How e-commerce and co-ops can undo Black Friday traffic collapse
For indie retailers, the accelerated e-commerce trend is a burning platform that should spark innovation and new business models. Immediately evaluate where you want to play in a never-normal-again world to avoid losing further ground.
Small and independent retailers have seen Black Friday sales decline for some time, but in the COVID-19 panic, in-store shopping crashed 37% compared to last year, despite 70% of shoppers reporting they feel safe in stores.
The flu scare is exponentially accelerating the already growing trend to online shopping. McKinsey & Co, reported online delivery volume increased by the same amount in eight weeks during the flu runup as it had over the entire previous decade.
McKinsey discovered that companies with “resilient, future-ready business models” widened the sales and profitability gap from industry peers early in the pandemic but those with legacy business models have fallen further behind high-performing companies and industries. As an example, the report noted media companies with streaming digital services outperformed traditional satellite-based peers.
Three change strategies are:
- Lower product costs and increase margins through consolidated buying
- Increase online capabilities and e-commerce
- Develop alternative shipping and handling
Store experience is a big retailing differentiator, but it’s still a reach to overcome significant discount pricing and free shipping of Amazon and big box stores. Consumers won’t easily give up online discounts and convenience now that they have been forced to try them. Yet, physical-store retailers still have advantages because of the store. Niche marketing and products, trust, product knowledge, service, and actual customer relationships give these stores a special place in consumers’ hearts. They miss them when they’re closed.
However, when indie retailers buy product wholesale at the same price that big-box retailers are selling retail, you know you have a buying or product problem. Most small and indie retailers are unable to create scale and leverage to compete with big-online and big-box retailers. A solution is to combine forces with other retailers – both non-competitors and competitors – to consolidate purchasing.
Retailers might combine orders with other nearby retailers to gain higher discounts from a common distributor or vendor. A small group of bookstores in the northwest did that as practice. Orders were beefed up to earn higher discounts and free shipping. The order was sent to the most central store and participating retailers drove to pick up their product.
Buying groups consolidate purchasing power to add margin to product sales. The biggest advantage of joining a buying group is increased discounts, 20% or more in some cases and more on special buys and private labels.
Vertical buying groups specialize in an industry sector, such as archery gear and supplies in the sporting goods category. Horizontal groups offer more product categories but may not have focused product selection in most categories. Some groups consolidate purchasing of narrowly selected operational materials, such as office supplies.
Ace Hardware, a retail cooperative of more than 5,000 independent retailers, started as a marketing co-op to share ad costs, but now provides total retail-support services, including advertising and promotions, data collection and analytics, inventory management, e-commerce, private labels, and an integrated, efficient supply chain.
Most buying-group business models involve a membership fee, possibly a purchase fee or percentage, special-service fees, or contributions to cooperative initiatives, such as ad building and placement or other services. Group services are designed to improve retail performance. To find a group, talk to other retailers in your category or do a web search on buying groups in your category. (See below for a few suggestions.)
An enthusiastic group of retailers could organize their own buying co-op to negotiate purchasing and delivery directly with vendors. A common objection to overcome – which might not be so great a challenge now – is that indie retailers are independent for a reason. They often see themselves as independent in thinking and operating, but necessity may overcome some of that today.
Sometimes a smaller percentage of something is better than a big percentage of nothing.
Anybody and everybody can sell online, but a retail store’s advantage is its brand and customer experience. The trick is creating seamless experiences between the store website and the store.
Indie retailers must balance in-store and online in multiple dimensions. Do I do order fulfillment out of the backroom or set up a margin-eating fulfillment service? Is my marketing only digital – how do I split my budget? How do I pay for an online store when I need inventory and my rent payment is a big nut to crack?
Even on a burning platform, you have options and choices. You probably already have a website and likely it’s on one of the major website platforms, such as WordPress, Wix, Squarespace, Weebly, or GoDaddy. These platforms offer themes and templates for different kinds of businesses and services.
For most small businesses, these platforms are adequate and don’t require coding. You don’t need to pay high-priced web developers for a custom site. Custom sites may add slick bells and whistles but to start up or beef up your website it’s better to begin small. That way you ensure you’re able to manage the backend retail with the technology. A platform site runs about $300 annually.
E-commerce platforms have website templates that integrate e-commerce with the website, such as BigCommerce and Shopify. However, a simple store-branded site can give you more design and branding flexibility and many e-commerce engines can be adapted to your site. Woo Commerce, Magento, Square, and PayPal are common e-commerce tools that plug into website platforms.
Some point-of-sale systems offer e-commerce engines. RetailPro and Microsoft, for example, let retailers embed a page in a website that connects directly into the POS system. Vend is a cloud-based platform that integrates retailer systems and works across multiple registers and stores.
Using web POS means online sales are included in your regular check-out, inventory management, sales reporting, and customer relationship management tools. Some embedded pages, though, are often simple and customers know they are leaving your website.
