There is a revolution going on, you have probably heard about it – it’s got quite a bit to do with the internet and its effect on retail business.
In fact you have probably seen it on your local high street, especially if you live outside of the south east of England. It has a number of roots, but one major one is the shift of high street spending to online.
The end result has been many shop closures and high streets throughout the UK that are now much less vibrant than they once were.
While on the face of it this may seem a poor time to invest in retail there are strategies that can still be taken with physical retail that not only protects it from further contraction, but actually uses the very thing that threatens it to create new value going forward.
The biggest threat of the internet has been to smaller independent shops selling mainstream items such as everyday clothing, or electrical goods. Much of these everyday items we buy have now become commoditised with a massive downward pressure on prices caused by new suppliers from the far east, the ease with which prices can be compared on line and an economic environment that has been poor for a protracted period of time. This is of course a very toxic environment when your primary unique selling proint is price and your business model depends on volume.
There have been physical retail winners in this environment such as Sports Direct, who still persist on the high street and have even grown in these conditions. However, Sports Direct is a national chain and has no doubt capitalised on many small independent business no longer trading.
Small independents have survived and can thrive in the future, where what they are selling is niche, reasonably unique and / or much less prone to the commoditising nature of the internet. Far from being dead in the water, niche retailers not only will have customers that beat a path to the door to buy products not available anywhere else, but have the potential to have a unique internet profile where price competition is minimal, or non-existent.
This means the best of both worlds. Not only a physical presence that can continue, but the internet provides a reach that will offset any drop in footfall, plus deliver a whole new, potentially global, market to make a business that once may have been just profitable, highly profitable.
The trick is recognising the opportunity and developing a strategy that will take the business forward. The following are 5 steps to take a small scale local retail presence, national and potentially beyond.
Step 1 – Find Synergy
The rise of the internet as a shopping medium continues to cause all sorts of problems for shoppers and providers alike. Two of the major issues are delivery and returns. For the deliverer, getting the parcel to the premises when the buyer will be there can be a real problem. It can be in no-one’s interest to return the parcel to the depot and leaving items with neighbours, or throwing the items over garden walls are solutions that are less than perfect. The same is true with returns which are a pain in the neck for everyone.
This has been solved to some extent by ‘click and collect’ deals and many local shops have taken this on as a way of increasing footfall. For example the Spar chain is a collection/delivery point for many local areas.
Strategically if you are in a niche it makes sense to have a click and collect relationship with a larger online business where there is some synergy with the business, but little or no direct competition. For example a retailer selling specialist outdoor clothing may do a deal with a fishing equipment retailer. On collecting the fishing equipment, the online buyer might see in the physical shop a jacket, or pair of trousers that could be useful on his next fishing trip.
This is a win-win-win situation that generates income on more than one level that can be used to fund further steps.
Step 2 – The Buying Environment
Once you have established a synergistic relationship with one or more large online retailers that compliment your niche it is important to make sure that shop visitors will be wanting to buy when they come to visit. This is not just for click and collect, but for everyone.
First impressions count, but if you have been running the same business for some time, you may no longer understand what the first impression is. The main message is regular review and obtaining a genuine first impression opinion from a succession of new friendly visitors on a regular basis.
Also, with respect to the click and collect idea, make sure the impulse buys are pushed to the fore. This is why the sweets and chocolate bars are next to the checkout in the supermarkets. Even consider what new items could be introduced for the click and collectors specifically.
Step 3 – Extend the Local Reach
If the business is sufficiently niche, then people will travel to the shop, it will not depend just on casual shoppers walking by and having something catch their eye. However, although people will travel, unless it is very niche, the chances are that people will not travel more than a reasonable commuting distance. It therefore make sense to push the boundaries of what that commuting distance is.
So instead of thinking a 20 mile radius in terms of promotion and marketing, perhaps it is worth considering a 40 mile radius. This applies both offline and online, with a good online presence highlighting the availability of the shop in applicable locations further from the shop than otherwise considered. Equally, physical advertising such as newspaper, or magazine ads, or leafletting could be made in locations not otherwise considered.
Step 4 – Extend the National Reach
If an online presence has the capability of selling online (i.e. taking money) then it makes sense to push the boundaries as far as is reasonably practicable. To begin with this may be just in the UK, but in time this can extend globally if the niche is strong enough.
This is not a small step. If you have been running a shop for some time, the mistake will be to think of a new e-commerce presence as additional advertising – it isn’t. A better way to envision it is as setting up a new shop.
If you were setting up a new shop, you would put people behind the counter and focus on it to make it pay. E-commerce is the same, it needs to be manned up and promoted. It is (or should be) an investment and only a sharp focus will bring a return on the investment.
In time this investment will not only increase both takings and profitablity, it may also raise the footfall in the physical shop and in time become the primary sales channel.
Step 5 – Find Reverse Synergy
Over time, with a strong e-commerce presence, the problems of deliveries and returns are now your problems and so it can make sense to look for other complimentary niche independents that can handle click and collect for your business in other areas of the country.
To some extent this step brings us full circle, but in other respects it is the end of building a foundation for a business that now has the potential to promote itself globally much more confidently.
Joseph P Kennedy was an American businessman, investor, and politician who was also United States Ambassador to the United Kingdom between 1938 and 1940. He is quoted as saying in 1929 that he knew there was a crash on the way and the market was overly optimistic when he started to get stock tips from his shoeshine boy. His response to tips from the shoe shine boy to buy, was to sell.
The opposite is also often true in that calling the bottom of the market can be critical in deciding the right time to buy. If it is true of shares it can also be true of retail in that independent retail businesses that have survived in recent years have within them an underlying strength that can be tapped into and developed.
If you asked a shoe shine boy today whether it would be a good idea to buy into physical retail he would say sell – which could well mean that buying is worth considering.