Ecommerce: A Movement to Niche Marketplaces and Niche Product Categories

[mandy]

What these changes indicate is a move from popular markets and marketplaces to a more evenly spread distribution of sellers across niche markets and throughout what is called "The Long Tail." Wired Editor in Chief Chris Anderson coined The Long Tail in 2004...

The movement to niche markets has been precipitated by the oversaturation of popular markets. There is no shortage of new sellers online, according to the survey. At the time of the survey, 47 percent of the respondents had only been involved in e-commerce for three months or less. The 2005 survey showed that the bulk of sellers headed straight into popular markets when there were still gaps to be filled. This group of sellers are now established and are forcing the new sellers to find new markets.

This has two consequences. First, due to high supply volumes of "hot" items, margins for these items are rapidly decreasing. Many sellers are now using these items as loss leaders for niche items. Secondly, new sellers are considering more specialized markets and are having to readjust their business plans. Unless sellers have access to extremely cheap suppliers, they quickly learn that there is very little profit to be made in iPods and the rest of the top 10 eBay searches (with the exception of iPhones, due to their scarcity)...

full article: http://www.ecommercetimes.com/story/The-...1214563443

[mandy]

Now for the rebuttal 

An article in the current issue of the Harvard Business Review suggests that "the long tail" and niche markets hold less profit potential than mainstream markets and products.

It was a compelling idea: In the digitized world, there’s more money to be made in niche offerings than in blockbusters. The data tell a different story...

full article: http://harvardbusinessonline.hbsp.harvar...et-article&articleID=R0807H&ml_issueid=BR0807&ml_subscriber=true&pageNumber=1&_requestid=26216