Advice on bricks and clicks business

Discussion in 'Growing and Managing a Business' started by bananow, Jan 6, 2011.

  1. bananow

    bananow
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    Hello everyone,

    I wanted to ask for your opinion and advice. My mother in law has been running numerous successfull stores with underwear for several years. Recently I came up with the idea to start an online store along with her brick stores. We would split the earnings of course. Now what I proposed is, that I will create and run the online store and people will pick the goods up at her stores and she would get a percentage from the earnings. The process is a little more complicated but this is the general idea. She would get at least 50% from the income of the online store.

    Now while I see great potential on the web she on the other hand thinks, that this online store would drag customers away from her brick store. In my opinion, that might be true but it might as well bring more clients. Another thing she is worried about is, that goods on the internet should be cheaper than the ones in store, which would again drag away her regular clients. Could you tell me your opinion and arguments about this and also about the goods being cheaper on the internet. Does that have to be so or are there some alternative business strategies for this? And btw I come from the Czech Republic (where all of this would take place), just in case that might somehow play a role in your reply :)

    Thank you very much for your replies
     
  2. scifi

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    First thing is that your should be lauded on your back for taking a wise decision i.e. to add online store to your mother-in-law brick and mortar business model.. It will definitely not affect your mother-in-law current customer base as the appeal of the store will be only at the places where such stores exists... Online model of store will give you access to clients worldwide much beyond conventional domain in which your mother in law was operating till now...
    It is not necessary that goods cheaper on the internet as it involves more cost initially in setting up an e-commerce website alone. Yeah, you can differentiate by running various schemes that will not be available in the stores. In fact you can demand premium for that at some stage later.......
     
  3. Fergal

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    Welcome to our business forum bananow, thanks for joining and posting your business questions.

    Will the online store use the same name and branding as the current stores?

    I can understand your Mother in Law's concerns regarding the online business taking sales away from the current stores. However, if the e-commerce side of the business is professionally run and set up it could actually increase sales in the stores. The website should help to promote and improve awareness of the high street stores.

    As Scifi also said, an online store will make the products accessible to a broader target market than those currently being served by the stores. However, you will be limiting this positive benefits of this by requiring customers to pick up their orders at the existing stores. It will be much more convenient for the customers if they can have the products mailed or otherwise delivered to them. Is this something you would consider?

    Another point for her to consider is that, if there are not people already competing online with your your Mother in Law's shops at the moment, there soon will be. It will be better for her if she is involved in selling her goods online, before others enter the market and start competing.

    The goods sold online don't necessarily have to be sold at a lower cost than in the stores. However, the overheads for the online stores will be less than the overhead costs in the stores. For example, costs such as rent, property taxes/rates, heat, staff costs will be much lower or cut out all together in the online store. This would allow you to offer a discount on the online store prices and still make the same level of profit.

    Good luck with it and please post back with your thoughts!
     
  4. bananow

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    Thank you very much, that is really encouraging! When I think about it, your arguments are correct. But my general idea was, that with my mother in law in play, I would have an advantage over my online competitors. Especially because Czech customers seeks out online stores with a brick store associated with it (it adds to the credibility of the vendor), then she has a lot of goods in stock and I thought she could help me promote the online store via her brick store, by giving every customer a flyer with information about the online store. Thats where I think is the root of the problem and what she will be worried about - that THIS will also drag away her customers. She tried opening a new store recently and it didnt work out, so she lost a lot of money and she will definitely not support me financially now and since I dont have much capital (i am a student and the mother in law is actually my potential future mother in law) I cant think of a better and inexpensive way of promoting the online store.

    I just think it is a good business opportunity for me and for her but I dont know how to convince her about it. And about the percentage cut for her, I think in this case it would probably have to much higher right? I was thinking around 80% so that it is worth for her to promote the online store. And one more thing - it was a bit unintelligible in the first post. The option of picking the stock up personally at the store is just an alternative, I would of course rather send the goods by mail or such, just like a regular online store :)

    And btw Scifi, what did you mean by this sentence: Yeah, you can differentiate by running various schemes that will not be available in the stores. ? I didnt understand it, sorry :-/

    To Fergal: I not sure I understood your thought either, reffering to your last paragraph. You mean that my prices can also be lower because I dont have the expenses the brick stores have, right? You said that this would allow me to offer a discount on my stock and still make the same profit. You meant percentage wise, right? Because the actual profit has to be lower if I have lower prices. Or am I wrong?

    Thank you very much for your replies, I really do appreciate it a LOT!!!
     
  5. Fergal

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    Yes, your costs would be lower which means that you could still make a profit by selling at a lower price.

    As an example, say the cost of acquiring a particular item in the retail store is $8 and you sell it for $10, then the profit is $2. If your cost to acquire and sell the item through the online store was $7, then you could sell it online for $9 and still make a profit of $2 on that item. I know it's a crude example - does it clarify what I said?

    You could tell her that the online store would use the same name as her current retail stores and that the contact details of all her stores will be on the website. Explain that the extra promotion would actually help to increase business to her stores and it would allow her to earn a profit from customers that she is not currently selling to. Give her some examples that show how more and more business is being done online and tell her that if she doesn't start doing business online she risks being over taken by her competitors to the detriment of her existing business.

    Do you know why her most recent store was not successful? Was that failure an indication or warning that she needs to change her business model in some way, if her business is to survive?

    If your Mother in Law is not interested in being involved in this you could start an online business without her by;

    • Partnering with someone else
    • Sourcing other suppliers
    • Getting involved in affiliate marketing
    • Starting a drop ship business.
    You could sell different types of products so that you are not competing directly with your Mother in Law's business.
     

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