As physical, brick-and-mortar retailers contemplate the online marketplace, they should consider their online stores in the same sense as if they were building another physical location. While it probably won’t be nearly as expensive to begin selling online as it is to build another physical outlet, the same degree of planning is involved.
The article in the second installment of series where I assist physical, brick-and-mortar retailers migrating online. The first installment, “How Small Brick-and-Mortar Retailers Succeed Online; 4 Keys,” we published last month.
Here are five planning tips for brick-and-mortar merchants to consider prior to opening their first online store.
1. Analyze Your Resources
If you’re a busy retailer, you’re likely working long hours. It’s tough running a retail business, and the last thing you can imagine is piling more work on top of your plate. So, look around. If you have employees, ask them what experience they might have with computers, design, social networking and advertising. Even those with nothing more than an internship at an ad agency probably picked up enough to contribute.
Almost everyone I talk to has a relative that “builds websites.” If you have one of these in your family tree, talk with them about your plans. But before engaging them to help you, emphasis the importance of your objective and ask them for examples of their work, just as you would any outside provider.
Also, you have to consider not only the initial creation of your online store; the ongoing operational aspects of running an ecommerce operation means processing daily orders, managing online advertising, answering customer inquiries and updating product information. These are all functions of your current retail operation.
Start out by cross-training your current staff to handle the online equivalent of their off-line responsibilities. For example, whomever handles customer inquires should respond to emails from your online customers; the person who manages product marketing in your store could learn how to update your online product presentations. Use the experience and knowledge you currently have in-house.
2. Consult Your Suppliers
You may find that not all your suppliers will allow you to offer their products online. Usually most of them will, although they may have stipulations regarding price, presentation and shipping. While the number of distributors who drop ship is growing, there are still many in niche markets that don’t. To sell their products, you will have to maintain an additional inventory in your current store. The good news is that in the beginning, you can sell directly from your current inventory until you get a sense for what is selling online (which may be different from what sells in your store).
Depending on your niche, many manufacturers are trying to protect their brick-and-mortar retailers by enforcing MAP — the “minimum advertised price” — policies. These rules mean that online stores cannot publicly advertise prices below a certain price level.
Does MAP pricing mean you can’t compete online? Not at all. Learn to love MAP pricing because it means you do not have to compete on price with larger online competitors. Everyone plays by the same pricing rules. However, as a niche-focused retailer, you have an advantage over larger, more diverse online stores: your expertise. Leverage your specialization and product knowledge to show customers why buying from you is a safer alternative.
3. Review Your Banking Arrangements
Even if you enjoy a good relationship with your current bank or merchant account provider, taking credit card orders online means higher merchant rates due to the fact that there is a perceived higher risk. Over the past years of operating ecommerce businesses, we’ve only had less than four instances where we actually lost money on an online transaction due to fraud or card theft. Our total losses amounted to less than $2,000 over six years. With proper monitoring in place — who buys twelve blenders to be shipped to an apartment? — you can keep your losses to a rate lower than what you’re losing in your brick-and-mortar store. Nonetheless, credit card issuers charge from .5 to 1.0 percent more, depending on the type of card used, such as rewards, perks, and debit.
Check with your bank on what rate and terms it offers for online purchases, but don’t be afraid to shop around. Be careful, though. As with most important services, check with others who sell online for referrals. Unscrupulous merchant account representatives can sign you up to a multi-year commitment full of hidden charges and add-ons.
4. Consider a New Online Brand
Sometimes we take a brick-and-mortar client and create a whole new online business based on its offline niche, but with a different brand image or market focus. For instance, a brick-and-mortar retailer selling high-end watches might want to leverage their distributor relationships to sell mid-range watches nationally, while not diluting the brand image of their brick-and-mortar store. Creating a new online brand is one way to do that.
Gap, the worldwide clothing retailer, created a solely online store, called Piperlime, to sell footwear and handbags. Some of these products were already in Gap stores — including Banana Republic and Old Navy — but instead of building hundreds of brick-and-mortar outlets dedicated to shoes and purses or associating their off-line brands directly with this niche, Gap chose a new brand strategy.
5. Create a Laser Focus
I spoke with a brick-and-mortar retailer once who sold home furnishings — everything from unfinished furniture to oriental rugs. His local clientele was as eclectic as his product mix. Instead of trying to offer everything he carried in his online store, we found through niche research that one group of products would perform well. His plan then became to create an online niche store and later, once he had online retailing experience, he would create additional stores to offer his other products. Each site would develop its own niche audience, as well as cross-promote to the other stores.
I’m convinced by my experience that brick-and-mortar stores have distinct advantages when it comes to selling online. However, selling online has its own requirements. Invest in time and energy to assess your current assets, investigate possible third-party expertise, and focus on one initial online concept.
In my next article, I’ll discuss different strategies for getting online, from the do-it-yourself to outsourcing, and the pros and cons of each.