Find Your Niche and Grow

I just finished Robert Spector’s book “Amazon.com: Get Big Fast,” which is a very good history of Amazon.com’s development. Spector talked to many ex-Amazonians, some of whom were key in developing the Amazon.com strategy.

With the amount of thought that went into the company’s data-collection efforts, it is no surprise that Amazon.com is now seeing it as a revenue source. (See Sean Carton’s “An Open Letter to Jeff Bezos.“) But I’m dissatisfied with Amazon.com for a different reason than Sean. I walked away from Spector’s book feeling like Amazon.com was on definite downward slide in terms of quality. Why? Because it is widely and rapidly diversifying its product base instead of remaining focused. The data selling is yet another example of this.

Here is my logic.

In the beginning, Amazon.com put so much effort into selling books that it really did create an entirely different way to buy and sell them. This was mostly due to the people the company hired. They all had rich experience with books, and they were able to convey this experience to the customer during the sales and support processes. It is almost as if Amazon.com had figured out a way to replicate and then scale the joy of buying a book from the small bookstore, where someone understands what they are selling.

And although Jeff’s stated goal has always been to “sell anything to anyone,” the passion his staff has for books is what I think made Amazon.com most successful. His basic premise is solid: Good data plus good customer service equals more sales. But I think his thesis starts to weaken when he assumes that good data and customer service built from delivering a certain type of product (in this case, books) means you can sell “anything to anyone.” So Amazon.com almost set itself up for some kind of fall.

Even today, the strongest brand connection with Amazon.com in consumers’ minds is as a place to buy books. The company’s system was, and still is, optimized to sell books, but all its effort is no longer focused on selling books. Instead, the focus is on selling anything. The situation begs the question: Will its customers be talking about the great washer and dryer sets they bought on Amazon.com the way they now talk about the great books they bought there? My opinion is no.

So is Amazon.com going to go out of business? No, Bezos played the “Get Big Fast” strategy and won. Will Amazon.com sell washers, dryers, and everything else as well as it did books? Most definitely not.

It reinforces what I’ve always believed about selling online: When proximity is a nonissue, niche product businesses have the advantage over businesses with broad product offerings. To return to the washer and dryer example, if I’m shopping online, I’m going to go to the Washer and Dryer Super Web Site before I go to Amazon.com because there is no additional effort for me to do so. The Washer and Dryer Super Web Site (theoretically, anyway) will give me a better experience because it knows more about the product.

In the offline world, the exact opposite is true: Physical distance between the consumer and the business greatly influences where that consumer spends his or her dollars. Continuing with my previous example, if the Washer and Dryer Super Web Site has one physical location and it is nowhere near me, I’m going to Wal-Mart, even though the Washer and Dryer Super Web Site’s physical store has a better selection.

So what’s my point? If you are a small business trying to grow online, find your niche and stay focused on it. Niches do better online because the customers can come to you; you don’t have to go them. Niches have lower overhead because your processes have to be optimized for only one set of products. And niches are harder to kill, even in the real world. Consider this: There are about 70 McDonald’s restaurants in New York City. Yet there are thousands of delis and food vendors that manage to survive and even flourish.

Going niche is the safest bet for online success.