How does one transition to an online store?
A close friend had to close down his toy shop business a few weeks ago. He was devastated. Despite spending over $10K on a new but basic website, he couldn't compete with other online store on traffic or price, partly because he was still running a physical store which means higher overheads, and partly he's new to the online world, but there's where his customers are. What would you do if you were in his shoes?
I don't think that paying $10K for the website is necessarily the problem as this is a fair rate subject to what was done and without seeing the site or knowing what that Web agency did for that I would not be able to make any judgment. Putting an eCommerce solution together can be very involved and is not about slapping together a few pages and uploading a collection of images and descriptions of your products.
As has ben suggested you can't expect results overnight and particularly if you don't have a point of distinction in a very competitive market. Toy stores have been a losing business sector for over 10 years and I would suggest that yur friend needs to examine the viability of the business as a whole before doing anything - is there really a market for what he has or has his competition got it tied up so well you just don't have a chance. I would suggest he closely examines his business plans and validates the assumptions within those plans first. If the plan seems to stack up I would then do some indepth marketing research and analysis and work confirm your business assumptions even further and subsequently establish a marketing strategy and plan.
At this point if everything still presents a strong enough case to proceed with the business put it all in action. The website will only be one part of what needs to be done and it may need to be revisited from the perspective of market positioning, content copy and marketing.
It sounds to me, and this is a big assumption on my part, that your friend may not have done too much of this and that he needs to go back to square one. If the business model and plan don't stack up then he needs to consider what to do with the stock he has. I so often see people persist in a business tat they are passionate about but really it needs more than this. I had an old friend from 20+ years ago who owned a large toy store in a good area that used to do well but in the end he realised that there was no future for independent toy stores - and that was 25 yrs ago so today I could imagine that it is so much harder.
Hi Phil, It's definitely a difficult time for retailers, both offline where sales are flagging and customers aren't walking in the door, or when they do they take a shot of your product and disappear to find the best price online.
Modern retailers need to be smart. This involves significant investment in their online store. Yes you do need to spend $10K+ to have a powerful sales tool to support your business. However this is not just your website.
You need to invest in a strong and distinctive brand, a professionally designed and user-friendly website, good quality product photography, a copywriter, and importantly thorough and ongoing targeted SEO. This last point is very important. Your friend may have had great products and competitive prices but if he's not ranking well in search engines he's not going to get traffic, and consequently low traffic means low conversion.
Having a bricks and mortar store is not necessarily a burden. The most successful online stores are generally those run by businesses with both an online and offline presence. The trick is to focus on all of your channels, including printed catalogues, direct mail and other types of advertising, social media integration, SEO (again!), all tied together with effective and memorable branding... and service!
Thanks Suzie, great insight, esp about focusing on SEO and an integrated approach to running both an online and offline presence. You made a good point about customers looking at a demo offline, then disappear to find the best prices online. What tactics do you know of that retailers employ to counter this? Also, my friend found that he couldn't just put offline prices up on his online store, because it would not be competitive, but the overhead from his offline store remained a burden and cannot be discounted. That was a real dilemma for him and, I assume, for many retailers too. Thanks for sharing.
Get good advice.
Firstly paying $10k for a basic website is an absolute ripoff. These days you can get good brand name ecommerce solutions from $20 to $50 a month. So he first needs to find someone who can tell him what and what not to spend his money on.
The second part is just basic business. If he wants to succeed online he needs to differentiate himself, find out what the customers want and give it to them. The rules don't change that much just because you're online.
Finally, success online doesn't happen overnight. You have to work at it, and I mean really work at it.
Realistically it will be at least a year before he'll see significant results, and maybe even two years.
Thanks Mark. Yep, I had the exact reaction when I heard how much the basic website cost. It wasn't even properly integrated w FB where most of his target market would be. The problem with getting good advice, is knowing where to find it. For those among us who are new online, finding our way around is no small feat. Google will just give you a dump of information that you have to go away and decipher yourself. And he obviously paid a lot for advice, except it wasn't good advice. I like your point of differentiating his business, but going online also meant that he was competing globally instead of Sydney West, and competing against the price of ridiculously cheaper imports. In his industry, quality and customer service isn't exactly top of mind for impulse buyers. Differentiation has suddenly taken a whole new meaning. You're right, success online takes time to build. In his situation, it has taken a lot more more than 2 years, but sadly with no end in sight. Juggling looking after a physical store, and constantly looking for practical (and inexpensive) help to be successful online just wasn't easy. Thanks for sharing.
