Whether it’s on a PC or mobile device, more people than at any other time in the history of the world consume products, services, and information via the internet. For this, one can thank increased accessibility, consumer trust, competitive pricing, and convenience – and there’s no sign of it slowing down any time soon.
Imagine a warm “internet pie” sitting deliciously in the sun. The aromatic lure of this pie is so enticing, that millions of ants are making their way towards it in a frantic push to get a taste. When they get there they hit an ocean of their peers all piled on top of each other – pushing, biting, and fighting for the crust on the bottom. The fatigue and despair of not reaching the pie get the best of many of them, but they will soon be replaced by others with fresh legs and hungry spirits. For the smart working, innovative, and fortunate ants that can get close enough to the pie to eat and grow, they will have the strength and experience to climb out of the pile to sweeter, more lucrative sustenance higher on the pie. Free of the commotion below, they are now in plain view of the giant ants that are eating to their heart’s content on the top.
While the competition may seem daunting, the internet pie is still large enough for small ants to get their share.
- Online retail sales are estimated to hit $370 Billion in the United States and $191 Billion in Europe by 2017, representing a compound annual growth rate (CAGR) of just over 10%. The research firm eMarketer estimates that worldwide online retail sales hit $1 Trillion in 2012 (source). These numbers have grown every year since the first products were sold online in the early 1990’s.
- As of June, 2012, worldwide internet users now number 2,405,518,376 according to data accumulated by Internet World Stats. Compare that to the seemingly modest number of 360,985,492 users in December 2000, and you start to get the idea of how many people there still are that have yet to view a web page load on the screen, let alone buy a product online. Remember how amazing (or terrible) your first time buying a product online was? There are still thousands of people discovering this for the first time every day. Now granted, internet penetration rates are the lowest in developing countries, however they are starting to catch up with better infrastructure and more affordable refurbished electronics (source).
- Mobile retail sales are only estimated to account for 5% of total e-Commerce revenue in 2012, but the trends point to online consumers becoming more active in purchasing products on their smart phones within the next few years. Increased mobile consumption has also presented an opportunity for app developers, targeted advertising campaigns for local businesses, and broad advertising thanks to faster data streaming.
To savvy small business owners and budding entrepreneurs, this data should mean one thing: It’s time to get involved. Here are 6 more reasons why you should.
1. The supply of quality and affordable online properties is dwindling
Domain names and the websites built on them is the real estate of the online world. Bhavin Turakhia, Founder and CEO of the Directi Group, recently said, “The internet space is getting cramped with thousands of new users going online every day. Distinguishing your online identity from this crowd is getting harder…with com, net, org and other major TLDs running out of quality domain names.”
For small business owners looking to not only get in front of their online customers, but actually have them pay attention, this means that affordable options are on the decline. With supply diminishing and demand expanding, expect to pay higher prices every year as the internet matures.
2. Opportunities to increase revenue
If you own an offline business, opening the door to selling your products online makes sense. Your customers are going there to find the best prices, to save time, and for convenience. But even if you already have a website and are making sales, there is always room to improve. Consider the following options:
- Conversion optimization – you are getting traffic to your site, why not get as many of them to purchase your products / services as you can? Internet business and website analytics expert Neil Patel suggested four good articles on the subject of improving on-site sales conversions in his recent guide on buying and selling websites.
- Seeking new products / services to sell – analyze your business for all possible complimentary products for the things you already offer, such as cases with custom graphics if you sell kid’s eye glasses or different colored laces to go with shoes. Put these offers in front of your visitors when they are in buying mode, similar to the “Customers Who Bought This Item Also Bought” section found on Amazon.
- Building up traffic – depending on how niche-focused you are, there is typically room to grow in terms of relevant keyword rankings in the search engines, available clicks / views for paid traffic campaigns, and media buying opportunities. There are also many email lists, forums, and advertising opportunities offline to bring more traffic to your site. While building traffic is usually the most difficult and expensive way to increase revenue on your site (due to competition and the pain staking task of optimization), it gets easier to multiply the numbers once systems are in place.
