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How the Internet has affected Specialist and Generalist Retail Operations

posted by Frank Stevens @ 2:02 AM
Sunday, June 7, 2009

How the Internet has affected Specialist and Generalist Retail Operations

In the retail business there are essentially two kinds of businesses, generalists and specialists. These two categories apply whether the business is an online retailer or a brick and mortar retail operation. Generalist retailers carry a wide range of many diverse products. Walmart is an example of a successful generalist in the physical store category, while Amazon.com is an example of an internet-based generalist. Of course, Walmart actually qualifies as an internet generalist, since they also have a successful web retail presence.

Generalists tend to be larger more heavily capitalized operations. It simply takes more resources and more effort to carry so many different products. Another key difference is in the marketing strategy of the generalist retailer. These operations tend to focus their marketing efforts on branding their own store instead of talking about the products they sell. They need people to think of their name whenever they are going shopping. A physical store has the advantage of location. People drive by it and can’t help but notice it’s there. A generalist web retailer, like Amazon.com, needs customers to know their name in order to get to the website.

Online shoppers are much more likely to search for the name of the item rather than the name of the store. The majority of searches for a particular item are likely to result in a results page that is heavily weighted toward specialist retailers. These specialists invest their marketing efforts in trying to make themselves appear higher in the search engine rankings for each of the limited products that they carry. Often online specialist retailers they will use the services of a good Search Engine Optimization (SEO) marketing consultant to help them achieve this goal.

When a web-based specialist has goods that are unlikely to be carried by most generalists, like point of sale (POS) equipment, commercial scales, or even electric fireplaces, then they have a very strong advantage. Customers can’t easily find these items in physical stores near their homes or businesses, so they are almost forced to shop online. Online specialists can carry goods in a very tight niche that might not sell enough in a physical store to support a business. Because of the national or even global reach of the internet, however, the online specialist is able to reach a much larger pool of customers than a single local store or even a chain of stores.

The web has enabled the existence of many new niche product specialist suppliers to exist. This in turn has helped foster a competitive marketplace for items which were hard to find before the advent of web-retailers. As you might expect, this retail competition has helped lower prices while increasing the level of customer service and the number of options available for customers. It has also led to increased competition among web retailers for those top search engine results for their product categories. Just as a local convenience store lives or dies by its location, online web retailers live or die by their search engine rankings. Better location and better rankings mean higher traffic which translates into more customers.

Many online specialist stores start out with very few product lines and then expand their business by adding another niche product line. QuickSupply.net for example carries electric grills, electric fireplaces, and POS equipment such as scales and balances. They have recently begun expanding into medical equipment such as blood pressure monitors, and Quick Supply owner Daniel Renkel tells us that his plans include filling out his medical supply product lines and then adding a complete line of Billiard supplies and equipment. In a sense, expansion for the online specialist is modular. The same plans, site infrastructure and marketing plans can be used for each new niche as capital and available resources allow.

Of course, maintaining a physical store in addition to the online presence has its advantage as well. Although many online retailers are simply order takers who rely on manufacturers to drop ship directly to the customer, others, like Quick Supply, have their own warehouses and stock all their products. This allows them higher familiarity with the products and gives them complete control over the customer experience rather than relying on a number of third party suppliers.

The web has enabled the success and proliferation of the specialist retailer, and has created a new specialist branch of marketer, the SEO marketer, as well. With the web, every business has the ability to reach customers at the national level, and with only a little more expertise at the global level as well.

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