Merchants Trade Retail for E-Tail
A growing number of retailers, many of them small independents,
are trading in their bricks for clicks. A report on the website of The Morning
Call in
Allentown, PA said those making the switch find they can operate less expensively
while having access to a much larger number of customers than they would in
a downtown store or mall location.
Dawn Kunkle is one of the merchants that has
made the change. She recently moved out of space she shared as part-owner of
Girlfriends Boutique in Bethlehem.
"I no longer have confidence in stores and wanted to take it all online," Ms.
Kunkle told The Morning Call. "I’m being able to branch out and
bring in my fashion lines that I could not afford to do with only 600 square
feet at Girlfriends. Now my inventory is unlimited."
Ms. Kunkle runs her
business from home. None of the 900 items she sells are stored on site. Everything
is shipped directly from the product suppliers to her customers.
"Stores are too limited because they have to deal with space and they
worry about carrying inventory into the next season," she told The
Morning Call. "With this I won’t have to deal with that and I will
never have a sale for something left over and have to guess what sizes people
are wearing to fill my store."
Charles Marinello, a principal in Retail
Initiatives Consulting Group, told the paper that not all indie retailers are
ready to give up on stores.
"Online consumers know what they want and they are generally price shoppers," he
said. "Online sales doesn’t work for all items like some trendy clothes,
large furniture and things like that. The family businesses and those types
[of smaller] stores have the advantage because they have customer service and
people will still want to see and touch things they buy."
Discussion Questions: Will we see an increasing number of
independent retailers going strictly e-tail in the near future? Do you
see any large chains making e-commerce the primary selling channel in the
years ahead?
For most large chains (especially those with an existing bricks & mortar footprint), multichannel retail seems to make the most sense. The website provides an important avenue for brand marketing, a platform for social networking, and (most important) a method to drive sales with broader assortments than the physical stores can carry.
For smaller specialty stores, however, I think it’s a harder choice: Is it easier to cultivate the same kind of “brand loyalty” with a website only, without the parallel advantage of a store location and human interaction? I’m not so sure, especially in the cluttered world of specialty apparel retailing.
If done right, it costs significantly less to operate an online store and online stores offer access to a much larger pool of consumers. Both could be advantages for small independent retailers. Those retailers moving from offline to online can get their brick and mortar fix by opening a pop up store during key retail seasons.
It’s hard to argue with the notion that e-tail is and will most probably be the fastest growth channel in retailing for the foreseeable future. The costs are lower and very leveraged, the reach is greater, there are plenty of reasonably priced development and hosting sights; in short, the risk factors are much less for e-tail.
Most importantly, it’s the fastest growing segment. Holiday sales on the net are forecast to be up over 12%, a multiple of the forecast for 4-wall. There will always be some categories that make more sense in 4-wall. If I were starting out, however, I would go first with e-tail.
If your expertise is product selection/assortment and not real estate and logistics, then it makes a lot of sense to be online only. The internet has changed the definition of what it means to be a retailer and what is required to be successful. Look no further than Amazon’s marketplace and its 10m+ SKUs.
We’ve seen this before so it’s no surprise. When you’re faced with limited funds and you’re looking at investing in online or a store, it’s pretty obvious which you can do for the lowest initial funds, and therefor less risk. But I think the draw to have a store (or stores) will still be there. However, how these new retailers envision their stores when they hit the $100M or so where stores become attractive will be interesting–because I don’t think it will look like today’s stores at all.
Big or small, you’ve got to have both. And, BTW, you’ve got to integrate them. The in-store and online experience have both got to look and act the same; be symbiotic. You’ve got to have QR codes in the store that link back to your site and talk about product benefits. You’ve got to have incredible service with both face-to-face and in the ether. You have to have a BRAND that works at every customer touch point. There is no choice really…that is, if you want to succeed past paying your rent.
This is what modern retail is all about now and what retail has always been about: hard work!
Small boutique stores face hard choices, but the decision to go online is a difficult one. Online extends the store’s reach at a much lower cost, yes, but creating customer trust and experience for clothing is best done on-site, no matter how small. The other concern is that the number of competitors increases enormously as the online community exists nationwide, and price, selection, and service become the comparison.
Small indie retailers cannot compete with Amazon and the like. I posted about this a while ago with several reasons. For the woman who is cited as a great example, what does she bring to the table if everything is shipping from a supplier and she has no risk? Why would this be a smart model unless you had all the SEO of the giants?
Grasping at straws is not the answer. What unique service do you bring to the table? If you can’t answer that in your bricks and mortar, you probably can’t do it online either.