3. Get better customer insight
One of the main benefits of running an online business is being able to utilize technology to gain customer behavior data. With free and much improved traffic analytics applications like Google Analytics, Quantcast, and Google Website Optimizer, one can see which keywords users are searching for that turn into sales, what demographics their visitors belong to including their gender, age, location, income range, and browsing habits, and see why visitors leave your webpage when they do. Gathering this type of data for offline customers is a bit more tricky, and expensive.
4. Reduced expenses
Looking at a traditional offline store, an owner will encounter costs such as rent, utilities, property taxes, insurance, inventory, shipping and handling, payroll, sales taxes, and the list goes on. With an e-Commerce store, there is no need to hold inventory in a warehouse (if using a drop ship model or using a 3rd party fulfillment center), fewer and less expensive employees who can work remotely, and no physical property expenses (just an average of $100 a month for online shopping cart fees).
Reducing unnecessary expenses is the quickest and simplest way to increase monthly net income, and moving your business online can provide an avenue for this. And thanks to innovation and increased demand, there are more options than ever to save on essential online business services and products.
The bonus is that once you have a system in place for your first e-Commerce store or online business, you can build many more using the often misjudged power of leverage.
5. Save time
Hiring out remote workers will not only save you time, it will help make your business more attractive to potential buyers upon an exit. Few buyers of online businesses want to take over a full time job if you as the owner are the critical piece – they want a business that runs on efficient systems with the right people in place.
There are thousands of traffic generation experts, skilled website developers, conversion optimization consultants, e-Commerce specialists, sales copywriters, social media marketers, mobile application developers, and other professionals for any kind of online business related task who will gladly take over so you can free up your day.
Unfortunately for startups, it’s an evil necessity to put in overtime in a business and do all tasks. But once the train has left the station and is rolling on some of its own momentum, get others to man the engine, serve the riders, conduct, and grease the wheels.
Keep in mind that if you aren’t careful, expenses can multiply quickly. You don’t necessarily need the $5,000 a month SEO package or the $1,000 an hour internet marketing consultant to get to the next level. Comparison shop for service companies and outsource with the best price to quality ratio, just as your customers have learned how to do so well.
6. Online businesses are in demand
Two recent acquisitions that you most likely have heard of are 1. Summly.com, the mobile app that summarizes news articles, that was purchased by Yahoo for $30 Million from its 17 year old creator, and 2. Goodreads.com, the online social community that caters to book readers, that was purchased by Amazon for an estimated 8 figure sum.
What we learn from these is that “giant ant” companies and other companies currently larger than you are constantly looking for new opportunities to expand their reach, build a bigger customer base, and make more money. In the case of Summly.com and other high profile acquisitions like Facebook.com and its purchase of Instagram, valuations can seem extreme and the real reasons behind the purchase can be blurry.
However, as Nick D’Aloisio of Summly casually mentioned, “If you have a good idea, or you think there’s a gap in the market just go out and launch it because there are investors across the world right now looking for companies to invest in.” (source)
This buyer activity isn’t exclusive to the big timers. As web-based business brokers, we’ve seen yearly growth in buyer activity for websites ranging from $10k to low 7 figures for the last 5 years. Revenue generating websites and other businesses utilizing the internet (such as Kindle book portfolios, mobile apps, and software products) are now seen as legitimate alternative investments to equities, real estate, and offline business acquisitions.
To sum it up
Wal-Mart recently made a move to compete with Amazon.com by allowing customers to order products online and pick them up in designated lockers at physical locations (source). Neil Ashe, the chief executive of Walmart’s global e-Commerce division, said, “We’ve dramatically accelerated customer acquisition online. We’ve got to be there. We weren’t there before and now we’re realizing the benefit of that.”
The “Internet Pie” will be around for years to come, and sadly many people will fail in their pursuit to make money in it. Some others will find moderate and acceptable success, and a small amount will become extremely wealthy. In the currently free spirited internet economy, the question remains, how soon will you get involved?
Ryan Sorensen is a Senior Broker and Partner with Flipping Enterprises, Ltd., a mid-size ($10k-$2M) web-based business brokerage firm specializing in e-Commerce, services, affiliate, blogs, information products, and others. With over $5M in total sales in 2012 and the top grossing seller on Flippa.com, Flipping Enterprises is experienced in helping both buyers and sellers succeed in today’s volatile and competitive marketplace.