E-commerce Filling Niche Markets

According to chapter 3 in our textbook, Managerial Economics in a Global Economy, the Internet has given rise to electronic commerce and it is revolutionizing business relationships. E-commerce offers tremendous advantages to buyers and sellers and represents a fundamental change in the way buyers and sellers interact in the market place. This is exactly what is taking place in the article I found entitled At Restaurant Sites, Food Is Just a Start. This article talks about how small restaurateurs are increasingly using the Internet to sell goods that go far beyond the usual array of branded T-shirts and hats, in hopes of not just building the bottom line, but also cultivating possible new markets for expansion. Through e-commerce these small companies are fulfilling a niche market and making extra profit off of it. According to Hudson Riehle, senior VP for the National Restaurant Association, “selling retail merchandise allows these companies to generate additional sales without having to invest much in infrastructure.” That is one of the biggest advantages in e-commerce for the supplier. Some other advantages for the supplier include that the store is always open, rent is cheap, and it can reduce their cost of executing sales and procuring inputs. Advantages for consumers include having around the clock access to the virtual store and they can engage in comparative shopping at minimal cost and effort. As e-commerce continues to grow, more and more companies will be looking to use it and fill niche markets that have not been filled.

1 comment:

Dr. Tufte said...

I think this is perfectly natural, but it is monopolistic competition. At the beginning there may be positive (economic) profits in doing this, but eventually competititon will drive them to zero. That doesn't make it a bad idea, just one that isn't a solution in and of itself.