Is an E-commerce Site Right for Your Retail Business?
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by Fiza Khan
As a retail business owner, you may be wondering whether an e-commerce site is the right move for your business. While an online store can open new opportunities for growth and sales, it also comes with its own set of challenges. In this article, we will explore the pros and cons of e-commerce sites, the technology providers available, and why big off-price retailers like OFFPRICE don't offer e-commerce.
Pros of E-commerce Sites:
- Increased reach: With an e-commerce site, your business can reach customers beyond your physical store locations, allowing you to tap into new markets and expand your customer base.
- Convenience: Online shopping offers customers the convenience of shopping from anywhere, at any time, which can increase customer loyalty and repeat business.
- Data collection: E-commerce sites allow you to collect valuable data on customer behavior and preferences, which can inform your business decisions and marketing strategies.
Cons of E-commerce Sites:
- Implementation costs: Developing and maintaining an e-commerce site can be expensive, especially for smaller businesses.
- Logistics: Shipping and handling can be a challenge for off-price retailers, as the nature of their business involves constantly changing inventory.
- Brand dilution: There's a risk that your unique in-store experience may not translate to the digital space, potentially diluting your brand identity.
Technology Providers:
There are many e-commerce technology providers available to help retailers set up and manage their online store. Some popular options include Shopify, WooCommerce, and BigCommerce. These platforms offer a range of features and pricing plans to fit the needs and budget of any business.
Why Many Off-Price Retailers Don't Offer E-commerce:
Despite the advantages of having an e-commerce site, many big off-price retailers like OFFPRICE don't offer online sales. This is because their business model is focused on buying and selling large quantities of products at low prices. E-commerce would require them to break up these quantities, which would result in higher costs and lower profit margins. Additionally, the cost of setting up and maintaining an e-commerce platform can be prohibitive for smaller businesses.
Off-Price Retailers, Embracing E-Stores
Off-price retailers like Marshall's and T.J. Maxx have already changed their approach and now prioritize ecommerce. While they traditionally focused on in-store shopping experiences, the shift to online during the pandemic has made it clear that customers expect to be able to shop their favorite stores, on any channel, at any time. As a result, these retailers have had to increase their ecommerce presence to remain competitive and meet customer demand.
However, the concern has been whether the unique treasure-hunt like experience of off-price shopping can be replicated digitally. This fear has been debunked by successful ecommerce off-price retailers like “Rent-the-Runway" and “thredUp”.
The future of retail lies in the ability to seamlessly offer both physical and digital shopping options, and value retailers are now working to catch up and increase their online presence.
Rise of Luxury Off-Price Ecommerce
On the other hand, luxury off-price retailers like Saks Off 5TH have recognized the benefits of integrating online and in-store experiences to create a seamless customer journey. The goal is to make it easy and convenient for customers to find their favorite brands at a great price, regardless of the channel they choose to shop on.
Saks OFF 5TH President and CEO Paige Thomas shared her thoughts about this during a NRF Retail Real Talk podcast saying, “When we think of Saks OFF 5TH and the customer, we think of it through an omni lens. The customer journey—the pain points and barriers—is what we’re focused on to make it easy and convenient for them to find their most favorite brands at a great price.”
What Retailers Need to Watch Out For
One of the biggest hurdles is inventory management and forecasting. Off-price retailers typically source their products from overstock and closeout deals, which can make it difficult to predict which products will be available and when. This unpredictability can lead to issues with inventory management and make it challenging to keep online inventory up to date.
Another challenge is maintaining consistent pricing across channels. With both in-store and online sales channels, retailers must ensure that prices remain the same across both platforms to avoid frustrating customers who may discover discrepancies. This can be particularly challenging for off-price retailers who rely on constantly fluctuating pricing structures to move their inventory.
Off-price retailers who previously relied solely on in-store sales must now also contend with increased competition from other online retailers. These retailers are often able to offer a wider selection of products and lower prices, which can make it difficult for off-price retailers to compete. As a result, off-price retailers must carefully consider their online pricing strategies to remain competitive in the digital marketplace.
Finally, off-price retailers must find ways to balance the costs of shipping and handling low-priced products. With lower profit margins, the additional cost of shipping and handling can eat into profits and make it difficult to offer free shipping, which has become an expectation in the world of e-commerce. Some retailers have responded by offering in-store pickup or flat-rate shipping, while others have increased their prices to offset the additional costs.
How to Build a Successful Ecommerce Business
To build a successful ecommerce business, it is crucial to focus on a few key components:
- First and foremost, you need to have great products that solve an unmet customer need and are priced competitively. Conduct market research to understand the market value of comparable items and your competitors' offerings.
- A compelling brand story is also important to convey your business's purpose and vision. Spend time thinking about the look and feel of your brand and find a simple, powerful way to convey the origin and mission of your business.
- To attract loyal and enthusiastic customers, define your ideal audience and direct your marketing efforts accordingly. Once you gain momentum, keep the momentum going by focusing on an audience that will appreciate your brand story.
- A smooth online experience is also essential. Ensure that your online store is user-friendly, and that the checkout process is streamlined. Customers should be able to make purchases effortlessly, without having to jump through too many hoops.
- Lastly, prompt order fulfillment is critical. Customers want speed and efficiency, especially when shopping online. Fulfillment is the process of getting products to customers, including sourcing, storing, packaging, handling returns, and maintaining customer communication. Pay careful attention to the fulfillment process, and make sure you have enough product on hand to fulfill orders even during the busiest seasons.
Conclusion
Whether or not an e-commerce site is right for your retail business depends on your unique situation and goals. While it offers the potential for growth and increased sales, it also comes with its own set of challenges and costs. By weighing the challenges, pros and cons and considering the available technology providers, you can make an informed decision on whether to take the plunge into e-commerce.