Two comments as a CPA who serves a variety of retailers... and as a ecommerce/ebook publisher who sells downloadable do-it-yourself incorporation kits...
1. I think the web obviously works for small retailers. You can make a good living even off just a niche-y site as long as you do it right. And an experienced retailer really has an advantage as compared to people who have no merchandising experience (people like me, i.e.)
2. The landscape is very fluid however... The PPC and organic SEO techniques that work today to drive reasonable traffic to your site may not work in two years.
Steve Nelson, Publisher, www dot llcsexplained dot com and www dot fasteasyincorporationkits dot com.