppliers, and it was often a chore to teach new employees how to handle placing orders with each of the suppliers.
A benefit to the megastore approach is that you are typically very well diversified. Sometimes Google tends to do strange and unanticipated things, which means that if you are banking on being at the top for a particular keyword phrase, and you're suddenly dropped, it could drastically reduce your sales. My brother experienced that after he'd purchased a significant inventory of thermal underwear. He had been #1 in the search results for that term all summer long. When the cold season hit, his site was dropped far down the search list, and he took a hit since he wasn't able to sell his inventory.
Evaluating the seach market scenario for the products you're selling and understanding what you'll need to do to capture a popular search term versus smaller long tail search terms will allow you to set up a plan to optimize your efforts.
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