Bricks and Clicks

The first wave of Internet retail, which occurred during the boom years of the late 1990s, focused on differentiating between online selling and selling offline. It failed. A few niche-based start-ups such as Amazon, eBay and Red Envelope made money and survived, but for the most part independent brick-and-mortar retailers decided that selling on the Web wasn't worth the trouble.

But now a second wave of online shopping is hitting the retail industry — and it's a quiet revolution. This time, the focus is on implementing tried-and-true retail fundamentals to reach customers, whether they're coming through the modem or the front door. And this time, the approach is working: Americans are shopping online in greater numbers than ever before.

According to Forrester Research, online retail sales for 2005 reached about $165 billion, a 20 percent increase over 2004. This year's sales are projected to reach $202 billion, and Forrester expects revenues to grow about 14 percent a year, hitting $329 billion in 2010. In all, some 56 million Americans have already made a purchase online: That's 39 percent of the U.S. population. And of the $26 billion in 2005 online holiday sales, 45 percent went to small retailers — up from 42 percent in 2004.

Meanwhile, affordable services such as Yahoo Stores and eBay's ProStores mean smaller retailers no longer need to reinvent the virtual “shopping cart” to have a secure and functional online store. As a result of such new technologies and the change in the online shopping environment, an increasing number of gift stores are using retail know-how to turn their brick-and-mortar businesses into bricks-and-clicks hybrids.

The first question for retailers looking to enter the e-commerce market is what merchandise to offer online. Of course, if a retailer can afford to put their entire inventory online, that's great. But most have to make decisions about what kinds of products are likely to appeal to the virtual shopper.

The best place to start is with highly recognizable brands that consumers trust. Other good categories for e-tailing include consumables that will be reordered regularly, and products the buyer doesn't need to see or touch, because they already know what they're going to get. Another factor to consider is whether the manufacturer can provide good images and descriptions of the products, or if retailers will have to generate that information themselves.

It's also important to remember that most people don't shop online for a single small item, because the shipping would cost as much as the item itself. Clever web design allows retailers to offer the same kind of add-on sales online that a salesperson would suggest at a brick-and-mortar store. For instance, if a customer is buying a candleholder, the website can be customized to suggest candles along with the candleholder. And if a customer chooses gift wrap service, they can be offered a selection of greeting cards with a chance to add personalized messages.

Despite the location-leveling benefits of the Internet, there are still choices to make about where to set up shop. Multi-seller marketplaces such as eBay or Amazon are a lot like leasing a high-traffic mall location: they bring lots of new faces that would probably never otherwise have found that independent retailer, and they take care of the infrastructure.

However, such marketplaces also impose limits on the design and functionality of a retailer's virtual storefront, and there is direct competition from other vendors on the site. Online marketplaces also charge “rent,” usually in the form of a per-transaction fee.

On the other hand, setting up a store on a retailer's own website is much like building a “destination” shop off the beaten path. The upside is that retailers get total control and 100 percent of visitors' attention. However, they must work hard to attract shoppers, and they have to handle all the back-end details themselves.

Retailers can also do both. For example, eBay offers sellers the option of embedding an eBay store into their own website. Even simpler, it's not uncommon for retailers to list a few items on a heavily trafficked marketplace, and use that to drive customers back to their own website — not unlike drawing passersby in with a sidewalk sale.

Just because a store is online doesn't mean it has to be impersonal. Photos and introductions of the staff, a store mascot or pet, or an online Web log (also known as a “blog,” see box, page 30) with a distinct personal voice are all ways that Internet outlets can “connect” with their customers on a personal level.

“The website talks about who we are,” says Melanie Ginavan of Artezen in Bloomington, IL. “It's not some giant warehouse; we're two people who designed the store and choose the product. Somebody really touched [the merchandise], really cared about packaging it. It's [my husband] Eric and I wrapping your present.”

Thompson Lange of Homescapes Carmel regularly updates a blog with photos and anecdotes of his travels, as well as source products. Customers log in to experience the vicarious romance of Lange's travel.

For stores that sell craft supplies such as scrapbooking products, a video tutorial that customers can add value and help sell materials — much like an in-store event. Other popular extras that are easy to do online include free gift wrapping, registries, wish lists and birthday and anniversary reminders — especially popular with male shoppers.

