When eCommerce Might Be a Very Bad Thing
You shouldn’t always sell stuff on the Internet. This might seem odd coming from a guy who gets paid to help you sell stuff on the Net, but it’s true. If you are in the physical retail business, expanding to the Net is sometimes a Very Bad Thing, and you may find out the hard way that showrooming is not limited to physical retailers.
I’ll explain this with a couple of stories –
We had a woman call Blend the other day inquiring about how much it would cost to build a website selling shoes. She was planning to open a physical shoe store at some point, but figured it would be cheaper to start virtually, rather than physically.
She pointed me to a shoe store on the Net that she liked, and asked how much that would cost. I told her at least $20,000, and perhaps $50,000. She was dismayed by this.
I wasn’t done. Beyond the raw cost of it, I called into question the very idea of yet another online shoe store, and explained why it might be better to open a physical store instead.
“Why,” I asked her, “would anyone buy from you, instead of Zappos? Or Amazon? Or Walmart?”
The gist I got was that she was hoping to bring a more personal experience to her store. She would select shoes differently, and provide personal service to people looking for shoes. This would set her apart – the experience of shopping.
Sadly, I explained, this is not what people want when they go online to shop for shoes. Rather, they just want shoes at a very cheap price, a la Amazon, or with free shipping, a la Zappos. Can you offer any of that? No? Then, again, why would someone buy a shoe from you over them?
I never heard from her again. While I certainly didn’t mean to crap on her dream, I probably did her a huge favor.
Another story –
We have a woman in Sioux Falls we’ll call Mary. She has a very successful retail store selling upscale goods. People love Mary, and they love her store. It’s in a great location, it’s a cute environment, and people love to come browse the store, interact with Mary, and buy things from her. Many of her customers know her by name.
Mary and I talked about expanding her store to sell stuff on the Net. Ultimately, however, it became obvious to me that this was a Very Bad Thing.
You see, Mary’s success is not due to the fact that you can buy Product X from her store. The fact is, you can buy Product X from lot of stores in town and thousands more on the Net. Rather, Mary’s success revolves around the act of shopping itself. Mary is nice and people like her. Her staff is super-helpful. Her store is adorable, and it’s in a great location that is conducive to wandering around, getting some ice cream, and visiting other stores.
The fact is, Mary is selling both Product X, and the experience of buying Product X. Her competitive advantage – the edge she holds over the Amazons and the Walmarts of the world – is that the buying experience in her store is social, sensory, and even emotional.
This does not translate to the Net. On the Net, buyers (especially female buyers) are much more transactional and mercenary. They don’t have to get back in the car and drive to another store – someone else selling the thing they want is just one click away. Hence, they’ll gravitate to the lowest overall transaction costs.
Today, when Mary updates her store’s Facebook page to tell people about Product X (her biggest driver of business, she tells me), people immediately call her and ask her to hold one and then they drive down to buy Product X and then often buy Product Y too.
However, if she also had a link to purchase Product X directly from her online shop, this would all change. The experience of buying Product X would become merely transactional, and that strips out Mary’s competitive advantage.
I see it working out like this –
Mary updates her Facebook page and tells people about Product X. There’s also a link to buy Product X right on her website. Someone likes Product X and they click through to look at it. They want to buy it, but – being a shopping mercenary – they think they can get it cheaper over at Amazon. Besides, they already have an account at Amazon, and they have Prime, so shipping is free. Additionally, they trust Amazon, they’ve shopped there before, and there’s very little effort required to switch purchase locations. They have Amazon bookmarked, and a cookie keeps them logged in.
And, with that, Mary lost her sale of Product X, and the potential sale of Products Y and Z too (worse, she suffered the humiliation of showrooming for Amazon). Mary can’t compete with Amazon in terms of raw transaction costs (cost, shipping, ease of use, etc.), and over the Net, she cannot bring her core competitive advantage to bear. The buying experience is reduced to a mere transaction, and Mary is completely outgunned.
So, if you find yourself wanting to sell something online, ask yourself a couple of questions –
First, if you have a store now, why do people buy things in your store and not Amazon? This is your current competitive advantage.
Second, if you sold these things on the Net, why would someone buy this thing from your site and not Amazon?
Now, there might be valid answers to this question – perhaps you sell products that Amazon and Walmart don’t. Perhaps you offer some value-add in exchange for buying from you. Perhaps, through some twist of the market, you can actually sell it cheaper. But remember, even Zappos had to have a hook – free shipping on the sale and returns. Without this, they were just yet another online shoe seller.
Regardless of the answer, make sure there is something. If your retail store is still in business, then you have at least some cometitive advantage. But many times, this advantage won’t translate to the Net. If it doesn’t translate, you are running the risk of a Very Bad Thing.
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