The Promise Of E-Commerce

 

Sramana Mitra, 04.09.10, 06:00 AM EDT

Main Street is no longer the place to set up a retail store. The Web is.

Whichever way you look at it, the Web has become the place for commerce.

Online spending grew 18% in March compared to last year -- the eighth consecutive month of double-digit growth, according to MasterCard Advisors' SpendingPulse. The growth rate has outpaced that of traditional brick-and-mortar stores. While many chain retailers' online sales are growing, their store sales are shrinking. At 41 of the 50 biggest retail chains in 2008, e-commerce revenue grew as store sales declined, says InternetRetailer.com.

For the longest time entrepreneurs wanting to venture off on their own would open a store downtown where foot traffic abounds. But that trend, it seems, is changing. Today's equivalent of foot traffic is eyeballs. Much of that traffic flows from search engines and mega-marketplaces such as Amazon.com ( AMZN - news - people ) and eBay ( EBAY - news - people ). Today an entrepreneur contemplating a retail business no longer leases space on Main Street. She opens a Web site. Her market is no longer local.

There is much discussion today about how we will reverse this recession and why entrepreneurs are a key piece of the puzzle. The U.S. Census reports that there are 19.5 million nonemployer firms -- mom-and-pops -- and a large portion of this segment operates retail stores. Another 4.5 million firms operate with less than 10 employees, a segment that is also heavy in retail. In this recession many of them have gone out of business.

For an economic recovery, the small, specialty retail segment will need to get back to a healthy state. E-commerce may be the answer. Evidence suggests many small online retailers are doing quite well.
Take FineArtAmerica.com, an online marketplace and social networking site for painters, photographers and other visual artists. Artists can use to the site to connect with collectors and other buyers and, says founder Sean Broihier, put the business side of their career on "autopilot," leaving them more time to create art. FineArtAmerica.com (FAA) has more than 28,000 artists who upload new images to the site each day; 6,000 of them offer prints for sale.

FAA has been profitable since launch in 2007, thanks in part to its low overhead. Founder Broihier is its solo owner, and the company has no employees. Revenues were $175,000 in 2008 and $1 million in 2009, and the company projects revenues of $2.5 million for 2010. Broihier says that FineArtAmerica.com currently attracts 175,000 unique visitors a day, and traffic is growing by 10%-15% a month.

Broihier is a very good example of someone who has taken destiny in his own hands by embracing the Web rather than joining the 10% unemployment pool in America. (See my post Deal Radar 2010: FineArtAmerica.)

Another entrepreneur, Jeff Taxdahl, founded Thread Logic in 2002 to create custom-logo-embroidered apparel for businesses and organizations. Products range from polo shirts to aprons to fleece blankets. In a business that has been slow to go online, Thread Logic has focused almost exclusively on Internet sales while keeping in close touch with customers. In 2009 sales were $1.1 million, up 27% over 2008. (See my post Deal Radar 2010: ThreadLogic.)