Wall Street Journal reports the story of a few startups that are competing against eBay. These companies do it by choosing a niche and then differentiating within that niche via a higher quality service.

Here are the sites listed in the article – and the niche they specialize in.

  1. Gazelle.com – Used gadgets (iPods, Laptops) at a set price
  2. Glyde.com – Used dvds, cds, video games and books
  3. Etsy.com – Handmade artifacts
  4. Bonanzle.com – Collectibles

These sites try to make the process of buying and selling extremely easy – from the UI design, to the user experience through the entire transaction.

This is similar to a story I recently wrote – about an entrepreneur who built a $50 million annual revenue company by selling just window blinds online. One more example is the story of Pangea Organics – they differentiate via product packaging, in a market segment that is overcrowded.

The moral of these stories, for e-commerce merchants, is this. Pick an area that you are really passionate about and then apply all your energy to become the leader in that space. By sticking to a niche, you are better off than those who take a “machine gun” approach and shoot at all targets at sight.

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