Is your e-commerce website a hidden second business? Part 1

Do you have a hidden second business without really knowing it?

Thousands of people do, but actually don’t realise it. Because the barriers to entering this business are now so low, they may have established a valuable second business without contemplating it.

The hidden business opportunity occurs when you add e-commerce capabilities to a website.

This occurs in two ways. The first is when your business isn’t a traditional retailer.

Here’s an example of how it works.

Showcase or retailer?

Some time back an artist approached me about their website and its lack of success. The artist in question was doing a great job of establishing an e-commerce website to sell his wares and sending good traffic to it via a number of promotional methods.

The problem was, it just wasn’t making much in the way of sales.

Of course art is a tricky thing to sell online. Many are not prepared to buy something they haven’t seen ‘in the flesh’ or if they don’t know the artist.

But my advice to him was something that simply hadn’t occurred to him.

I told him that by adding e-commerce capabilities to his business, he had ceased just being an artist showing off his wares and now essentially had a second business – an online gallery.

The fact that he could now promote and sell his wares online meant that he could now do what galleries had done for centuries: sell the artwork of its exhibitors.

The only thing was, it only had one exhibitor – himself!

Yes he had now built his own gallery that only sold his own paintings. He was a very niche retailer.

Most entrepreneurs by now would be able to guess my next suggestion.

Now that you’ve built it …

Given he had gone to the trouble and expense of creating the infrastructure of a new business for himself (the online gallery), why not exhibit the works of other artists as well, making a tidy commission along the way?

Better still, if it went well, it would become a sellable business in its own right.

The artist was somewhat taken aback.

“What, put other artists on there and create competition for myself? You must be out of your mind! That kind of defeats the purpose of wanting to sell my own paintings online.”

Or does it?

Creating your own competition – and value

Well, actually, from a creative perspective it would create competition for himself. Customers may well like other artist’s work more than his own and hence not buy it.

But from a business perspective, it makes perfect sense in much the same way retailers stock a variety of products in an attempt to satisfy the needs of their customers.

And of course the traffic would multiply as a result of stocking several ‘brands’.

So while he would clearly be creating competition for his own artworks, the fact that he is exhibiting and selling other artworks provides two new revenue streams that wouldn’t be possible with just his own works:

• First, a commission on the sales of other artists works – something most artists would welcome as they seek outlets for their works; and
• Second, the online gallery would build value as a gallery business, which could be packaged for exit and sale at a later date.

At the time, the artist departed the meeting thinking I was a complete loony. And last time I checked, he still offered only his own works from his website, which meant it was worth next to nothing as a business and had just the one revenue stream.

A virtual retail outlet

But the fact remains. By adding e-commerce he is establishing a retail business infrastructure. Better still, given that many suppliers are prepared to ‘drop ship’ (send direct to the customer on the retailers behalf) you needn’t even buy any inventory for your outlet.

The same goes for any business. Those farmer and craft market stands are doing exactly the same thing. They have a retail business selling their own produce.

Once you start thinking of it in this way, and think of the resourcing required to run a successful retail business, websites can indeed spawn a whole new business.

It may even require a retail specialist to come and run it for you.

Of course few artists want to be either retailers or entrepreneurs and obviously that is their prerogative.

But is it really retailing?

Many would argue that you aren’t establishing a second business at all, that you are simply selling direct to the public rather than through a third party.

That’s valid too. But many haven’t even considered the fact that they are actually a retailer and so could expand this business in its own right, building a valuable revenue stream and asset.

Have you thought about your website in this way?

Next week I’ll cover the second business existing retailers spawn when adding e-commerce to their websites.

In addition to being a leading eBusiness educator to the smaller business sector, Craig Reardon is the founder and director of independent web services firm The E Team, which was established to address the special website and web marketing needs of SMEs in Melbourne and beyond.