But not every benefit that a website gives to a retailer can be measured in online sales. “Cross- channel” shopping, the process wherein consumers do research online before buying at a store, increased 8 percent in 2005, influencing $125 billion in offline sales last year.

Jenny Sweeney, of Jenny Sweeney Designs, says she considers her retail website primarily to be a form of customer service, rather than a direct moneymaker. “We don't think of it as replacing our store,” she says. “E-commerce isn't a big percentage of our business, but it holds its own.”

One way to help track cross-channel customers is to offer a printable online coupon for in-store use. Such cross-promotion is next on Sweeney's agenda. “We have different customers in the store and online. The web customers are mostly out-of-state, whereas our store customers are local for the most part. We need to work on our cross-marketing a bit more, because a lot of people see the store online and want to see what it looks like.”

Like a brick-and-mortar store, a retail website should be attractive, easy to understand, and meet the consumer's needs and desires. For a bricks-and-clicks combination, the virtual store should also coordinate with the real one, so that a visit to the website evokes memories of the store and strengthens the overall brand image. Using the same color palette, fonts and logos as in-store signage and packaging is one way to create that brand identity. But do consult a professional web designer, as some things don't “translate” effectively.

Beyond Bookmarks, Ashland City, TN, (profiled in the January issue of Gifts & Decorative Accessories) created its web site with the philosophy that it should mirror a brick-and-mortar store as closely as possible. The result was so successful that president Christy Moore was able to sell the store design itself for more than a million dollars.

One common mistake to avoid is adding technological bells and whistles that distract from the shopping experience instead of making it easier. Retailers can “mystery shop” their own websites to see how easy it is to find and purchase product; the very Internet-savvy retailer might want to ask a less experienced friend or relative to try it too.

One of the greatest advantages of getting online is the ease of reaching customers. Email makes direct response marketing both simple and cost effective; retailers can hire a service like Loyal Rewards, Perkasie, PA, to send promotions to their mailing list, or to create a store newsletter themselves.

In addition, online advertising is within the reach of most stores' marketing budgets. But online is not the only place to promote a Web store. Retailers should put their Web address on bags, bag stuffers, business cards and direct mail pieces, and in turn use their website to promote in-store events and services.

For retailers in tourist areas, the best advertisement for the website is their store. Every visitor should be asked to sign up for an email list, and marketing email should include pictures. Such promotions trigger the sense memory of being in-store — an appeal that “clicks only” retailers can't match.

Of course, that doesn't mean stores can't attract customers who've never seen their physical location. Says Ginavan: “We're getting a wider audience without even trying. We get folks from larger metropolitan areas, and addresses from the middle of nowhere. We're shipping all over the country to people who've never been to the store.”

To reach new customers online, stores must identify the target customer and go after them effectively, whether that means picking the best websites to advertise on or the best keywords to include in Web searches. Most search engines rank sites by popularity, and most users don't go beyond the first couple of pages of results, so a retailer can't count on everyone who runs a general search like “gifts” to beat a path to the door. Making sure that the website lists branded products carried as meta tags (see box, this page) is one way to raise a site's profile.

Another way to reach customers is word of mouth. Send out a friends-and-family offer for mailing list members to pass along, or provide fun content customers will want to email for its own sake. That kind of promotion leverages a mailing list to reach more people. Customers referred by bridal registries or wish lists should also be given incentives to sign up.

How much can a brick-and-mortar store sell online? It depends on the store. For example, Amish Corners in Drakesville, IA, sells 50 percent of its soy wax candles and Amish-made crafts on the Web. Of course, Drakesville has a population of only 185 people. Still, owner Brad McKee recognizes the importance of having both a storefront as well as an online presence. “The store lends credence to our web site,” he told the Asbury Park (NJ) Press.

Most stores probably don't see such a high percentage of online sales. “It was five to 10 percent of the business, but it was definitely moving that way,” says Ginavan of her Web sales before she decided to move her store online.

For most brick-and-mortar stores, online sales won't replace person-to-person retail any time soon. But they can provide a way to hang onto the business of customers who leave and locals who like the convenience of online shopping, as well as reaching a few new shoppers.

A site that adds even 5 or 10 percent to in-store sales can mean the difference between an operation that is merely surviving and one that is thriving and ready to meet the challenges of the future. And as younger generations that have been weaned on the Internet enter the consumer market, bricks-and-clicks stores will be ready to meet and serve them where and how they live.