Editor's Note: We welcome Bret Williams as a new contributor. He is founder and president of Novusweb, an ecommerce development firm. He is also a former online merchant. His contributions for us will focus on the issues faced by small, brick-and-mortar retailers when they migrate online.
Among the fastest-growing segment of new online businesses is local brick-and-mortar stores migrating online. In this series, I hope to address the challenges and opportunities locally-owned businesses have when exploring the online marketplace.
You Can Beat Walmart
Throughout the latter half of the twentieth century, towns all across America saw local businesses affected when Walmart built a store there. Some cities claim that Walmart decimated their downtowns, driving most local retailers out of business. Whether this is true or not, the perception is that once Walmart opens up in your town or neighborhood, it’s impossible to compete on price or selection.
But the same fate doesn’t await local businesses that sell online, recognizing that Walmart.com is a major online competitor. Even Amazon.com can’t prevent enterprising small businesses from capturing a profitable segment of the online marketplace.
Let’s consider four reasons why this is.
1. Controlled Product Selection
A lot of local businesses offer specialized products. Many can’t be purchased from Walmart, Sears or other big-box retailers. We’re seeing more and more manufacturers — particularly of high-dollar, top-quality products — only allowing existing brick-and-mortar retailers to sell their products online.
2. Price Protection
As with selection, manufacturers are enforcing "minimum advertised price" (MAP) policies. While not restricting the price at which the product can be sold, MAP does restrict the price at which the price can be advertised, including on the web. This means that all online retailers must promote products at a price no lower than the established MAP for the product. While many consider MAP policies to be somewhat collusive in nature, the fact is that MAP helps smaller retailers by protecting profit margins and forcing everyone to compete on non-price issues, such as product information, service and support, site usability, and product availability. These are the more important aspects of buying online, but too often overshadowed by disreputable price discounters.
I once owned American Dictation, an online business selling professional dictation and transcription equipment. We did quite well, despite the fact that there were over 150 direct online competitors. Aside from the advantages of restricted availability and price protection — which all retailers in this niche enjoyed — we consistently succeeded by providing product expertise. As simple as it may appear, using a digital dictation recorder instead of a tape recorder created many questions among our target group of doctors and lawyers: “How do we get the voice file to the transcriptionist?” “Is it safe to email voice files?” “What size memory card will we need?”
By offering a toll-free number during normal business hours and really knowing our product, we converted at least 80 percent of the calls to actual sales. Local specialty businesses can do the same. They have the expertise to not only handle sales calls but to create wonderful, informative content for their online store.
4. Niche Market
While large online retailers like JCPenney.com, Walmart.com, and Amazon.com offer thousands of product SKUs, local businesses that sell online might have anywhere from a few dozen to a few hundred. In fact, more than about 200 key products is difficult to manage in terms of keeping product information fresh, unique and up-to-date. Even if, as a local business, you do carry thousands of SKUs, consider segmenting your online sales into more discrete niches. The reason — and the reason so many people are researching for niche site ideas — is that online shoppers search for products, not sites.
If I need an Olympus digital voice recorder, I would search in Google for “Olympus digital voice recorder,” not “recorder website.” I might for some products go directly to Amazon or BestBuy.com, but if I’m seeking a niche product, I’m probably not going to find it at these sites. (In fact, you can’t buy professional Olympus digital voice recorders at these sites.) So I will end up going to Google to search for the niche item I want.
As a brick-and-mortar retailer, especially in a city or suburb, you’re likely in existence because you offer a niche product or service that is not provided by your big box competitors. Your specialty gives you an advantage. It also gives you a leg up over non-brick-and-mortar online stores that pretend to be product specialists.
It Begins with Purpose
Before you rush out and start up your new, online storefront, however, take time to plot and plan your attack. Don’t just dive in and open a Yahoo! store, or set up a Google AdWords account just yet. If you can have a bit of patience, I'll cover in this series of articles all aspects of how to expand your customer base from a 10-mile radius of your strip center to the entire U.S., and beyond.