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Suppose, as an example, I have a website with the address, www.cool-gifts.com and I'm getting regular sales and its a worthwhile site, but no great fireworks. After research I find that there is a great market for '2nd hand stuff' and I'd like to serve that market. Would it be best to add '2nd hand stuff' as an additional category of gifts in my existing site....or, since the 2nd hand stuff is a market in itself, would I be better off investing time and energy bringing up a whole new site (www.used-stuff.com)?

If I had employees and financial resources, it probably would be a no-brainer...start a new site. But, what if you are a small guy, with limited resources?

So...new site....or add to existing site?

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I think you could do both. Until something is set up, talk about it on your current website. This means the traffic going to your site will see your new website (in it's idea phase) and this will generate interest.

Once the other site is up and running, then link, even advertise your new site on the existing site.

It also sounds like the two websites would appeal to the same demographic, so doing this is a no-brainer (In my opinion anyway).

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My vote would be new site, with explicit links/statements that the site is ran by cool-gifts.com. If your original site has a good reputation it can only help (and help pass on page rank)

Reason being I would expect cool-gifts.com to have a design which fits the image of the products you are selling - cool gifts implies a "cool design"

Personally I'd have reservations about buying 2nd hand gifts from a "cool" looking site, I'd expect something a bit more homely or "warm" design wise.

I think the bit of extra effort to get a new stand alone site up and running will be worth it in the long term.

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I think you should take the hit now and separate the site from your current site. This way, you are able to really focus the site on one type of market and product. This is very similar to the way large companies keep high end brand names separate from their mass consumer products such as Lexus and Toyota (which is really the same company).

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This would be fine but one of my concerns is that large companies can do this because they have the resources, but as a small guy, if I create a new site for every new niche that I bring in, would it end up diluting my focus. Maybe I'll add the new product ideas to my existing store, and create a new site in the background. If I see good demand for the used products, I could promote the dedicated site. – nitbuntu Feb 27 '11 at 10:43

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