One of the dangers of owning a business and being the boss is that one can tend to get myopic; you see what you see and know what you know and getting a fresh, outside perspective can sometimes be challenging.
That came to light for me recently while coaching some MBA students. Their big idea? Creating a platform that would be a better way for businesses to offer free demonstrations in their stores.
“What problem does that solve,” I asked.
“It gets people into stores!” they replied.
And that got me to thinking about the state of business in this new decade. If you are going to be starting a business, which makes more sense – an online store or a brick-and mortar store? Well, let’s consider the pros and cons of each:
Brick-and-mortar pros and cons
We hear a lot about the so-called “death of retail.” My take is that there is of course some truth there, if exaggerated. Yes, big box stores like Sears and J. Crew are in deep trouble, but, that said, small business is as healthy as ever.
This is especially true in this robust economy, and that too is no small thing. People have money, and are spending it, and they are still spending it in physical stores, despite what the naysayers say.
Consider the bookstore. If ever there was a type of business that seemed destined for the scrapheap of history, it was the physical bookstore. Such an antiquated, cute notion – wandering and browsing through a shop with a limited number of titles and retail prices.
Not long ago, the headlines screamed that huge competitors like Barnes & Noble were going to put them out of business. Didn’t happen. Then it was surely going to be Amazon who was going to swallow them all up.
That didn’t happen either.
According to the New York Times, “The American Booksellers Association, a trade group for independent bookstores, has grown to 1,887 members with 2,524 locations as of May 15 , the highest participation since at least 2009.”
So that’s the good news. People still like going into stores, and if the store is well run and competitive on price, it can thrive.
The downside is that it is considerably more expensive to own and run a brick-and-mortar store. Labor, rent, insurance, etc. are all overhead costs not matched by their online equivalent.
E-Commerce pros and cons
Despite the above, we all know that the trend in shopping is towards e-commerce. Amazon isn’t Amazon for nothing, and Alphabet, the parent company of Google, just topped a trillion dollars in valuation because of all those little ads pointing people to online stores.
The pros are obvious: People love to shop online and are only going to do more of it. The cost of entry is significantly lower than getting into a physical store. And, for example, with something called “drop shipping,” you do not even have to carry inventory to stock your online shelves.
But the good news is also the bad news. Yes, there are a lot of people shopping online, and yes that is where things are headed. But that also means that there is a lot of competition. Getting heard above the din is no easy feat online. Getting people to your little online store, and then getting them to buy from you and not someone else is challenging.
So, what’s the best choice? How about both? Open a store and sell online. Heck, if Jeff Bezos is now selling both online and off (Amazon Go, Whole Foods, Amazon Bookstores), it might not be such a bad idea.
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can also listen to his weekly podcast, Small Business Success.© Steven D. Strauss.
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