In recent months we have witnessed a number of high profile bankruptcies amongst high street retailers. Online shops on the internet have been blamed as the culprit. The fast growing ecommerce industry has brought stiff competition to the high street retailers, who now not only have to compete with other high street retailers but also virtual sellers from around the world, including ultra low cost suppliers from opposite end of the world such as China and India, who offer free or fast delivery to anywhere in the world.
These online sellers are taking businesses away from high street retailers because they can offer the same products to the consumers at much lower prices. They are able to do this because the cost of doing business online is so much lower. The absence of physical store and shop assistants means they can operate without expensive rents, utilities and wage costs. An online shop is accessible anywhere in the world, which gives them access to much bigger customer pools so they can better benefit from economies of scale.
Instead of treating ecommerce as the enemy, traditional retailers should embrace it and think how it can contribute to their own bottom line. The answer is simple. Anyone can set up a website and it doesn’t cost much money to do so. Once your products are online consumers outside of your local market will be able to buy them too. Just think how much bigger your potential market has become. You do not need to hire any shop assistants to attend your online shop and you do not need to pay rent. Therefore any online sales should go straight to your bottom line.
The fact that your online shop can be accessed anywhere in the world, there is plenty of room to expand your existing customer base and grow your top line. Greater sales volume means you can order more from your suppliers and negotiate for lower prices. You can utilize the greater economies of scale to lower the operating cost per order.
As you generate more and more of your orders online, which carry higher profit margins, the overall profitability margin for your business will improve. By diversifying your operation online, you have also reduced your business’s risks by protecting it against sudden shocks to your physical shop such as staff sickness, road works, riots and protests. Should something happen to your physical shop, your sales will continue online thus minimizing any adverse impact on your business.