Online Stores

[Admin]

I thought this article made a lot of good points about the feasibility of online stores.

Is an Online Store Right for Your Small Business?

by Rahul Pitre

Stories of Internet entrepreneurs, who rake in millions simply by punching a few keys on their laptops in-between sips of martinis while relaxing on tropical islands, are abound in popular media. Naturally, every small business is tempted to open its doors online.

Over the years, I have built a fair number of online stores for my small-business clients. Some are happy with their stores; others are not. Some do a brisk business; others barely recover their hosting costs. Those that failed have a common trait – a lousy business model. During the Internet boom, businessmen were so transfixed by hocus-pocus like click-rates and pairs-of-eyeballs that they hardly paused to think whether selling online is practical, or, in some instances, whether they have anything worthwhile to sell at all. Indeed, many spent more effort on collecting e-mail addresses than on actually selling anything.

What has all this got to do with me? Well, they paid ME to build their stores. Now that they can’t recoup their investment, they think I am partly to blame. Of course, they tend to overlook the minor detail that they paid me only to build the stores; not to question the sanity (or rather, insanity) of their undertakings. Their stores work as promised; they just don’t sell anything and they don’t make any money. So, due to no fault of mine, I have ended up having a bunch of unhappy customers.

But I have learned my lesson. Now, if you approach me for a proposal to build your online store, I ask you six questions before deciding whether to take up your assignment.

1. Do you already have a brick-and-mortar business?

If you do, you have probably won half the battle. An online store provides an always-open extension to your retail store; another avenue for your customers to buy from you at their convenience. With a brick-and-mortar store, you are likely to measure the success of your online store in terms of how well it augments your core business. Without it, you are likely to measure the success in terms of how much money it brings in. In my experience, many small businesses are disappointed in the amount of money their online stores bring in. They end up spending too much money and effort for too little a payback.

2. Do you plan to compete on price alone?

It is difficult to compete in the online marketplace on price alone. Small businesses cannot hope to achieve the economies of scale that Amazon.com and Buy.com can. Unless you have another way of differentiating your offerings, making money from an online store is likely to be an uphill battle.

3. Will you sell niche, difficult-to-find, or specialty items?

If you do, your online store has a better chance of succeeding. If you offer a unique class of products, value added services, or personalized services, you are likely to see more business coming your way. If you are planning on opening a general bookstore on the Internet, for example, failure is almost guaranteed. But if you are an expert on a specific niche of the books marketplace, such as out of print publications, foreign language books, or first editions, an online storefront might make sense for your business.

4. Are your items easy to ship?

There is a reason why they don't sell concrete mixers over the Internet. If your items are too bulky, shipping them may be a headache for you and just the cost of shipping and handling will be prohibitive for a prospective buyer. Your headaches may be compounded if, god forbid, your customer decides to return the items! Shipping is not such a big deal for big businesses that have entire departments dedicated to the activity. But for small business, that ship infrequently, it is a major consideration.

5. Can you set aside a few minutes at specific times every day to check, process, and fulfill online orders?

Prospective owners spend quite a bit of time fussing over their website’s design and pondering how to get their products to show up towards the top of search engine search results. But few give much thought, if at all, to order fulfillment. Will you have the time and the inclination to package and mail the orders every day? Will anyone take care of online orders if you are sick, or are on vacation for a few days? Can you find a few minutes every day to update the inventory and prices in your online store? Just like a brick-and-mortar store, an online store needs updated item lists and up-to-date price lists. It needs a facelift periodically. It needs promotions and discounts to be updated regularly so as to attract customers. Customer service is even more important in your online store than it is in your in your brick-and-mortar store. Are you up to it?

6. Are you expecting a windfall overnight?

If you are, you are likely to be sourly disappointed. It takes a long time and considerable effort to build a loyal customer base. You have to be patient to be able to see significant gains from an online store. You can’t bet your next mortgage payment on income from your online business.

If your answers convince me that an online store makes sense for your small business and that your strategy is likely to pay off in the long run, I will gladly take up your job. Otherwise, I will send you to my competitor. If someone has to end up having an unhappy customer, it rather be him!

Johanna

[UKRay]

Another item from the archive that is worth some consideration. Short but succinct!

[cdthayer]

Very good article, but I would like to point out a difficulty for those of us that have very small operations. My wife & I have a small Mom & Pop brick-and-mortar business, not big enough to compete on-line by price alone, sell some niche or difficult-to-find items that are easy to ship, and have time to ship & maintain our website daily. Of course, right now, our website is more of an "advertisement" site rather than an on-line "store".

One thing that I've heard is that "small-business" (I think) technically means a business with less than 500 employees. Selling the same thing in two places at the same time can be a nightmare for smaller operations.

