Recognize these retailers? They've filed for bankruptcy protection in the past year: Pier 1 Imports, Neiman Marcus, J.C. Penney, J. Crew, Forever 21, GNC Holdings, Men's Wearhouse. According to legal firm Epic Global, there were over 3,600 Chapter 11 filings through June, a 26 percent increase from the same time last year.
Traditional businesses need to explore online revenue models to survive. Here's how offline businesses can make a digital transition.
Compete in the right sector.
Everyone is buying goods through an electronic screen. The opportunities are in online shopping, groceries, take-out food, delivery services, home gyms, office equipment, and everything related to work-from-home (WFH) and health safety. Opportunities also include PPE supplies, occupancy planning, and internet networks and systems.
Are you in the right sector? While digital transformation helps, companies must compete in the right sector to have a chance at surviving a historic recession when Americans are bargain hunting. If you've been following the news, travel, luxury goods, and unnecessary spending are out the door.
Enable online and social orders.
Businesses that provide essential goods and services (like food, medical supplies, home-office equipment, etc.) should establish digital channels to increase cash flow. A small business can spend up to $3,000 on an e-commerce website that features a small catalog, online checkout, and template designs. It's prudent to choose a domain that easily identifies your business, such as bluehillsbakeshop.com or mikesgroceries.com.
Younger consumers like to order via social networks. If your business has a Facebook Page, you should establish a Shop section that lets users order, give an address, and check out.
Keep prioritizing customer value.
I recently spoke with Dr. Mik Kersten, founder of Tasktop, a software firm that helps companies increase customer value. He says that when implementing software, an established business should monitor value-added outcomes for end customers, as well as increase the velocity in which a company adds value to customers.
Put another way, a business leader can't afford to spin their wheels by measuring the wrong KPIs (key performance indicators) or by not addressing what truly matters to customers. A digital transformation must be done with purpose, intent, and with the customer in mind. Which means a rollout must retain existing customers or acquire new ones.
In the consumer goods industry, Kersten says examples of "value streams" that flow to end users include new product features (that impress customers), reduction of defects, improved security and safety, and greater convenience for customers (such as home delivery or in-store pickup). When adopting an online business model, managers should focus on how digital interactions create value for customers and make the user experience frictionless and convenient.
Explore new revenue streams.
Why are e-commerce and social channels important during the pandemic? Loyal customers will support your business because they want continued access to goods and services.
In the consumer industry, it could make sense to incorporate drop shipping into your operation. With drop shipping, a business doesn't have to maintain large inventory levels. A business can generate online orders and a third-party company can ship orders directly to customers.
An online business can change other dynamics. Some consumers will expect 24/7 customer support. If you have the budget, you may want to install chatbots that answer common questions, as well as guide site visitors to checkout. Depending on industry, you may want to implement in-store pickup or ship directly to households. Buy online, pick up in store (BOPIS) increased 130 percent year-over-year in June, according to a recent Adobe study.
Consider bundling your products with complementary goods and add-ons. If you're a bakeshop, you may want to sell condiments, cheese, milk, juice, etc. in your website's catalog. Find a partner that can deliver such goods in exchange for a commission or marketing partnership that allows your business to be featured on the partner's e-commerce and social channels.
Continuing our bakeshop example, you may want to create and monetize YouTube videos by showing audiences how to bake popular cakes and cookies. Such videos can generate income from advertising. Videos will also increase awareness for your brand and potentially open doors to new revenue via partnerships, book publishing, and affiliate marketing.
The key question to ask is, "How do people and businesses make money online?" If you already have a good product or service, it's imperative to capture online market share.