Over the past few decades, we’ve seen a lot of physical retail businesses transition to become online businesses (or physical-online hybrids). This makes sense. Online juggernauts like Amazon.com have changed the way people buy things, and physical retail stores have had difficulty keeping pace. Transitioning to at least a partially online model is a kind of “if you can’t beat ‘em, join ‘em” strategy that has worked relatively well for businesses like Wal-Mart and Best Buy.
However, we’re now also seeing the reverse of this trend: online businesses transitioning to physical retail. Why are they doing this, and should your online business also establish a physical presence?
The Advantages of Physical Retail
Online retail offers a number of advantages over physical stores, including convenience, speed and breadth of merchandise, but there are still some advantages of physical businesses that online retail just can’t match:
- Word-of-mouth and physical exposure: Search engine optimization (SEO) and social media marketing are highly effective, but the brand exposure you get by having a physical presence in a high-traffic area is hard to match. You’ll also generate word-of-mouth exposure among local residents.
- Different market segments: A whopping 79 percent of consumers now buy things online, but let’s not forget about that missing 21 percent — one in five American adults doesn’t buy anything online with any kind of regularity. There’s an advantage in targeting this market segment by opening a physical store.
- Immediate availability: Though online retailers are competing to see which can offer cost-efficient, same-day delivery first (using drones, in some cases), the reality is that online purchases still take time to arrive. Physical retail stores offer customers instant gratification.
- Personal touches: In a physical store, you have the opportunity to engage with your customers face-to-face. The same can’t be said for online interactions.
Making the Transition
So, what can online businesses do to make a smooth transition to something more physical?
- Choose the right space. One of the biggest decisions you’ll make is choosing the space where you’ll set up your business. You’ll need to research where your target market frequents, the type of competition in the area, and try to find a good deal on a lease or building purchase. For small online businesses, this may be next to impossible; one of the biggest advantages of starting a business online is the minimal startup costs. Do your research and talk to other business owners in your prospective areas to get a feel for the layout.
- Invest in a good point-of-sale (POS) system. Your POS system will be a major factor in your success. Its intuitiveness or difficulty will determine how efficiently your employees can handle their responsibilities (and how satisfied they are with their jobs), and its robustness will determine your average customer experience. Models like Shopify’s POS system offer easy integration with a number of different devices, but you may also want something more robust or permanent depending on the nature of your business and its long-term plans.
- Cross-promote. Once you’ve gotten a foot into both worlds, don’t isolate yourself to either channel. Promote your physical business on your online channels, and promote your online business in your physical channels. Your goal is to generate as much cumulative business as possible, so make sure all your customers know that both avenues of purchase exist. Chances are, they’ll find each route to be advantageous for certain applications.
- Start small. Some online retailers are making multimillion dollar investments in physical spaces; fortunately, you don’t need to do the same. In fact, it’s better if you start small (especially if your audience is somewhat limited). Invest in a small location, with limited inventory and a minimal staff. You could even start out by attending trade shows and conventions. Avoid investing too much in the physical space until you know it can work for your business.
- Gather data and adjust. Most importantly, keep active measurements of how your business performs in both channels. Gather as much data as you can on how your customers react, both in an objective scale (e.g., how much they buy) and in a subjective scale (e.g., how they respond to surveys about your brand), and adjust your approach accordingly.
Some businesses fare better as online-only. Some fare better as physical-only. Others, and I would argue the majority of retail businesses, fare best as hybrids, and are able to achieve the best of both worlds. If you’re an online business, consider the potential advantages of opening up a physical retail location. If it makes sense, prepare to make the transition.
Larry Alton is a freelance writer, whose work regularly appears in Huffington Post, Entrepreneur, Inc. and Adweek.