Digital vs physical: should new business owners bother with a bricks and mortar presence?
2019 has started with yet more dire warnings for the Great British High Street. Debenhams is struggling with poor profit figures reported; House of Fraser closed more than half of its outlets in 2018 including flagship stores in Oxford Street and Cardiff; Homebase limps on having shut 58 stores at a loss of more than 2,000 jobs. Glorious retail names such as HMV, 98 years old in 2019 but back in administration, are still ascertaining how to survive the digital age to prevent becoming another giant of the past.
With Altas Group recently predicting the loss of 175,000 High Street jobs this year, Informi, which offers advice and guidance to small businesses, spoke to many businesses about whether newly formed businesses should even bother with a physical presence, or just opt for online:
GO FOR THE ONLINE-ONLY APPROACH
“I hope to see Oxford Street completely residential one day.”
**Irina Bragin runs Made of Carpet, a small independent fashion brand. She started the company with just £10,000 eight years ago and has a current annual turnover of around £100,000. **
“I had the advantage when starting our of being a professional Graphic Designer, while my husband is an IT engineer and I have not therefore needed to spend money on design and web-development on my business. I am also a huge advocate of online shopping and I sincerely hope to see Oxford Street completely residential one day.
“At some point in my first couple of years, listening to “experts”, I lost a lot of money (over £50,000) exhibiting at fashion trade exhibitions in London and Paris. Instead of spending tonnes of money trying to find wholesale buyers for your goods, go online and sell them retail – straight to the end-consumer.
“If you open your goods up to buyers on Amazon, Etsy, eBay etc., then promoting on these marketplaces, Google and all over social media then you will sell for RETAIL prices: 2.5-3 times higher than wholesale.
“There are plenty of other reasons why it is better to be online than a brick-and-mortar business, including commercial rates, employment law, additional expenses etc. I know three people personally who lost, or nearly lost, their brick-and-mortar businesses because they did not have a strong online presence.”
“For most retailers, online is where it’s at.”
** Prezzybox is a UK-based major online gift retailer, set up in 2000. Today it turns over millions each year, and has a strong online presence – with over 42,000 Twitter followers, for example. Zak Edwards is their managing director. **
“For some businesses, it helps to have an high street presence - for example a specialist cheese shop - as there sale is so much more experiential. There’s also the advantage of immediate footfall. The disadvantage is obviously the cost of the premises and the fact that your customer reach is limited to your locality.
“For most retailers however, online is where it’s at. Set-up costs are a lot lower, whereas overall reach is much higher. You’re also open 24 hours a day, 7 days a week which is a massive advantage. It’s great going home at 6pm to come back the next day to a mountain of orders which have automatically been processed. You’re not governed by physical space either. You have a virtual showroom where you can sell thousands of products - especially if you utilise manufacturers who offer drop ship services.
“Finally, online marketing is a massive advantage. There’s a raft of free marketing tools which you can take advantage of which can really help drive traffic to your business - for example Google organic listings, Social marketing, newsletter marketing etc, which really help to drive sales. Again, if you’re purely a high street brand it’s more difficult to monetise online marketing efforts.”
“Being digital gives me the business advantage to compete with much larger companies.”
**Conduct Science Network offers scientists low-cost, high quality tools in order to conduct digital logistics. The company is based in Boston, Massachusetts, and was founded by Dr Shuhan He. **
“As a doctor, I want to be right in the middle of a performance bell curve. That is to say that everyone recognizes what I’m doing, and agrees that it’s the right way to treat a patient. It’s the “standard” practice. Its average–exactly where everyone else is.
“When you’re running a business however, you’re inherently in a competitive ecosystem. That means that to compete, we have to be at the right side – the top end – of the bell curve in performance, so to speak. This is how we win. Thus, being on the right side of the bell curve means you need to be doing things that not everyone else agrees with or are doing.
“I see creating digital companies as placing myself on the right side of the bell curve. Is there a chance it’s on the wrong side? Yes. But that’s the risk I take to be competitive and win. Thus, being entirely digital gives me that advantage as a small business owner, and lets me compete with companies that are much larger and have more staff and capital.”
“The ultimate dream is to be able to sell product or services when you are not working.”
Becki Clark is a senior consultant at Perform Green, who deliver digitally inspired solutions for a variety of clients. This includes teaching people new skills, build commercial relationships and provide expert delivery capability.
“Nothing beats handling a product for customers, but the power of online is still compelling. Ways in which to maximise your online impact include:
“You can go to where your customers are. Retail space is fixed in location. Online, you can take your offers to where your customers are. Online advertising offers advanced segmentation and can show your advert directly and only to your target audience, not every passer-by. And once you capture their email with full GDPR permissions, you can send offers and articles directly, and not have to pay to advertise.
“You can gather real time data. Imagine if you were to follow someone around the supermarket. What did they come in here to buy? Did they come in, go straight for their item and pay, or do they linger? What are they looking at? How do they compare products? Online cookies can track those sorts of behaviours. Data can be aggregated to determine who is buying what when, and you can use that data to improve your product or offering.
“You can digitise the offering and ‘sell in your sleep’. The ultimate dream is to be able to sell product or services when you are not working. Generating passive income is much easier online, where a few months producing and honing the product and the advertising can lead to leads funnelling themselves; choosing and receiving the product all without your direct intervention.
