There is plenty of misinformation on the internet about e-commerce versus traditional retail shopping. Most studies base their findings off of a single number: the change in sales over time. But to truly understand whether you should warehouse to sell online or focus on the in-person sales experience, you’ll need to look past the big picture analytics. It’s all about the relationship you want to build with your niche. Which channel would your specific shopper choose?
For example, 94% of retail sales in the US take place in a brick and mortar store, accounting for nearly $4 trillion in annual sales. But many retailers have seen a 37% increase year-over-year in the number of orders placed on mobile phones. In-person retail is undoubtedly here to stay, but there is also a time and a place, albeit virtual, for online shopping.
Should you open an online store?
A better question might be, why would a consumer choose to shop online? Years ago, customers with a need for immediate gratification might have flocked to their local retailers to fill an urgent need. But with logistics companies like Amazon making online transactions happen in real-time, you can still shop virtually and have products in hand fast.
Instead, for consumers, online shopping is all about decreased overhead. You can shop from anywhere, anytime, without having even to put on pants. And to take it a step further, most consumers believe that shopping online actually saves them money because they are less likely to stop for other things, like lunch or coffee, along the way. Consumers are also more likely to comparison shop for added cost savings when shopping online.
Warehousing has a similar appeal to shop owners. Since your ideal customers don’t have to worry about standing in line at the checkout, you don’t have to pay someone to work the counter. The initial cost of setup is also substantially lowered when you take away the need for aesthetic upgrades, like eye-catching displays and lighting.
Should you open a brick and mortar store
According to Forbes, consumers are spending more in-store per visit than online. 71% of shoppers spent more than $50 in-store as compared to only 50% when shopping online. If you’d like to get a slice of that, a brick and mortar store might be for you. http://bit.ly/2NyvH24
But let’s get realistic. Opening brick and mortar stores can undoubtedly be costly. The aesthetics and staff required to create that visceral experience will certainly cost you. The retailers who can benefit the most from an in-store shopping experience are those who:
- Provide an escape from reality, where shopping is an experience that takes a decent chunk of your day.
- Require professionals on staff to help you make educated purchase decisions.
- Set trends and inspire consumers to make purchase decisions based on what’s hot right now.
Which option is less expensive?
Most would argue that warehousing is a great way to save money on your project initially. Your set up costs will certainly be lower for a variety of reasons. Without a brick-and-mortar store, there’s no need to choose a location with prime foot traffic, so your real estate will come with a smaller price tag. Most warehouses can operate in a base level prefabricated metal building without many bells and whistles. Depending on the size of your operation, you may need some interior customizations from offices to a shared kitchen space. However, even then, your initial costs will still be lowered without all the aesthetic customizations.
You also stand to save money over time by either reducing the number of overall employees you’ll need or at least lowering the number of skilled employees. Running a fulfillment center vs. a hands-on shopping experience won’t require the same customer service representatives, but rather just some employees with quick hands who can lift a box or two.
However, with a warehouse, you stand to lose a great deal. You may think that you’ve hit the lottery with your lowered initial costs, but all of that savings, and then some will need to go into online marketing. After all, you’ve sacrificed foot traffic and lowered the amount per visit that your customers are likely to spend. You’ll also need to cover shipping costs since most consumers expect free shipping from online retailers. So, one option isn’t less expensive than the other one. The most successful retailers usually use some combination of both.
Do you need a brick and mortar store AND a warehouse?
Department stores aren’t the only operations that require warehousing and in-store shopping experience. Many retail thrive in this “middle ground,” and thanks to the flexibility of design available in prefabricated steel buildings, it’s not only possible but well within your budget.
They’re called combined fulfillment centers, and they’re a lot more practical than you may think. You may find that you could benefit even if you didn’t know warehousing was in your future. Essential store functions and shipping from the store come together in an ultra-streamlined work environment, eliminating the need for expensive centralized fulfillment centers.
They also create a perfect opportunity for do-it-yourself store owners. Normal store functions happen in the beautifully-customized in front of the house. Your prefabricated metal building will look no different than any other store to your clients, thanks to custom doors and windows, covered openings, and facades. Meanwhile, in the back, your team can tackle marketing functions like product photography, online retail, and warehousing in a wide-open workspace.
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