How To Stay Alive: The Challenges of Brick and Mortar in an Online World

Mar 09 2014

Because we buy and sell domains each day, most of us are more familiar with Internet based business than most people.  But there is a daily transformation and battle to stay alive for the small local businesses that your visit locally.  Each and every day consumers are spending more of their day online.  Anyone that owns and runs a brick and mortar business that competes with that move is being forced to change their business structure or face the inevitable ending of shuttered doors.  I’m one of those owners (I own nurseries and garden centers) and every day I talk to other local owners and discuss the past, the present, and the future.  Here’s an inside look at our discussions

People will always do some of their shopping local but the kicker is technology has allowed them to price shop better than ever. Even for the perishables or the harder to ship items that sell best locally, the consumer can print out coupons or force price matching with a few clicks.  It’s forcing margins to new lows.  All positive for the consumer but anyone that doesn’t have the volume to compete on slim margins is being pushed out.  Even in the larger towns, in 5 years you’re most likely going to only have national or large company stores as options to purchase your products.   The only small family businesses left will be in products that the big boys don’t want to mess with, service related businesses,  or that the local business actually produces the product.

What’s kept our family business competitive is two things. We make our own products. We grow most our own plants and do it by the millions.  The cost of the product doesn’t get cheaper than creating it yourself in scale.  Shipping is minimal. We have a few locations.  Half grown at the same location as our largest garden center and the other at the other garden center.  We run trucks several times a week back and forth.  Our production center is located along one of the most traveled interstates in Illinois allowing easy access in and out.  The most important part of the business model is we built the sales outlet before we grew the plants.  We made sure we had a need for the product and then grew the plants to meet those needs, supplementing with plants from other vendors.  The more plants we grow ourselves the higher the margins, but if we have to buy them in we still make money.

The fact that we grow our own product is one key to our success.  The other is shipping.  To get a 10 foot tree and even a 12″ perennial in a pot is expensive and hard to ship.  The cost of shipping is equal to the cost of the plant making local shopping a better option.  Our industry actually is probably more familiar with online competition than any other industry.  Mail Order plants have been a huge business since the early 1800s.  Those catalogs have moved to the Internet but the concept is exactly the same.  So we’ve competed with it for 6 generations.  The key is to let them own the tiny little plant market.  The little plants are the only kind that can be shipped so for 100 years the local garden center has marketed our plants as better quality, larger plants, …same cost. 20 years ago what we were missing was the variety and choices of the online and catalog companies.  Our companies expanded the varieties and got our perennial varieties up to 600 types.   So we not only had better plants but actually better selection.  In short, our nurseries lose basically no plant sales to online vendors.  Boxstores?  That’s for another article.

But what about someone like the local shoe store?  Someone that buys in products.  It’s been brutal.  Shoe manufacturers (and most brands) have minimum pricing set on their shoes.  Which for the local shoe store is probably a lifesaver but also makes it impossible to compete online.  How do you compete with Zappos?  A company that has the lowest prices AND can get the product in your hand in 24 hours.  Most people buy local because the want it now.  With Amazon and Zappos having almost instant delivery it’s taken away one of the last reasons to buy local.  Our store has survived through service and loyal customers.  We know that if we don’t buy their shoes they won’t be there for all the little things we need as well. Gel packs, a pair of socks or gloves.  Things you don’t plan and just go pick up while you’re in the area.   But you can’t survive on the add ons.   It’s nice to go and try on a pair of shoes and see which ones fit well.  The positive of runners is they buy a lot of shoes, the negative is they stick with the same brand and know exactly what size they wear.  Making it very easy to order online.  So why don’t they just sell online?  You heard me talk about Zappos right?  How is someone supposed to go online and compete with them?  You can’t have lower prices.  You can’t have better service?  There is virtually no way to compete unless you find a certain niche that you can concentrate on and become known for that niche.  Unless you’re prepared to spend a lot of time and money trying, you are better off staying local. Concentrating on being the best in your area and making sure your product selection is good for your community.   Showing up and sponsoring all the big outdoor events and becoming synonymous with running.  Our local running store expanded into swimming and made a fantastic move into local sports uniforms.  More products that consumers feel more comfortable buying locally.

My friends in the service industries are doing just fine.  Sure there are some people doing taxes online and various other things but in general, the service companies are thriving.  It’s also the reason many small companies have added services to their product line.