“Online allows you to reach much further and to interact with your global customers to connect to a worldwide community. Don’t be afraid to engage locally, though. There are exciting initiatives taking place in the high street which may not die entirely, but instead may be reborn into something else, like a phoenix rising from the ashes.”
THERE’S STILL SPACE FOR A PHYSICAL PRESENCE
“Multiple sales channels allows customers the flexibility to purchase our product.”
Freshly Spiced offers spice-blend recipe kits online, via retail shops and at events. It was set up by husband and wife Tom and Claire Ali, initially as a hobby and now as a full-time business.
“The presence of our products in farmshops and delis, along with events we attend, give us a visual presence to help build a brand and drive sales through those channels along with pushing sales online. This has worked really well and we now have a good balance across all sales channels. Online has continued to build but we have not found this to be at the detriment of the locations we stock in.
“We want to sell through multiple sales channels, as it allows customers flexibility to purchase our product. However, to build the brand and raise awareness we started off by attending local events, mainly food fairs or gifting events. This then drove traffic to the website, and as we have added stockists, people who are not wanting to buy online or possibly want an item that day have the awareness of where we stock.
“It also gives a bit of a backup option, because if you were to only sell through a physical store and that sales channel started to slow, it could very quickly impact your business. By having different options it allows you to get a picture of where and when customers buy your products, allowing you to plan or look at how you can improve sales during those periods.”
“There is room for online and for the high street.”
Anna Oldbury is a mum of two, and director of Liobites, a Croydon-based company set up in March 2018 to sell healthy natural fruit crisps and smoothie bites. She got the idea behind the company when her youngest daughter started picking dried fruit out of her cereal.
“My first business was an online store selling hosiery. Despite being small we managed to secure a first page Google page ranking. When you trade online your page ranking is your location. It was going very well until Google changed their algorithms and overnight, we disappeared from the first page. This is how fickle an online presence can be. The marketing costs of selling online can kill small businesses. One could argue that social media can spread the word about your business. Instagram and Twitter followers like your products, images and competitions, but they are not always your typical customers.
“In March 2018 I launched LioBites as a disruptive food brand – a new, unknown product that customers are curious about, but aren’t sure if it will taste any good and need persuasion. The reality of the new, disruptive product is if the customers can’t try it, they will not buy it. We have an online presence and we are doing very well. However, we have invested a lot of time marketing Liobites at events, tasting boxes, and specialty selling events.
“Growing trends such as Veganism and more environmental awareness are attracting people to shop locally in order to support small independent shops. Millennials are shopping with consciousness; they want to know the origin of the product and how it was made. A conversation with the shopkeeper can entice repeat purchases and create that long lost community feel.
“In my opinion there is room for online and for the high street. The high street requires more effort from the retailers and a more personalised service. Creating loyalty in a retail store can lead to future online purchases. Our future is not about a product but what it represents, and this will define the way we shop.”
“There is still a huge role for the High Street to play.”
In the Buff is a natural healthy ketchup that includes a plant-based protein in order to appeal to fitness lovers. It contains 10 times more protein than your average ketchup, and Nick Briggs is its co-founder and managing director.
“Having a physical presence in store offers helps both the visual and physical ‘connection’ of your product with your potential customer. For us at In The Buff, this is a key ‘conversion tool’ as they can trial (taste) our new products if they have never come across us before.
“An online presence seems to be an easier route to market and is reasonably cost effective – so as a ‘set and go’ solution, online-only works. But there are postage and packaging costs that really can hurt or make your product quite expensive which is really hard to work around, without your margins being hit! Also, other than seeing, none of the other senses can be really replicated in the online space. Humans are a mixed bunch. Some like to touch, feel the weight of a product, taste/smell and basically where they can, stimulate their senses that are relevant to that product. But some are more impulse, experimenters, so they will purchase online without these additional benefits.
“I’d say that having a presence both physically and online is key. The High Street is taking a huge hit currently, but there is still a huge role for it to play for our consumers and something the online space will never be able to truly replicate or replace. As a start-up, you have to be clever and spread yourself where you can afford to and realistically cater for with the resources you have. Being relevant is also key. Both channels have very positive offerings to connect our brands with the end customer, but with one currently shrinking and one growing, does give cause for concern that our presence and opportunity as a brand is also going to get harder.”
“In reality, we are witnessing transformation.”
**Colin O’Reilly is sales director for the EMEI region at MRI Software, who create real estate software solutions for property owners, operators, occupiers and investors. The firm recently produced a report discussing the future of the High Street with property professionals. **
“The news is full of stories about the decline of the UK High Street, and we’ve seen a number of retailers recently close stores. There is, however, much more to the current situation than meets the eye. While many business owners are assessing and evolving the way in which they balance physical space with online initiatives, it’s not necessarily all doom and gloom as reported in the media. In reality, we are witnessing transformation.
“As an example, our research suggests that Generation Rent is here to stay and they want to live, work and play in town centres – which offers real hope for revitalisation of High Streets. The challenges faced by retail won’t be solved by a shift to residential, but the trend will be a significant boost to opportunities for property owners. Retail property owners will increasingly become residential landlords. Ultimately, more people living in town centres will enhance the opportunities for retailers and other businesses, such as coffee shops, health clubs and entertainment venues.
“This trend promises to feed businesses – helping local retailers who are willing to adapt. There’s no doubt that UK town centres are changing, but there’s definitely hope for the High Street yet.”