A niche allows an ecommerce business to gain dominance in specific categories of the online retail market. Many believe that a niche strategy is key to compete in ecommerce.
A variety store aims to be everything to everyone, often at the lowest price. Its strategy is based on range and price. The risk is that the variety could turn out to be too broad to manage.
True Variety, Not Superficial
With a niche ecommerce destination, you can specialize and include everything a person would ever hope to find in a certain narrow category. Imagine focusing on wristbands for children. These are bands designed for fashion or sport. You really could sell every imaginable wristband for children. If, however, you want to make a variety store you would not have many bands, because the resources you spend setting up more than a couple of selections must be given over to setting up a little of everything else that exists in the universe.
Interestingly, the niche ecommerce website has as much variety as the variety store. The difference lies in the type of customer it attracts. The variety store will draw customers who do not care about the type of wristbands they buy, but need many things during the one shopping experience. The niche store will attract the customer who is concerned about which wristband his money will buy. It is likely that the variety store shopper will want lower prices, while the niche shopper will want higher quality goods.
SEO is more powerful with niche stores. In the variety store you dilute your SEO because your pages are disconnected from each other thematically. This diminishes the chances of your individual pages showing up at the top of searches*.
In the niche ecommerce site, all pages are closely related. Each page supports each other through relevance.
Operating a niche ecommerce business gives you a more focused, in-depth, knowledge of your market. You become an expert in your niche. The deeper knowledge gained through niche sales draws more people to your site, if you use that knowledge correctly.
In the spirit of content marketing, you could become the authority destination for information in your niche -- probably by setting up a blog. This is good for traffic and SEO. If people are coming to you for information on your niche, they are already interested in the products in this niche. That means you have a solid chance of converting them to customers.
They respect you. They are interested in your content. They desire the products or services you are selling. How much more do you want? Convert them!
Branding Is Simpler and More Powerful
The sharper the focus, the easier it is to brand, and the more powerful the branding. You have only one message you are conveying. As a result, focus is power!
More Bang for Your Buck
With a variety store you must advertise to people who are looking for all kinds of things. This may mean advertising in places that are far too many to count. A focused ecommerce niche, on the other hand, requires advertising only in places that promote one thing. The more advertising you do in the same kind of places, the quicker your branding takes off and the more your advertising budget will pay off.
Some fear that a niche has a smaller audience, and therefore a smaller potential for sales. This is an illusion. There is a critical component left out of this kind of thinking: conversion. Niche traffic is much easier to convert than the variety store traffic. You can have 1000 visitors a week. But if you convert only 10, it is no good compared to converting 15 out of 100 customers who visit per week.
The Trouble Is Finding a Niche
Since many agree with my belief in the superiority of the niche strategy, why don't more people set up niche online stores? The answer is simple: it is not easy finding a niche. Conduct your market analysis, take into account your experience and interest, and find a niche.
It should be clear to you that I advocate the niche strategy. There was a time, over a decade ago, when players in the ecommerce industry were still getting their feet wet. At that point of time it could have made sense to consider the variety store approach too. Today if you want to operate in multiple niches, you should consider setting up a network of niche ecommerce websites.
* Disclaimer: Google does not reveal its algorithm. So any statements I make about SEO effectiveness are based on my experience or empirical evidence.