We would like to expand the sales capabilities on our website, but we're having difficulty figuring out how to manage both the walk-in and on-line purchases that can happen at the same time. We have about a 50:50 mixture of common-stock items and niche or difficult-to-find items. Our "niche" is vintage fabrics and sewing notions. These are the items that we'd like to get on-line. The common-stock items that we can restock quickly to fill duplicate orders are the ones that we can't compete on-line by price with very well, so there's not much reason to push them on the site. The niche or difficult-to-find items are very limited in quantity, and no longer available in additional quantities to us. The possibility of not being able to fill an on-line order because the only one of that item that we had just walked out the door 5 minutes ago may seem like wishful thinking, but could happen if the inventory levels on-line weren't adjusted at least daily and maybe even hourly or minute-by-minute. It's bad business if the "Vintage Whatzamajigger" listed on-line isn't actually available to the Buyer that just clicked on "Buy" at our website. Currently, the items that we make available on-line are not available to walk-in buyers on the sales floor. They're boxed up in storage, so we don't have to worry about "over-selling". Additionally, we don't have any on-line instant purchase capabilities so far. The Buyer has to contact us by email for availability for every purchase. So, we basically have two separate businesses; the walk-in store and the online store. That's the only way that we've figured out how to do it so far. But, we'd like to place inventory on-line that we also have for sale on the sales floor. A sophisticated computerized bar-code scanning sales system that would link the cash register to a database would do it, but that would cost more money and time to set up than we could afford. The bulk of our niche inventory is "pre-barcode", and we have inventory that dates back 50 years through two previous owners. How do other small operations cope with this type of thing?

CD in Oklahoma

Edited May 13, 2009 by cdthayer

[HorsehairBraider]

@ cdthayer: You think you're small - my business is just *me*!

And how do I handle this? Not sure if this will help any, but I'm willing to say: I have a "One of a Kind" page. People have to contact me either by phone or email to be sure what they want has not just been sold. This works well for me. When I go as a vendor to an actual show, I bring that OOAK stuff with me and it gets a lot of attention and actually helps to draw people in to the booth.

Now, it's a pain to keep the photos fresh and keep photos deleted when stuff sells, but it's not that bad that I can't handle it. I'm about to do a whole new set of photos, actually.

On to more general topics.

Interesting, my website has been really successful. I wondered why, and this article helps explain. I have a niche product that is easy to ship... who knew... That was not exactly my goal when I set up the business, it just kind of worked out that way.

[cdthayer]

...I have a "One of a Kind" page. People have to contact me either by phone or email to be sure what they want has not just been sold. This works well for me. When I go as a vendor to an actual show, I bring that OOAK stuff with me and it gets a lot of attention and actually helps to draw people in to the booth.

Thanks for the input HorsehairBraider. Sounds like you're doing it about the same way that we have been doing it. But, with our "I want it all, and I want it NOW!" world that we're doing business in these days, people sometimes don't like the hassle of two-way communications to buy something. They want to select the quantity, put in the shipping and credit card info, click on [buy!], and forget about it. I've just been trying to figure out a way to make it as easy as possible for people to buy from us. Although, a large portion of our merchandise is custom-made, so they'll just have to wait for it if they want it. To help make the process go smoother, I started using forms on some of our pages. It really helps to get good information that I need to fill their order, but they still have to wait until I contact them back before they can purchase anything. [forms = webpage with blank text windows that the customer enters order information in, and then when they click "Send", it sends the order form to me via email.] It has really helped on our end for calculating the shipping. People tend to ask (in a standard email inquiry) what the shipping will be, and then not tell you where in the world that they are. LOL! I now have them enter their Zipcode or Country Code as a required field on the form. I can weigh their items and quote a shipping cost to them on the initial reply to them along with the availability and payment information. It's helped eliminate some additional emails. But of course, some people don't use the form for one reason or another, so we still get a few emails that say "I want a number 820. How much is it with shipping?". (We don't say it, but we think it: "Uuuuh, the 820 comes in 6 sizes, 2 rear-closure options, and we can add a foam bill on it if you want it. Which 820 do you want, and where are we shipping it to?") Keeps life interesting.

...a pain to keep the photos fresh and keep photos deleted when stuff sells....

Keeping up with the photos is a full-time job, isn't it? I need to re-shoot some of my old sewing machine parts and get those back up-to-date. I enjoy doing it though, and that helps. It would be a real pain if I didn't like to do it.

Another problem with listing OOAK and Vintage Stock items on-line, for us anyway, is being able to accurately describe them. For instance, some of our vintage fabrics were originally purchased out of a stationwagon on the street out in front of the store. Back in the old days, when vendors came around with a new load of goodies, there weren't many part numbers or content labels on things. The merchant picked them by the "purdy-lookin' flowerdy one", the "multi-colored heavy chair-coverin' stuff", or "that shiny leather-lookin' roll". One of the most often asked questions about fabric, is "is it 100% cotton?". Who knows what it was made of? Dupont and others were on a roll back in those days, cooking up all kinds of man-made fibers. We can do a burn test to get an idea of what's in it, but without labels, we can only get close like in horseshoes. About all we can say is "We don't know for sure what it's made of, but it's real nice multi-colored heavy chair-coverin' stuff!". LOL!

CD