I deal with one client who recently made the transition from running:
1. Online Store
2. Off Line Store
3. Running in home parties for her product.
She realized that the off line store in the city was costing big bucks to run and the margins were not as good as her online store and her in home parties. So she shut down the offline store and now just runs the in home parties and the website.
In the end of the day it is all about your strategy, I think the best thing is to run an online store for a while and make sure that things are done correctly. Make sure you have the right PPC and SEO strategy in plan. Make sure you have the right content and most of all MAKE SURE you have cash flow before you shit it down.
Thanks James. Yep, shutting down his offline store, and keeping his online store would ideally be the way to go. The problem he had was that his online store never really took off, so he couldn't make the transition like your client did. Btw running home parties for her products is a great idea! I think he would have benefited from doing something similar. I like your point about having a good strategy, and I think that's what would have made the difference, except that finding good advice, let alone those who can help him with a good strategy, was an ongoing challenge for him. Thanks for sharing.
Yeah well the client I deal with they actually purchased the business from some one else, who set up the online store and the offline business. The new owners set up the in house partys and developed the online store further. I actually use to work direct for the old business owner so thats how I got the work with the new owners aswell.
I have dealt with a few businesses that have found themselves in this position. All the previous answers offer good advice but the ideal is that your friend already has a website that customers are using - however, I am guessing this is not the case?
The other key is to utilise any previous customer data - again, I presume some sort of CRM which can be leveraged to kick start the new on line business?
If none of this exists then it will be like starting from zero and having to utilise all the social media sites for leverage and also not forgetting some of the 'old fashioned' methods such as networking in the right areas and identifying the target market. Get into schools, mothers groups, day care etc with your brand and product info.
Peter
Thanks Peter, he did have a website which customers were using, except it wasn't attracting enough traffic or new customers. Good pt about piggybacking on existing customer database. He has a database, but like most retail shops, wasn't exactly accustomed or disciplined in keeping customer records. His goal of setting up an online store is to get new customers online. And you're right, in many ways, it's like starting from scratch to build up a loyal following again, only this time it's more focused online as well, which naturally is out of his comfort zone. Thanks for sharing.
There may be a lot of factors involved with what happened to your friends business, however to answer your questions about "what would you do in his shoes" and I will make the assumption that this choice was from the point of starting the online store, not whether I would shut it down at this current point.
First of all, I would look for someone experienced and has previously built an online store before to consult (free or paid) and give me advice at what the perfect strategy was before. Surprising you can get a lot of free advice through website such as this going to a relevant ecommerce networking event. 3 hours of your time can equate to thousands of dollars worth of advice.
I would base a strategy around the advice and if I was not comfortable I would hire someone to set it up. Hopefully the free advice would have pointed me to a $30 dollar a month ecommerce solution and I would have money left to hire an online manager for at least the first few months.
Even though there is a lot of parallels between online and offline stores they are also very very different. I worked with taking a few retail stores and saw them move online with success/non success but if it's one thing that I learnt from those experiences, it's that it takes a lot more resources then you first think. A whole new set of skills need to be learned beyond just business skills in order to compete online, and these skills will be hard to obtain while you are trying to run another business which is time consuming in itself. And like you said you are also competing worldwide with people that are able to offer lower prices. Many successful e-commerce stores only focus on that, or have a team only focusing on that. That is key - it might have been a great idea to close it down as there seems to be too resource intensive to do both without extra outsourced help, because the reality is just around the corner of the internet you have a competing store who have a team of people working solely on it fulltime day in and day out, and that's who you're competing with.
Unfortunately there are a lot of people selling the sexy benefits of trading online, without giving sufficient warning about the challenges. This will be a learning curve for a lot of people looking to trade online, and if you can outsource your weaknesses that's going to be more number 1 tip.
Thanks Wendy. Networking for the purpose of research is a great idea. I think you also hit the nail in the head that going online is not just about the website, but competing with others are more established, more resourced, more experienced, so it's far from a walk in the park. He did outsource his weakness but it cost him heck of a lot. The right advice could have helped him to get a cheaper website, but what many don't realised is the amount of effort, time and cost required to make it work. In the case of my friend, his customers are flocking online, so it was either go online or get squeezed out of the market. The challenge for him was without seeing success online, he had to keep his physical store running, hence more overhead costs, which in turn translates to higher prices even in his online stores. Maybe an option for him would have been to set up a completely different entity and brand for the online store, with similar inventory but with lower prices to remain competitive, but it would meant that he would need to sustain both businesses at the same time. There would still be a set up cost, but at least he would be more likely to a payback for his online business sooner. Thanks for sharing.
