Written by Giles Bennett
As 2015 drew to a close we sat down for a coffee with one of our long-standing clients - The Yorkshire Pantry. In March 2013, around two and a half years after starting the business in a city centre shop in York, their lease came to an end and the landlord put forward terms for a new lease which they felt were unreasonable given the economic climate at the time.
Rather than find another shop, they took the decision to move the business online only. Now, two and a half years later, we asked them what lessons they'd learned in doing so. In this blog and the next, we'll be posting the insights they shared with us :
It's the same business, but it's a different business
Whilst we had had an online shop before moving entirely online, it represented maybe 15% to 20% of our turnover - all of a sudden, it had to represent 100% of our turnover. Whilst the majority of the products remained the same, the approach which we took to the business had to change substantially. Evaluation of existing and new products had to be done on a totally different basis, because - as we'll come on to - what works in a shop won't necessarily work as well, or at all, in an online-only environment. Marketing of the business required an entirely new approach. Staffing was different - even the opening hours changed. So the first day of being online only felt in many ways like the start of an entirely new business, despite the familiar sights around the office.
What worked in a shop won't necessarily work online
Following on from the above, we found out very quickly that lines which had been popular in the shop in York didn't automatically enjoy the same level of popularity online. Whilst the marginal cost of having an underperforming product on the website was minimal, and poor online sales of a product could be ignored if it was a strong performer in store, there was no such redemption when entirely online. We realised that this underperformance was down to a number of factors.
When people can see and touch the product they're buying, they have a different reaction to it - as an example there was a range of hand-decorated jars of preserves which, although more expensive than most of the the other preserves we stocked, sold brilliantly in the shop, but hardly sold at all online. In the shop, where people could see and feel the quality of the decoration, they could discern the reason for the extra cost and didn't mind paying it. Online, though, it was reduced much more to a comparison between one jar of jam, and another, much more expensive, jar of jam. Since it was hard to make the case for the more expensive jar when the customer couldn't physically discern why it was more expensive, sales of the more expensive brand tailed off considerably.
On top of that, people had different motivations for purchasing - a reasonable percentage of the shop's footfall was tourist traffic, with people looking for mementos of their visit to York, or small presents to take home to friends and family. Online still retains a large percentage of gift sales, particularly at Christmas, but now we often sell much larger bulk packs of items, to those simply stocking up for home usage.
Be prepared to change
The change in what people bought, combined with the change in why people bought meant that we had to be flexible - and to resist the temptation to be sentimental. We had to be prepared to ditch products, or brands, that didn't work - we couldn't just continue stocking them because it's something we'd always sold. Yes, long-term relationship with the suppliers are important, but they're in business too, and will understand that if, at the end of the day, something's not earning its space on your shelves then it's got to go.
The demands on your physical space will change
In a physical shop you've got to balance a large number of considerations. Primary amongst these is the need to get your products in front of your customers - if customers can't see something, then they can't buy it. Naturally, you've got to make the most of your space, as your rent and your rates will almost certainly be the largest part of your overhead. Storage space, whilst nice, doesn't pay for itself, so the more stock you can have stored on shelves, out front, the better. But you've got to juggle these considerations against the need to also create an environment that feels relaxed and uncluttered, allowing people to circulate the shop freely - hopefully lots of people at any one time - to browse and buy in an environment that's conducive to doing so.
Online, some of those considerations pretty much go out of the window. You still need to be able to get products in front of your customers to sell them, but you don't need to be able to physically showcase your products within your office / warehouse / stock room (whatever you want to call it) todo that. In your office / warehouse / stock room, you just need to be able to receive, store and pick them.
Racking, and lots of it, is the order of the day - 60% of our current unit is racked out to the rafters, with just enough space between the shelves to be able to get down to put incoming stock on them, and take outgoing stock off them. It's like skyscrapers - your rent and your rates are based on the square footage on the ground, so the more use you can make of the vertical space, the better.
Of the other 40% of our unit, 15% is given over to packaging supplies (we get through a lot of packing peanuts, which take up an inordinate amount of space, and a lot of cardboard boxes), 20% to the packaging area, and 5% to desk space. That's not including the toilet and the kitchen. But it does include the shower - since no-one ever uses it, we store more packing peanuts in there.
You've still got to get products in front of customers
Because your customers aren't physically wandering around touching the items (although we do still get people knocking on our door from time to time), and because they're no longer walking past your shop window, you've still got to get your new and existing products in front of them - both when they're on your website, and when they're not.
The website becomes your shop window, so spend as much time on it as you would in keeping your displays seasonal. Get a good relationship with a great web development team, and make sure you get a steady stream of ideas for how to develop and promote the site from them. On the homepage, ensure that you keep your banners up to date, and on top of seasonal changes - there's nothing worse than seeing a Christmas banner in the middle of February.
Digital marketing of your website in other ways (Google Adwords, Shopping Ads, etc.) will vary depending on the products you're stocking, but the underlying ethos is always the same - be sure to stay on top of what you're spending, and make sure you track whether it's working for you. It's all too easy to leave a direct debit to Adwords set up, then turn around six months later to look at the numbers and find that the adverts haven't been paying for themselves, let alone turning you a profit.
A lot of companies - mainly those selling social networking services - insist that you've got to be on Facebook, or Twitter, blogging every five minutes, but to be honest, we don't subscribe to that view. As we're a Yorkshire-oriented company, a lot of our marketing continues to be very local to where we are, rather than broadcast far and wide via Twitter. Your mileage will vary, no doubt.
We continue to maintain and develop a very large mailing list, though, and stick by the same promise when we started - that we'd only email once a month, at most, and never give the subscriber's address away to someone else. It's a great way of letting existing customers know about new products in our store.
More insights to come
Keep your eyes on our blog when we'll shortly be posting the second, and final, post with more insights into the move.
