How Best to Expand: Internet or Add Location
SRT-Jan/Feb 2020
Recently a client of mine posed an interesting question. She asked “In order to expand my business would it be better to invest in the internet or open another location?” Clearly there are many areas to explore prior to making a final decision so let’s begin with the online opportunities.
Online Opportunities
In today’s world of retailing having some sort of online presence is an absolute. I am referring to an informational site that tells your customers about your store hours of operation directions of how to find the store an overview of brands carried services offered upcoming events and perhaps even a blog to communicate with customers. Providing more information increases your chances of showing up in the organic (not the ads) section of Google. Most will agree that at the very least every store of any consequence should have an informational website.
Should you wish to advance the story you might rationalize that it would be a great marketing ploy to add a shopping cart since 10% of all retail sales are done via ecommerce. On the surface this makes sense. After all you are exposing your products to the virtual universe. You might think it would be great to have a customer in Montana discover your store in Michigan. Great idea or is it? There is much to consider before deciding if jumping into the online ocean will be a good financial move or one that will leave you fodder for the internet sharks.
Considerations
- Competition: Since about half of all web sales come from Amazon they are currently the gorilla in the room. Know that if you play the Amazon game the low price gets the “buy box”.
- Amazon fees and the fact that a substantial amount of inventory dollars must be allocated to the Amazon warehouse.
- Also consider that if Amazon stores your inventory you will be charged for that as well.
At this point
Perhaps you have decided that Amazon isn’t for you but you still want to offer your customers the opportunity to buy from your site. Competition however is still an issue. Consider the fact that you may very well be competing with your best brands who have all of the styles sizes and colors available. Some of them may be selling your same styles for less than you are charging or offering your customers perks that you might not even be aware of (but you will because your customers will tell you).
Competitive Pressures and Costs
If you have decided that you can live with the competitive pressures can you handle the costs involved? First of all you must have the internal structure dedicated to:
– Maintaining the website
– Keeping the inventory current
– Hosting the site
– Integration with the POS system
– Potential data breaches
– Dealing with customer emails and phone calls
And the list goes on. Next comes SEO or search engine optimization charges to promote your site which would include Google Adwords.
Returns and Delivery
Consider also the fact that a minimum of 30% of online purchases are returned versus only 9% to brick and mortar stores. Will you offer same day delivery? Free shipping? Free return privileges? All represent additional costs and time.
The Case for Brick and Mortar
It’s hard to build customer loyalty enjoy the interaction of good customer service and experience proper fit when the customer is sitting behind a computer ordering shoes in his or her bathrobe at midnight. Most good retailers will claim that they can actually save the customer time by culling the vast assortment of available merchandise to only the best of the best. That is why they have buyers. They want to work with the customer to understand their individual needs and wants and ensure they have the proper fit. Among the chief reasons to shop in a store are for advice service and expertise.
Making Online Selling Work
There are ways to make online selling work.
One retailer I spoke with
is careful to buy only styles that are NOT being sold by the vendor directly to the customer. She also avoids what the major stores are buying by specializing in a unique “one of a kind” approach. To do this the store may buy special materials and order different colors.
This store has been able to greatly reduce the online return rate by incorporating the personal service with online customers that they would in store. One way is by offering known size variances on the store’s website. They will also go as far as to have sales associates call online customers if they feel that the customer does not understand the fit nuances of a particular shoe.
Depending on your size and setup
online services like that of Shopify or Bigcommerce might be a more cost-effective approach to internet selling.
BORIS
The acronym stands for buy online return in store. Current data suggests that over 50% of both fashion and footwear retailers offer this service. Customers like this because they can avoid paying for return shipping and save time not to mention the added convenience of getting an immediate refund or exchange for another product.
The Independent Retailers and the Boris Service
The independents that I spoke with that offer the boris service prefer to do this only on exact styles that they currently carry except under extreme circumstances. Most independent retailers are not set up to take back styles not part of their assortment even if the brand is carried. This seems to make sense since no retail should be expected to absorb individual pairs of style they don’t offer. They will however use the opportunity to interact with the customer and reiterate the reasons that the store should be considered initially for future purchases.
One retailer I spoke with actually gained a lifelong customer by taking back a defective shoe that a competitor wouldn’t. He did carry the line but not the style in question. He actually gave the customer a new pair of shoes. The customer was so thankful she bought multiple pairs and the retailer was able to return the defective shoe to the vendor. Sometimes things work out as they should!
Online Strategy Considerations
Whether you decide to:
- Add a shopping cart to your website to sell online
- Use an online service
- Simply keep your site informational
Remember the main objective is to get the customer into the store!
Ritchie Sayner
Summary
The article explores the decision of whether to expand a retail business online or by opening a new location. It highlights the necessity of an online presence and considers the challenges and costs associated with e-commerce such as competition with major players like Amazon and handling returns. Additionally it discusses the benefits of brick-and-mortar stores in building customer loyalty and providing personalized service while also touching on strategies like unique product offerings and the BORIS service to enhance online sales efforts.
“Whether you decide to add a shopping cart to your website to sell online use an online service or simply keep your site informational remember the main objective is to get the customer into the store!”
Real-World Examples of Business Expansion Decisions
Deciding whether to expand a business online or through additional physical locations is a complex decision. Here are some real-world examples illustrating different approaches.
- A local boutique in New York City decided to expand its reach by creating a comprehensive online store using Shopify. They focused on offering unique exclusive items not available through major retailers which helped them stand out in the crowded online marketplace.
- A family-owned bakery in Chicago opted to open a second location in a nearby suburb rather than going online. They found that their personalized customer service and the sensory experience of visiting their store were key to their brand which could not be replicated online.
- An independent shoe retailer in Los Angeles implemented a BORIS (Buy Online Return In Store) strategy. This allowed them to offer the convenience of online shopping while maintaining the personal touch of in-store customer service ultimately increasing customer loyalty and satisfaction.
