The first principle of online selling,

The first principle of online selling, especially for small businesses that cannot afford to make many mistakes, is to sell the right items. Trying to sell the wrong product online is like failing to hitch the horse to the wagon -- you can do everything else right, and you still will not get anywhere.
Not every product is appropriate for online sales, and those that are may already have reached saturation level in the e-commerce landscape. Yankee Group analyst Adi Kishore recommends evaluating a new e-commerce venture before launching it. "Take a long, hard look at your business model," Kishore told the E-Commerce Times. "Is anyone else doing it? Develop specialty products."
Kishore noted that commodity products lend themselves to online transactions but are often overexposed by giant e-tailers. The trick is to advance a unique product niche within a commodity category.
Targeted Efforts
Advertising is another potential pitfall. Mass-market advertising is not only too expensive for most small e-commerce ventures, but it does not even work well for them. "With blanket advertising, you're wasting half your budget, and you don't know which half," IDC research manager Jonathan Gaw told the E-Commerce Times.
Instead, companies should explore more finely targeted, and in some cases experimental, promotions. The good news for new and small companies is that they do not have to learn this lesson the hard way, as many e-commerce pioneers did.
In finding targeted media in which to inject a message, the key is to think across channels. For example, just because a company is trying to transact business online does not mean it should ignore brick-and-mortar promotional opportunities. Even in the online space, it is not all about Web promotion -- e-mail and back-channel possibilities also exist. Ideally, a promotional strategy should be blind to channel distinctions, because all channels can contribute to e-commerce exposure in today's multichannel selling universe.
In short, small companies should develop a portfolio of promotional initiatives that complement each other. "Specialized niche audiences are served by specific targeted media," the Yankee Group's Kishore noted, pointing to "e-mail newsletters, certain chat rooms, specific Web sites [and] printed magazines" as possible venues for advertising.
Affiliations
One concept from the bubble years that has become more important in the post-bubble era is strategic partnering. Amazon (Nasdaq: AMZN) is doing it. EBay is doing it. Small businesses can do it, too.
According to Kishore, the preliminary work of building an affiliate relationship involves identifying potential partners that will benefit the business the most. "Partner with sites that have high traffic," Kishore advised. Bulk traffic is as important as exact match-ups between partners.
Again, cross-channel thinking is crucial. "Don't ignore the brick-and-mortar environment," Kishore noted. "You can partner with a physical retail outlet."
Paying the Search Engines
Another method of gaining notice that has soared in popularity recently involves placing ads on online search engines. These sites, most prominently Google (Nasdaq: GOOG), feature targeted advertising next to search results of predetermined keywords. The cost of buying paid search hits is controlled to some extent through an automated auction process that gives the top spot to the highest bidder. The advertiser pays only for click-throughs, elevating the efficiency of this type of advertising.
"You get a load of recognition for a reasonable price," IDC's Gaw told the E-Commerce Times. "You might not have a big budget, but for a while, at least, you can outbid Amazon."
An added (and free) benefit of buying search results is sheer exposure -- your name appears fairly prominently even when viewers do not click through. In traditional advertising, such an "impression" would be billed.
Although purchased search results are all the rage, traditional online directories should not be disregarded, either. Helen Chan, a senior analyst with the Yankee Group who specializes in SMB (small and medium business) e-commerce, emphasized the importance of finding directories that match your product category or even geographical location. "Find the appropriate vertical directories, not just the generic listings," she told the E-Commerce Times.
Making Connections
Chan, who wrote a recent Yankee Group study called "SMBs and E-Commerce: Strategies for Success," also said small e-commerce ventures should look beyond the dry metrics of dollars and eyeballs. "It's all about building connections," she noted.
She rattled off a quick inventory of basic approaches that should be undertaken by any small site. "Provide links in partner sites. Cross-leverage traffic. Integrate with every part of the business process. Get that site in front of existing customers. Include the site in existing marketplaces like eBay (Nasdaq: EBAY) or Yahoo! (Nasdaq: YHOO) Shopping."
Crucial to small-business e-commerce success, according to Chan, is keeping customers interested after the first visit. To that end, communication and personalization features are imperative. They not only make a site more engaging, but also open the door to more alluring advertisements. "The more customers expect interactivity at the site, the more they'll visit it," Chan noted.
Chan's published report identified this bundle of "behavioral" factors as the most crucial determinant of e-commerce success for small enterprises.
The Upshot
In a sense, for small businesses, bad news is good news. "There's not very much capital in the market today," Kishore said. "The formula of heavy marketing, coupled with the hope of reaching critical mass, is not an option any longer." With the competitive scramble for venture capital also a distant memory, small e-commerce projects can launch into a relatively level playing field.
Of course, small companies must dig their trenches far from the giant footprints of big-name online destinations. But with everybody in partnering mode, even the smallest operation stands a chance of affiliating with a larger e-tailer.
The real progress in SMB e-commerce is made by companies with imagination. Great targeting can easily make up for a modest budget, leading the way to e-commerce success.