There is not much doubt that every retailer with a brick-and-mortar store also should have a website. The Internet penetration in the U.S. is one of the highest in the world, and customers today expect to find information about their favorite retailers on the Web, without exception. The only decision that a retailer has to make today is if its site will be e-commerce enabled. That is, will it sell products to customers from the website.
There are many factors involved in determining if an e-commerce enabled website is a good idea. Here are some issues you should be aware of to ensure your Web strategy is one that pays off for your business.
You and Everyone Else
Are you a commodity seller? In other words, if you're a small store in a remote community selling product that is not exclusive or different from any other retailer in the country, then selling online might be difficult. Enabling a shopping function on your store's website might attract some local shoppers unable to get to the store. But your store would be competing with every other retailer in the country that is online. Expecting a local shopper to order product from an online local retailer is not very realistic when you're selling a commodity item, unless your store offers free shipping or another incentive that gives it an advantage over a larger retailer in a nearby market.
The Sales Tax Equalizer
Customers today are very savvy Web shoppers. When you enable your site for e-commerce, you need to check your "net delivered cost" to customers both in-state and out-of-state because many customers will do this analysis to compare the real price. If you offer free shipping, then the free shipping likely would have to be of greater value than the local tax paid by the shopper. In many cases it is cheaper for a customer to order from an out-of-state website that has no sales tax on more expensive items if the cost of shipping is less than the sales tax.
For example, if you have an item that retails for $390 on your website and your state has a 9 percent sales tax and shipping cost is $14, for an out-of-state customer the net cost, or the delivered price he pays, would be $404 (cost of the item plus shipping), while an in-state shopper would pay $439.10 (cost of the item plus sales tax plus shipping).
Don't think for a moment that many shoppers don't do this comparison because they do. The in-state tax collection is still a huge issue for many shoppers on the Web and the reason why many smaller retail websites are successful. Larger retailers with stores in many states have to collect sales tax for the state that the customer is ordering from. This gives a real advantage to smaller retailers who only have presence in one state. You have to do that analysis for your site when you are setting your Web pricing.
The In-Store Pick Up
Another tactic that stores are using to offset the tax issue for local shoppers is to offer free in-store pickup of the item. Many customers do not mind stopping by a store to pick up an item if it saves them shipping charges. Large retailers like Sears and Best Buy have been offering this option for some time, and many of their online customers take advantage of it. This strategy also offers the benefit of giving the store another chance to add on an item to the sale. Stores that offer in-store pickup often give the customer a coupon good only for the specific day the customer comes to pick up his item. This is a huge opportunity for more business, and for turning an online shopper into an in-store shopper.
Returns -- The Dirty Secret of the Web
If you are seriously thinking about enabling your site for e-commerce be aware that returns are a major issue with Web purchases. Just like catalog retailers who have experienced this problem for years, websites are not immune to customers changing their minds, not liking items, or finding that the items do not fit or are the wrong colors. Some websites experience as high as a 40 percent return rate. In addition to the loss of revenue, the real problem is operational. The cost of re-checking a returned item into stock is not low.
One famous designer website had a huge problem a few years ago when they did not check the shoes that were returned. They found that return rates were escalating and upon researching what was happening, discovered that customers would order two different sizes, mix up the shoes before returning them, and the mixed size shoe boxes got back into inventory to be sent out to new customers, who would then return them, again. It cost that designer website hundreds of thousands of dollars. Some websites today charge a “re-stocking” fee for returns, but be careful of this strategy if your competition does not charge it.
Being aware of issues such as these can help you stay alert for common problems. It also can increase your chances of successfully growing your retail business on the Web.