The fun part of having your own website is the easy capability to transfer your selling style and store culture online. Once set up, adding content, such as articles, photos, and products, is easy and straightforward. Most retailers open stores because of their passion for the product or service they sell, which is always apparent in the store. This passion usually transfers easily to the web through the language you use, how you treat customers online and in-store, and telling the story behind your passion.
This is what content marketing is all about. You usually know how your customers find you, what they are passionate about (which is why they like your store), and how they like to be treated. Think about what you do in the store and translate it virtually.
Because retailers are creative, they usually can write stories to tell about the store, the products, and the benefits and value of doing business with you. The store personality comes through as part of this process.
Have somebody review and edit your content before placing it on the site. Everybody needs an editor. Or, hire a writer or photographer to get you going.
Setting up the website requires a little planning to determine how customers will engage your site and what content is needed to help them move along their buyer journey. Think about what content or information is needed from a consumer’s first awareness to researching products or services, from consideration to evaluation, from deciding where and when to buy, to buying, and post-sale engagement and loyalty.
Now’s a good time to review who your customers are. Use your sales and customer data to better define who is really buying from you and why, then create a “persona” for insights into what they’re going through. The process creates more empathy and emotional connection for your customers.
This is what you do anyway as a retailer, it’s just organized differently through the virtual process. Most important is the store itself and the passion it inspires. Even with all the e-commerce growth, e-commerce sales are still less than 20% of all U.S. retail sales.
Find E-commerce Fulfillment
Shipping is complicated involving order receiving, data capture and analytics, picking and packing product, preparing product for shipment, and getting it on the van. Then there’s proof of delivery, damage response, and returns.
Small retailers’ options range from setting up a backroom shipping department to using a third-party service to handle inventory, ship it, and return it if necessary.
Many shipping software options are available to handle actual shipping. Major carriers like UPS and FedEx have programs that adapt to your website to order and track shipping, and many more software providers link with e-commerce platforms and services, such as Woo Commerce.
For small retailers just starting the e-commerce journey, consider creating your own shipping and receiving department in the backroom. This will help manage costs and you learn what’s required to integrate shipping with your website, from pick-and-pack, shipping prep, and putting orders on the van. It will also help you know when to hand off larger volumes to a shipping service.
You may need to reorganize your staff to ensure orders are processed quickly and shipped. The trade-off is knowing when you need staff on the floor to ensure customer engagement and sales and when you need to ensure product sold via the web gets processed and shipped on time.
Shopify, Etsy, and eBay integrate shipping into their platforms, but you risk branding problems. For extra fees, fulfillment houses will include your company name and logo on shipping labels. However, be careful to ensure your store and brand experience are consistent along all customer touch points.
Some platforms allow you to integrate their ordering pages into your website, which includes shipping functions.
In small market areas, retailers have been known to deliver phone and web orders themselves by car. As volume grows, you may consider other options. UPS, FedEx, Amazon Fulfillment, and specialized fulfillment houses will store your inventory in their warehouses and track in-stock and replenishment. You order initial product, ship it to the shipper’s warehouse, and the shipper fulfills the orders you send via web.
Without an integrated delivery system, it’s difficult for indie retailers to get big discounts on shipping. The small package delivery and individual pick-and-pack are the most expensive parts of the shipping process. Amazon Warehouse Service has invested millions in robotics and artificial intelligence to pick-and-pack and process order shipping.
Where indie retailers might benefit, depending on the volume of orders and product type and size, is with a centralized warehouse. That gives shipping vendors opportunities to combine regional or long-distance shipments to save on transport costs. And for a new retail group, it can be an anchor to develop other indie retail capability.
Ace Hardware has solved this problem for its individual retailers. From a small Chicago group, it now operates 17 distribution centers across the U.S. to serve co-op members. Several years ago, Ace acquired added distribution capability and formed subsidiary indie-retail distribution services for non-Ace retailers. The resulting Emery-Jensen Distribution and Jensen Distribution Services offer hardware merchandise and e-commerce support.
In the e-commerce world, the sale isn’t completed until the customer actually receives the product on time and undamaged. In the past decade, big retail has made an art of omnichannel retailing and giving customers options to ship product to home or office, pick up in store, or deliver to a safe pickup place to avoid porch pirates.
With new services and programs, indie retailers can narrow the gap between big online and big-box retailers, plus keep the added advantage of the unique in-store experience.
Buying Group Examples
Worldwide Buying Group focuses on outdoor-sports merchandise.
Nationwide Buying Group focuses on rent-to-own dealers and custom installers in the major appliances, consumer electronics, furniture, bedding, home theater, and outdoor industries.
Bookshop.com offers services to indie bookstores, including e-commerce and web services. A centralized e-commerce engine generates sales that are shared with participants.
The Retail Observer lists buying-group partners that cover several product and service categories.
Vend cloud based POS offers simple installation.
RetailPro offers multi-service POS for single or multiple stores.