Small retailers have had to battle against big box stores for decades, and small internet retailers face similar challenges against the discount ecommerce websites. How should small retailers position themselves? Should you launch an internet retail store to gain additional customers and sales? Or will your new ecommerce website suck time and money away from your core business?
In today’s article, I want to look at whether you should consider using an ecommerce solution for your small retail business.
In 2010, researchers from The Ohio State University1 conducted a survey of small, independently owned rural retailers and identified seven factors that formed retailer beliefs about internet use in their business:
- usefulness (strategic positioning and operational effectiveness)
- business growth
- ease of use
- e-commerce optimism
- e-commerce pessimism
- and control of time
Retailers were clustered into 3 groups based on the survey response and their beliefs. The largest group (42.5% of the sample) was the optimists: those that were “optimistic about the impact the internet would have on growth potential for the business.” The second group (28.33%) was the efficiency-minded: those who “had negative beliefs about usefulness of the internet and growth potential of the business via the internet.” The third group (29.17%) was the skeptics who “showed very strong pessimism about ecommerce and indicated they were unlikely to comply with views of important others in regards to using the internet for the business.” In which group do you fall?
Below I outline some pros and cons of setting up an ecommerce site and share ideas of others. To be clear, what I mean by ecommerce is the ability to transact sales over the internet. Regardless of whether you have an online shopping cart, it should go without saying that you should have a website and optimize your site for local searches (perhaps I’ll discuss local seo – search engine optimization – in a future article).
PRO: The promise of ecommerce is that you can make money while you sleep. You can sell to customers all over the world.
EXAMPLE: An online store is suitable if you have exclusive or niche inventory. For example, let’s say you’re a fly fishing store that also makes customs flies. Attempting to sell your rods and reels in an already saturated online marketplace might go nowhere, but selling your custom flies might prove more marketable.
CON: Having an online shopping cart does give you these opportunities, but like your brick-and-mortar store, it’s not just a matter of “build it and they will come.” Carving out a share of the online marketplace requires marketing skills and resources.
PRO: An internet retail site can generate sales from your existing customer base.
EXAMPLE: One bicycle retailer uses their online store to sell bikes in their store. This is how it works. A customer comes in the store looking for a bike. The sales person shows the customer what they offer. The customer says s/he needs to consider it further. The sales person says fine and gives them a card with information about the bikes they looked at and their store website. That night, the customer goes online does some research on the bikes and decides on a particular model. The customer goes to the store’s website and makes the purchase right then. The next day the customer returns to the store to pick up their new bike.
PRO: An online store can be an outlet for stale inventory. New old stock that has sat on your floor for way too long may not be interesting to your store customers, but someone out there may be looking for just that item.
EXAMPLE: Little Independent is a new online marketplace for independent retail stores for just these kinds of items. Bike shops will often use an Ebay account for clearance or closeout items.
CON: Have you ever looked up a price online for an item you sell and seen it priced lower than your wholesale cost? It’s discouraging to say the least. The online marketplace is saturated with discount options, but keep in the mind that people don’t just buy on price.
EXAMPLE: According to a NY Times article on internet retail: “Powell’s Books offers a subscription service through which it chooses a new book and includes an extra item like a related book or candy — personalized touches that it says big sites can’t match.”
PRO: The technology is available and low cost. Integrations with common point of sale and accounting softwares are also easy to find, keeping operational headaches to a minimum. MerchantOS, for example, integrates with Shopify, an online shopping cart solution. For $30 per month, you can try having an online store. Expense-wise, there is little risk in trying an ecommerce solution.
CON: While the technology cost barrier is relatively low, promoting and growing your online store will require your time, staff and resources. Could your time and resources be better spent on your existing sources of revenue?
If you already have an online store, we’d love to hear from you in the comments. Has your store been successful? Would you recommend setting up an online store?
Are you considering opening an internet retail website? What factors are you considering in your decision? How do you plan to market your site?
1 – Leslie Stoel, SoWon Jeong, Stan Ernst, (2010) “Beliefs of small, independently owned rural retailers about internet use: a typology”, Marketing Intelligence & Planning, Vol. 28 Iss: 1, pp.88 – 104