Offline Goes Online — When it Makes Sense and What to Consider in the Process
The Covid crisis made one topic particularly relevant for a large number of retailers: How can I sell my goods despite a lockdown? Some of these retailers have decided to go the route of having their own web store. But is this the right choice at all and what should be considered when making this decision? This article deals with this very question.
Many retailers are/were used to their physical store. They knew all their processes, regular customers and so on. But with one lockdown after another, it was almost impossible for many retailers to cover their fixed costs in the long run. The consequence: they had to file for bankruptcy and close their business. But some have come up with alternative plans to avoid exactly this outcome by any means necessary. One of these ways is to open their own web store. After all, if you can’t sell offline anymore, you can at least sell online. In the first place, this train of thought is completely correct and understandable. However, it sounds easier in theory than it is in practice.
When does an own webshop make sense?
If you already sell your products offline and also offer them via a web store, then you are talking about classic multi-channel commerce. This is a form in which sales can be made both offline and online. At the end of the day, it is up to the customer to decide where the actual purchase is made. However, the introduction of a dedicated web store to the existing physical store comes with some hurdles and challenges.
One of the first challenges is reflected in the e-commerce suitability of the company’s own products. After all, not every product is automatically suitable for online retailing. If we want to sell a shower gel online, this is easier to accomplish than selling a car. This can be evaluated using different models. A common model used for product suitability in online retailing is based on three criteria:
- Assessability
- Describability
- Support effort
The product must be as assessable as possible by the customer online. In addition, the product should be easy for the web store operator to describe so that the customer can understand it in just a few sentences. Finally, the support effort also plays a decisive role. This should be as low as possible in order to avoid additional costs in the form of personnel expenses. After all, support also costs time.
If you have products that meet these three criteria, you can move on to the next hurdle:
The introduction of a web store.
Depending on the number of products, how many interfaces to third party systems you need or which system you use, the costs of a webshop implementation will change. Because these can cost between 2.500$ and 100.000$ (or even more). For many, of course, way too much. These are initial costs that you want to keep manageable, especially in the beginning. Nevertheless, one must think about it intensively. A store that only has to sell a few products and also only addresses a very small target group will probably cost less than a large store that addresses a huge target group. This is very banal, because there are still many missing components and variables that make up the actual price of a webshop, but it should be enough to illustrate the point for now.
If we have now given the product suitability at this point and have a suitable offer for us for the creation of a webshop about, for example, an agency or a freelancer, we can start with the implementation. After a certain time we can call the webshop our own — great!
But a webshop alone is not quite enough. Even if the webshop is well designed and optimized for conversions, it will never generate sales — let alone profits — if you don’t generate traffic. This “problem” also needs to be solved. There are two different options available to a webshop operator:
1. We can outsource the traffic part to an agency or a freelancer
2. we can take over the traffic part ourselves.
Both options have their advantages and disadvantages. In any case, they are accompanied by corresponding costs.
Only at this point we are “finished” with our webshop project for the time being. In all probability, you are never really finished with your own webshop. Because there is always something you can improve. Be it on the traffic side or on the webshop side in the form of conversion optimization. At the end of the day, however, if we have taken all three steps into account, we will have our own web store with buyer traffic. From this point on, we can offer and sell our goods online parallel to our offline business.
What else should be considered?
If you opt for the concept of multi-channel commerce, there is always a certain risk of self-cannibalization. This means that by adding an additional participant in the value chain — the web store — you run the risk that, as time goes on, it will attract more and more customers who previously bought in your own store. This makes the offlince channel (the physical store) increasingly irrelevant. Nevertheless, we have to cover ongoing fixed costs for this sales channel. However, this case will not occur overnight in most cases. Nevertheless, one should be aware of this possibility and already create appropriate preventive measures should it occur in the future. Along with this, one could also ask oneself the question whether one wants this at all. Are you even prepared for the fact that in the future you might only be present online and have to close your offline channel?
This article not only shows the specifics for the Offline Goes Online scenario in the form of a multi-channel strategy, but also describes the most important steps in the introduction of your own web store.