So where does this lead going forward?  The first is don’t try and fight it.  The business model for startups at this time is impossible to compete with.  It’s a lose millions of dollars in exchange for broad scale acceptance.  Amazon still loses money during certain quarters.  You absolutely will lose money in the first couple years. If you are going to compete you have to find a niche.  Some specialty that you can become known for something on a national level. A site that helps someone choose a product on a more personal level and guides them.  Of course it has to be a product that people need help choosing.  It also needs to be products that the consumer doesn’t automatically assume they can buy cheaper at Amazon.   I truly believe that a domain can make you a player right of the bat.  For instance.  We sell fairy garden products in store. I think we can sell even more online.  There are hundreds of places to buy them and even Amazon sells them.  But I bought to build out our new store.  The name should give the store immediate brand appeal.  What better place to buy Fairy Garden stuff then at FairyGarden?  We can set up the site with completed fairy gardens, sample gardens, and articles with ideas. Something Amazon can’t do.  And just like in the store, we need to keep fresh product that is different than the product that may be on discount at other places.

Some may say that this is simple Business 101.  It may be, but like the Internet, everyone talks about knowing everything but it’s a different game when it’s your money, real money, things move in real time, and you have employees and infrastructure. No fake stories of domain sales but “I can’t reveal because I have a non-disclosure”, it’s real. Ninety five percent of the people in the domain industry has no idea how to run a business. They are traders.  They tend to be dart throwers rather than true business builders. If they don’t sell the name, the business model is almost always build it out, hope for enough success so that it can be sold to someone else.   For every 1 of the companies we read about on the Net there are 1000 other small companies trying to stay alive.  Half will fail right off the bat.  Some may make it quite a few years and then can’t adapt to changes or try to over expand. Some will be like mine, around for generations (ours celebrates it’s 150th anniversary next year) but having to adjust every year to changing trends in the way people spend their money.   But there is one common theme. Anyone that fights the Internet will fail.   Those that learn to use it to market and expand will have the greatest chance of success. You don’t have to sell online but you absolutely need to market.  Every local business now needs two signs.  One for the front of the store and a domain name.   Both are the first things a person sees.

There are thousands of companies that try and assist small businesses with these things. But the people that call or visit are usually young and have no idea what it means to run a small, local business.  The know how to help, but they don’t know how to convince the owner that they need help.   They all say the same thing.  I can make you a website, fix up the front of your Facebook page, and get you to the front page of Google if someone searches for your name.   They build it and walk away, leaving the older generation with products they don’t know how to utilize.  The same people that spent $3K a month on yellowpages have kept the money they would have spent and used it to try and make it through the bad economy of the last 4 years.   I sit at these meetings and tell them that money still needs to be spent, just in another form of marketing, the Internet.  Yes, nineteen years after the start of the Internet, most local businesses still don’t know how to use it for their business.  And that’s the exciting part, they’re is still so much growth ahead of us.  I just hope my fellow local business owners are around long enough to take part.

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About the author

Outsmarting the Dumb, Outworking the Smart

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  1. Viljami

    Excellent, insightful post. So brutal. Let’s hope that IBM’s predictions about the rise of the local in the coming years hold true.

  2. Konstantinos Zournas

    Nice article Shane.
    My mother has operated a lingerie retail shop for almost 30 years now and I know exactly what she has to do to keep it open these days. Internet adoption is a bit slower in Greece so I think she can keep the shop open for another 5 years before she retires.

    She has made adjustments over the years going to from small number of expensive sales to a lot of cheap ones.

  3. Jeroen

    Good article.

    It’s a fact that many local business owners underestimate the value of a good domain name. I have sold some generic descriptive domains but surprisingly, many business owners are not interested to own their most generic/descriptive domainname even when offered for cheap.

  4. Sameh

    Good read. Online Shopping is growing slowly in Egypt most likely because of the slow credit card adoption and more of a trust issue in buying stuff online. I guess “Cash on Delivery” solved the Credit Cards issue for now. Word of mouth and the heavy advertising by Online Marketplaces on Facebook and on websites people visit daily is targeting the trust issue.

    Overall, the Government is responsible for the slow growth not the people:
    – So far they have no Broadband plans nationwide and Internet Connections are topped around 4 mbps, Internet prices have been the same for the last 4-5 years. I pay around $54 monthly for 4 mbps connection.
    – PayPal just entered Egypt last year because they couldn’t reach an agreement with the Gov before that and so far we can’t receive money through PayPal.
    – High Customs Fees. Just to name a few obstacles and issues that lagging the growth.

    On the other hand, we have fast adoption rate of Smartphones, Internet Connections (both Mobile & Home), Social Networks (mostly Facebook) and I started to see many people (mostly youth) who are taking advantage of all of this to start a real business online. Some do it on a much smaller scale. For example, one of my sister’s friends used Facebook to sell birthday cakes. She is very talented and creative. In the beginning she used to get 1-2 orders a week and she always posted photos of the cakes she made to its page. Now she can’t handle all the orders herself and she receives orders from other cities regularly. She never owned or worked at a bakery before, she used to make these cakes for fun.

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