Agreed, also one thing that a lot of people don't realise sometimes larger retailers go online with a really agressive apporach. The game is to great a huge database to resell to and many companies are prepared to lose money to gain the intial customer - much like any promotional strategy. So if you are looking to make money straight off it may be a little too short term thinking - you may need to lose money initially to keep your customer for the long term- and your add ons and future sales will translate to a long term profit. Or you can just run a "win an ipad" competition haha.
Technology is not a panacea. Based on the limited information provide, as such loading a number of assumptions, I would say that your friend needed to look at the root causes and not the symptoms. ($10k on symptom and $0 on the cause - will only delay the inevitable)
Thanks Rajab. You're right, technology is only an enabler. Root causes would vary a lot, and in his case, he had to follow the trend in the industry, or risk becoming irrelevant in the market. That is the inevitable. His competitors were cutting his grass with 24x7 online stores and lower prices. He didn't have much choice. And for those among us who aren't necessarily technology or online savvy, it's a whole new lot of skills required. Thanks for sharing.
A lot of good comments above, especially about business model, strategy and transitioning. Unfortunately your friend is now a long way down the road - with no offline store left and I am guessing minimal stock. Hopefully he at least has some cash from his stock liquidation sale.
I'm not sure from your post whether he still wants to be in the toy business via his website or not, but if he does, one good thing would be to salvage as many customers of the offline store as he can. These people may have some kind of relationship with him already so he can pull on that - if he can reach them.
* Email everyone he has an email for. Mail everyone he has an address for. Advise them that due to rising costs he has had to close the store but the same great range and service are available at www.xxx.com.au. Include a promo code for 10% off their first online order.
* Put a notice up at the front of the old store with the same offer. Also promote it via local networks - mothers' groups, churches, schools (ours has a weekly e-newsletter you can pay to include an ad in)
* could even consider a local letterbox drop.
Use a different promo code with each channel so he can see which ones work and might be worth a repeat.
Not sure what his online capabilities are, but either during account setup or as a later survey (offer a $100 voucher to one lucky winner to encourage participation), he needs to get some segmentation data. Good questions would be
age and gender of children (birthdays if you can get them)
preferred 3-5 categories of toys
if your child is going to a party, how much do you generally spend on the present?
Now he has the data to tailor email campaigns. Regular scheduled emails with a big image of 'the latest trending toy' and a buy now button. Bumper edition of present ideas in late Nov / early Dec for Xmas. Personalised edition with more high end toys a month before their children's birthday (people spend more on their own kids than other people's.)
As for 'latest trending toy', it has to be reasonably popular but it also needs to be one he can compete on price for. Bit of internet research required here!
And finally, set up a Facebook page to promote with lots of pictures regularly updated and two-way posting allowed. Request likes in the emails if the website won't take a button. Encourage people to share posts by a monthly $100 voucher to a lucky winner. This will be slow burn especially since FB doesn't show posts to all followers, but it is a way to extend geographic reach over time. Parents have friends / siblings with similar age kids who live elsewhere.
So many good points above but one clear one I can see from the points is this: When you have a bricks and mortar store you also need to have an online store so that they run in conjunction with each other.
This means you already have your SEO and marketing up and running, your online store is low cost for as said anything from $50-$100 a month.
If your customers are invited to join at each purchase and sent a newsletter with sales or tips etc they know where you are and what you are up to and then and only then do you start the process of closing down your bricks and mortar store.
Your customer is then in the loop you have a growing online business and the transition is so much easier than when it is a "fire sale" situation.
HI There
I would love to see the website. A basic web site for 10k in a rip off.
We do great e Commerce for $1497 currently working on a toy shop site.
It would have made better sense to spend less on the site and lots on marketing to the site.
Our sites come with an SEO plugin as standard.
We have clients that have over 2000 products on a site, another that has 150 items for sale and has put over $80 k of sales thru her site because she marketed to her site.
I am still blown away by the fact that he spent $10 k on a basic site.
Good Luck with it all.
cheers
Lorna
www.platformb.com.au
Phil Khor, Founder at SavvySME
Thanks Greg. I like your suggestion about revisiting business model, and see if it still stacks up. In my friend's case, that was the catalyst for him to shut down and sell off the remainder of his stock. Sure, I think he could have done it sooner, instead of dying the slow death so to speak. Having said that, it doesn't nullify the fact that it's a tough industry (as your friend can attest to), and that competition online is as fierce as it has ever been, especially when he was playing catch-up in an online world without proper support or advice. The problem, as you alluded to, is when businesses that we run becomes about our passion, or our self-esteem, and when you have invested so much of your time and money, accepting failure just doesn't hit home easily. Thanks for sharing.