Most retail brick & mortar (B&M) stores, no matter how small, have some kind of online presence. The web has not only made it easier to stay connected with, and extend rewards to, loyal customers, but it has also allowed many smaller retailers to extend their reach beyond their local community. But for those entrepreneurs who are contemplating closing their physical storefronts and taking their business completely online, you must be able to differentiate your products from the crowd if you want to compete with established players like Amazon.
According to U.S. Census data, growth of e-commerce sales is surpassing traditional retail offline sales at a faster rate, so it makes sense for B&M retailers to have a 24/7 e-commerce site. However, attracting that virtual traffic requires just as much, if not more, planning and research as setting up a B&M. “Most companies new to online business have unrealistic expectations of their marketing costs,” notes Andreas Huttenrauch, managing director of Globi Web Solutions, a Calgary, Alberta-based web design and marketing company. “Because the barriers to having an e-commerce store are low, competition is high, and advertising becomes very expensive.”
While closing the doors of your B&M can eliminate fixed overhead like rent, utilities, equipment and insurance, and significantly lower payroll costs, keep in mind that other expense, like search engine optimization (SEO) and search engine marketing (SEM), do not come cheap. “Positioning your brand and products for optimal traffic can equal or exceed print advertising,” says Huttenrauch. And you must target the right customers to begin with to help turn that virtual browser into a paying customer. “You need to have a unique selling proposition that differentiates you from the crowd,” Huttenrauch points out. “The moment you can stop people from comparison shopping, you have a leg up over your competitor.”
Smaller retailers usually find it difficult to completely shut down their B&M stores. “Those that can tie to their customers geographically, with a physical location have a much better success rate,” says Huttenrauch. “Unless your brand is well known and has more trust in the marketplace, consumers will go elsewhere.” So, it’s important for retailers to highlight their physical locations, even if market conditions have forced them to close. “Showing pictures of your stores, staff, and its history on your web site gives people comfort that you’re not just a guy selling stuff out of his basement,” notes Steven Antisdel, founder and managing partner at Precept Partners, LLC, an Internet technology, strategy, and consulting company in Benton Harbor, Michigan. “Online, trust is queen of the realm.”
Before he got into the consulting business, Antisdel was vice president and general manager of Bookout Furniture, the largest furniture store in southwestern Michigan. In 1996, he launched an e-commerce site called FurnitureFind.com, one of the first furniture retailers on the web. “Opening an online channel helped us grow significantly, over 1,000 percent between 1997 and 2000, as it allowed us to expand from a regional to a national market,” recalls Antisdel. “We did a lot of systems building and modified processes at every level to manage that growth.” In 2002, after going through private equity funding, a merger, a spinoff, and surviving the dotcom boom and bust, FurnitureFind.com emerged as one of the few and largest furniture retailers remaining on the web. By 2003, a venture capital firm bought both the B&M and online businesses, and subsequently sold them to another group that closed the B&M locations but maintained the online site.
Because his business was among the first e-businesses of its kind, Antisdel was asked to speak at various trade and online conferences about how his company made the transition to e-commerce. This eventually led him to consulting with other companies on how to optimize their online channels. “We don’t hear very often of businesses trying to close their B&Ms,” notes Antisdel. “It’s usually a good competitive advantage to have had the challenges of working with real customers. It enhances your credibility online.”
Richard Sutton had the advantage of nearly two decades as an established retail purveyor of Southwestern and Plains Native American art and jewelry in downtown Cold Spring Harbor, N.Y. when he began experimenting with an e-commerce channel for Kiva Trading Company in 2005. Sutton had actually set up Kiva’s web site in 1995 as a way to drive traffic to his store. “When Google became a player, their search engine was strongly driven by informational material related to key words,” Sutton points out. “For many years, our site would come up in the top five.”
Kiva’s history on the web initially helped drive traffic to the site. Sales online exceeded in-store sales by 20 percent within a year of activating e-commerce on the site. During that time, lower sales due to pre-crash jitters and a new landlord were making it difficult to keep his Long Island retail gallery open. In September 2007, Sutton closed its doors. He was able to save nearly $60,000 in operating costs by eliminating commercial rent and utilities, print advertising, and insurance, as well as the cost of paying a part-time employee. “When the financial bubble burst, we were already set up to continue as an online-only venture with a national customer base,” he says. Sutton was able to pass on the savings to online customers by offering his products for 30 percent less than in his store.
Sutton’s business is unique in that he sells one-of-a-kind pieces, so there are no repeat sales. After testing an Amazon virtual storefront, he set up an eBay store through his site and then added an online catalog for customers adverse to the bidding process. Sutton was able to monetize online traffic using tools like Google AdSense and set up a graphic dictionary of American Indian symbols, which is still unique online and helps drive a lot of traffic to his site. “The cost of paying a marketing service to tweak your SEO is too high for most small businesses,” notes Sutton. “It’s critical to know how to do these things on your own to keep costs down.”
Sutton attributes his successful transition to e-commerce by narrowing, not broadening, his offerings in a unique market niche and his ability to adjust to changes in the market and technology. “Wearing a lot of hats has kept our business alive, even during the really bad years,” he explains.
As Antisdel points out, whether you have a physical or virtual storefront, success depend on your business’ ability to ‘pivot’. “Lots of e-businesses start out as one thing, but the market moves in another direction,” says Antisdel. “The biggest reason for failure is when a business is too rigid in its thinking to serve the market differently or serve a different market.” For a B&M, shifting your business online can open up whole new markets. But it’s best to test your products to see that they can compete in the virtual marketplace before closing those doors.