Guest column: Start-up tips for indie online retailers

Philip Downer writes:  Front of Store welcomes its first guest columnist.  Paul Lucas is a retailer and former bookseller, who now helps local businesses to conquer the cyber-world from their kitchen tables.  He commented on a recent posting at Front of Store, so I’ve asked him to expand on his thoughts.

Over to you, Paul:

Five years or so ago, I set up a couple of companies. The first (and main business) is an IT service and consultancy company.  Soon after I set up a complimentary company called ‘ReallyEasyWebsites’, providing good-looking commercial websites for a sensible fee.  Over the past five years I have set-up dozens of eCommerce websites, and advised would-be entrepreneurs on the opportunities and pitfalls of online retailing.  Philip has kindly offered me a space on his blog to share some of my insights and thoughts in this often confusing area.

The latest data from the British Retail Consortium is grim reading for any retailer.  Total retail sales in March 2011 were down 1.9% – the biggest fall in 16 years.  However, online sales achieved 7.5% growth.  This was lower than the prior month’s 10.4% growth, but it nevertheless underlines the continual shift from bricks and mortar to online sales.  If you are about to set up shop as a retailer, therefore, your thoughts must trend towards the online environment – after all, that  is where all your customers are shopping, isn’t it…?

Well, not necessarily.  Most customers will only shop where they feel comfortable, and ultimately where they trust the retailer.  If you think that your online store will be flooded with customers and making money the day you open for business, then you have seriously over-estimated the medium.

Online retailing is often perceived to be a cheap alternative to established retailing models.  Your rent and overheads may be lower, but without a physical shop front your promotional requirements are much higher.  Whatever product you’re selling will require staff, to communicate with your customers and manage the sales process.  Physical products require further warehousing and labour to store, pick and ship.  Include the risk of margin erosion by a sometimes large competitor base and overall, unless you can pull some mighty savings with scale, your costs are significant.

However, it’s not all doom and gloom – there is a potential market for your business on the internet.  The next wave of successful web stores, in my opinion, will be the ‘niche-experts’.  It’s a big global market out there and a fraction of one percent of any media, goods or services is still a very healthy business. As an advocate of the ‘Long tail’ here is the general advice that I give to all would be ecommerce entrepreneurs:

  • Focus your business on a specialist product category, one where you can be the expert; a sector where you can give individual care over each product, recommend, suggest, discuss and encourage.
  • Change the way you tackle your market, think like a concerned aunt (fuss about every detail, and get them right), nurture your customers with over-reaching service offerings and attention to details.
  • Build a community of visitors; regular updates, reviews and feedback are all powerful marketing tools.  If your website does not allow you to deliver this, then talk to a designer and get it changed.
Investment in advertising is essential.  If you ran a store on the high street, you would be paying rent to own that little piece of real-estate with your customers walking around outside.  That same amount of rent money [at least] should be invested in attracting the same consumers onto your site.  No longer is it a case of “build it and they will come”, particularly since Google changed how they rank websites 18 months ago.  The new algorithm used by Google negates the benefits in paying for links to your site from so called ‘link farms’, as those results are now damaging to your page ranking. With a slew of ‘Black Hat’ techniques that most search engine optimisation companies (SEO) offer also being blocked, and Google’s power to change its mind whenever it likes, paying for SEO is about as useful as wallpapering your lounge in dollar bills.  Simply focus on making the site successful and better rankings will follow, there are no quick wins here.

All forms of advertising need to be considered: traditional media (newspapers etc), social blogging and online adverts are all good places to start.  This is where ‘expert-niche’ pays you back, as you can (with thought) target and prune your advertising to the exact sector of the world population you want to attract. If you sell widgets, advertise in “Widget Weekly” that all widget buyers read to learn about new widgets.

Finally, your internet business should never be seen as an ‘add-on’ to an existing company, or be done in your spare-time.  There are many examples of large, established retailers simply adding the extra burden of online sales to their store or mail order distribution or warehouse teams.  Even the internet advertising king Google failed when they launched an online store to sell its Android platform phones. The store opened on the 5th January 2010; however, the offer was riddled with errors:  little real advertising, outsourced warehousing, and shoddy customer support.  The plug was pulled 4 months later with the admission from Google that its online store was stuck as a “niche channel for early adopters”.   An online store is as demanding an environment as any traditional shop. It needs all the skills of a retailer with a good knowledge of the area of sales in which they are competing, along with the financial backing to get noticed. Get the basics right and your business will flourish.

Paul Lucas (pj@tapcom.co.uk) is an IT entrepreneur and owner of Tapcom Ltd, an IT support business and parent company to his web design agency Really Easy Websites (http://reallyeasywebsites.co.uk).  He is based in the north-west, on the Cheshire/Flintshire border.

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