What am I missing here? This article seems to advance the idea that running an online apparel store is a piece of cake compared to its brick and mortar counterpart. Au contraire! While online doesn’t have the payroll and inventory concerns of B&M, it certainly is not without challenges. Fulfillment, returns, and shipping are all minefields for the online retailer that with one slip up can erode profit and turn potentially happy customers into tweeting, yelping, critics. And, what about the challenges and cost of customer acquisition?
In the long run, I think most small apparel retailers should stick to brick and mortar where they shine with their ability to connect personally with their customer and community, and utilize online to enhance their connections to their community through social networks.
Let’s be clear about what we’re talking about. We’re not talking about multi-channel retailing. We’re talking about abandoning one business model, which requires a relatively high investment, for a completely different business model which requires only a fraction of the investment.
For all of the struggles of independent retailers in the past couple of years, including many deeply in debt, jumping to an online-only model is hardly a panacea. While the cost structures of an online-only business are compelling, the challenge of building an online presence and a consistent revenue stream are daunting. And as Charles Marinello suggests in the piece, the online model is becoming increasingly price driven, which means margins are going to be under perpetual pressure.
Independent retailing has never been easy, and it does require a significant investment, but there is no shortage of opportunities for those who recognize that the most successful independent retailers focus on building and sustaining relationships with their customers rather than merely selling stuff. Their online presence extends that focus, and their reach, but they recognize the power of in-store personal interactions to forge and deepen those relationships.
This is only a natural occurrence as technology becomes cheaper and more of people’s time is spent in the “virtual world.” Putting a presence on Main Street is no longer the publicity getter it used to be. Get your store linked to a 10,000,000 hit YouTube video and you’re ready for doing business.
The scary thing about all this is that with retail traditionally being the largest employer, who is going to buy all this stuff if a retailer becomes one person filling orders from her basement?
If one was an independent retailer in small town, USA, they could immediately increase their reach to the rest of the country and the world by going online. Their objective could be quite simple, make more money online than it costs me to do that business. If they have a unique proposition, all the better. If they are not terribly unique, they probably aren’t doing well in any case.
Many independent merchants have found, like the interviewee in the article that this adventure into online retailing not only expanded their business, but was so profitable that it no longer paid to have an open store.
If someone has a unique retail idea, rather than start with a brick and mortar store, try it out on line. If there is no audience on line, their will be no audience walking by on the sidewalk.
In 20 or 30 years, online retailing will be the primary source of sales for many categories and may even surpass brick and mortar in terms of revenues. Online retailing has a sustainable competitive advantage versus brick and mortar. Stores will evolve into places to touch and feel and will not be retailer’s primary place to move merchandise.
With online shopping, the retailer can do so much without having to worry about training the associate to cross-sell. For instance, when purchasing an item, showing other items that go with it, etc. Customer service would likely be better; no waiting in long lines to check out, etc. The e-tailer would have to focus on their distribution operation to make sure the orders are sent out efficiently and accurately. Frustrated consumers who get the wrong product shipped to them will be likely be lost and not easily reacquired.
It’s quite a stretch going from 600 square feet downtown and transferring that to cybertown and immediate success. Could it happen? Sure.
There may, however, be a different model, much more worth discussion. That would be the reverse model which has also occurred and may be more likely in the future. Clicks to bricks. That is, how successful will online retailers be in transferring their success to bricks?
I suppose defining success is different for all businesses, but is it just exceeding sales once generated from 600 square feet? That might be easily possible. Nevertheless, I don’t think we’re talking about mega cyber success here, are we?
Retail is never black and white. It’s a thousand details. To be successful online today is not just about setting up a site “and they will come.” A well developed ecommerce site is not cheap and the processes that go into driving people to that site take a structured commitment that I find very few on the small end are willing to tackle.
A proper online strategy (key word here) is complex and different from a B&M strategy. Getting properly noticed in a world of millions of websites is not an easy task. Looking ‘Mickey Mouse’ online is as bad as having a crooked sign and a messy store. People walk on by or click on by. Just going online because you cannot afford to do a B&M store is not a strategy.
When I first read this I was recalling Linens ‘N Things. They went from bricks to clicks. I do not know how successful they have been with the change but it was necessary in order to survive. In their case, they had already established a strong customer network that was instantly available to follow them online. Thus instant sales.
In the case of the independents deciding to use only clicks, it will only work successfully if they have a strong and vast network already established. Without that, they will need a lot of staying power before the business will take off.
I tend to believe that the combination of brick and click is far stronger than etail-only models. In my opinion, it legitimizes the operation.