Small brick and mortar retailers are all enchanted by the siren song of e-commerce. Virtually every POS at this point has a native e-com platform that sync’s your inventory, solving what was an almost impossible hurdle for non enterprise level businesses just 5-7 years ago. It feels like all you have to do is flip a switch and suddenly you’ll be making twice the sales with “no additional overhead.” Unfortunately it’s a much tougher road than most retailers expect, which is why the advice I almost universally give when small brick and mortars ask me about e-com is, you probably shouldn’t do it.
I realize this is an unpopular and seemingly backwards way of thinking. After all, we have e-com stores for both of our retail brands (Tigertree and Cub Shrub) and they are finally doing quite well. So I see how I seem like both a hypocrite and kind of a jerk for suggesting you shouldn’t do something I am both doing and succeeding at. I am also not suggesting you shouldn’t have a website. You should TOTALLY have a website, you should just consider if it’s better to be used to funnel traffic to your physical stores by telling your story and amplifying your experience over listing product.
The Formula Is Vastly More Complicated
If you are a traditional multi-brand retailer (meaning you primarily purchase things at wholesale and resell them) in a downtown neighborhood, the math and overall idea is really pretty simple. Assuming you have a strong point of view, are skilled at merchandising, understand some single store buying fundamentals, can hire and lead a staff, or have someone that can do the things you can’t… the formula is pretty much the same. Unique product mix, plus good customer service, plus foot traffic derived from an optimal storefront in a pedestrian friendly area, or advertising, or both, equals sales minus COGS, rent, payroll and some miscellaneous expenses.
Really as long as your rent and payroll stay within comfortable percentage to gross sales ranges, you’ll make money. You can look those up for your specific niche, as the ranges are pretty broad on account of various standard margins across the retail world. But that is pretty much it, and you have to make some pretty colossal mistakes on your other expenses to mess it up if the two biggest pieces of your pie are in line. That’s not to say that the point of view, merchandising, buying, hiring, leading… aren’t all difficult. They are, which is one of the reasons why most retailers don’t stick around. The formula, however, is largely the same with few variations.
So, What’s Different?
If you are a retailer in a good location, imagine instead you were 25 miles outside of town, not near anything. Just to entice your customers to your door, you need to convince them to forgo the giant store that might have better prices and is located across the street and then the row of 100 stores that seem identical to yours on the way out of town.
That is essentially what you are up against, and what is driving the clicks to bricks craze. What have traditionally been native e-com brands are opening stores because veteran, multi-million dollar-a-year, online stores with entire departments devoted to garnering online attention and search dominance have realized that opening a physical store is a cheaper customer acquisition tool than finding those same customers online.
What That Means For You
What that all means is, your most efficient path to online customers is likely your store. Step one of your strategy needs to be considering if your product is one that is easily introduced in store and that you’ve given them a compelling reason to get it from you. This does not have to mean pricing, though if you are approaching an unknown audience, it’s going to be tough. It also means that you need to understand that you’ll likely see some amount of decline in store from the customers that shift online and need to develop a strategy that entices them to pick-up in store -or- know how you’re going to find enough new customers to replace them. There are a couple of points that could give you an ecom advantage in this department.
- You have been open long enough, have a lot of local respect, and are in the sort of city people spend short periods of time in and move on. This could be for college or work, but you’re looking to create missionaries for your business once they move. Focus on building bonds with this customer set and continuing to cultivate those relationships once they move elsewhere.
- You’re located in a tourism destination. With this you need to be able to form bonds quickly, offer a truly unique product or experience and not only sell trinkets about the destination. You need to be the great store they found when they were… not the souvenir store they got the squished penny from. No one leaves the French Quarter and goes shopping for overpriced New Orleans shot glasses online. But bonus points if you are the great store AND have promotional squished penny’s. Juxtaposed nostalgic shtick always works.
Where Should You Focus
Independent retail online is just as much of a grind as independent retail in a storefront. Are there opportunities that could likely overshadow those in your city or town? Yes. But you know the person who recently opened up near you, that you feel like is threatening to take some of your market share or brands? Bonus tip: if you don’t you definitely are not ready for ecom. There are five of them in every city in America and they all have a Shopify (or similar) site now. Extra bonus tip: learn from adversity. Drill down into what makes you unique and make sure it’s being applied to both your physical and digital footprints.
I’ll tackle all of these in-depth, and more, in future posts. Please tell me if there are any that you could use immediate help with and I’ll try and get to them first. I’ll give a cursory hit to the things you need to be considering right now if you’re on the fence about your ecom operation.
- Why You? You won’t be your best in-store if you don’t understand why you are doing this and it isn’t evident on every rack and shelf, but you can stay open and maybe even turn a profit. But you don’t stand a chance online if you don’t really know who you are as a business. What makes you unique and compelling?
- Why You And Me? After you know who you are, you need to know why anyone else should care about that and find as many threads connecting you to your audience as possible. The great thing about the internet is, not only are there more than enough customers in whatever niche of a niche of a niche you want to focus on, but the more specific you can get the more direct and effective your marketing efforts will be.
- Do you have processes? This is the big scary one that knocks most people off course. Your content, marketing, customer service.. all have to be remarkably process driven. You’re in-store activities really should be too, but you can aw-shucks your way out of a lot in-store. Ecom is much less forgiving. Know all of your workflows. Know all of your timelines. When things aren’t going according to those, know why and see if you need to change them.
- Do you understand the overhead? Be realistic about the overhead. Do you need a third party app to connect your in-store and online inventory? Do you need more filtering than your platform offers? Do you need more reporting than your platform offers? Do you need better shipping options or a chat bot or an email pop up or a loyalty card program? These SAS apps add up. We operate three stores in high rent areas and our break-even online is not very far removed from our break-even in store.
I can still remember running down the stairs screaming “we sold something” to my girlfriend (now wife and still business partner) when our first wallet sold on ETSY twelve years ago. It’s thrilling and addictive. It is absolutely possible to add significant revenue to your business by developing your online presence. Just understand that you are not flipping a switch, you are starting another business.
2 thoughts on “E-Com, And Why You Maybe Shouldn’t”
I really enjoyed your article and the experience and insights it reflects.
Thank you Ralph! I look forward to posting more on this subject but this was getting a bit long as it was.