Why Run an Online Store

It’s strange, after reading of the demise of another competitor, one would wonder why you’d bother to build an online store.  That’s a very good question, and certainly one that I’ve asked myself a number of times.  The profit margins are extremely tight, with both customers and competitors always looking to lower it even further.  There are quite literally competitors in Canada who sell products at a loss – as part of their business plan.  So, why bother?

Love of the Industry

Let’s be truthful here, most of us could be working in another industry / another business and making significantly more than what we are earning doing this.  Heck, from speaking with a lot of B&M owners, the profit levels at B&M stores can be significantly better too.  Knowing the industry, at least you don’t need to learn the product  (as much) as with starting out in an industry that you don’t know.

Low Capital Costs on Startup

This is a tricky one – it’s easy to start-up the business with much less capital than most brick & mortar stores.  Most online stores start running out of their houses / apartments, keeping stock in their spare rooms or living rooms and shipping orders out every few days.  So, instead of $50 or 100k, you probably can start up at $20 or $30k.  Or even less….

Flexible Hours

It’s easier to fit an 80 hour week for an online store than a B&M store around other life commitments.  It’s still not uncommon for me to get online at 11pm and start working after spending the evening with my family.  You can still go out in the evenings, hang out with friends for a bit and then go home and work more on an online business compared to a B&M store.  You put in the same ridiculously long hours, but they are more flexible.  And when you’ve got family obligations too, that can be extreemly important.

Introvert Friendly

If you aren’t a people person, running a B&M store is going to be significantly more difficult. I know, for myself, that there’s only so much interaction that I can deal with at any one time.  Working in an online store puts a ‘wall’ between you and the constant amount of customer interactions, so it’s a lot more introvert friendly.  Answering an e-mail is so much eaier than talking to a person.

Scalability

This is more a theoretical idea than one that I’ve seen yet, but it should be possible to scale an online store much easier than a brick & mortar store.  At a certain point, you’ll max out the sales per square foot that a B&M store can handle at which point you’d have to either move to a larger location or build a second store.  With an online store, your physical location is much less important so moving should be less of an issue while purchasing should be ‘simpler’.  After all, when restocking a game, if you have to restock 10 copies or 2, it’s still a single line on the invoice and search.

I write about the challenges we face as an online store more often than the advantages, so I thought this list might be a nice counterpart.  If you can think of something I’ve missed, feel free to chime in.

Fear & Loathing Online

As an online game store, it sometimes feels like the entire industry is out to shut you down.  We’re the evil demon in the mists, the boogieman destroying the fabric of the gaming universe.  We are the bad guys.

The Loathing

We’ve had publishers refuse to sell to us, restrict sales of certain items, issue pricing dictates and offer Brick & Mortar (B&M) stores additional retailer incentives. We’ve had distributors refuse to do business with us, or attempt to dictate how we run our business if they do sell to us, or selectively refuse promotions to us because we are an online store.

Other retailers have attempted to get us discredited, refused to talk/work with us in their industry forums and been actively hostile in person.  We’ve even had some predatory marketing practices targeted directly at us.  And the purchasing public can be just as hostile (if not more so) than any of the above.

The Hypocrisy

What gets me is the hypocrisy often shown by the above.  Many of these publishers will sell online & direct themselves and/or sell to big box stores.  They’ll go to Kickstarter (another online sales method) and provide incentives to customers but not provide them to retailers, cutting directly into a retailer’s customer base.  Yet they’ll state in their very next breath that they are all about supporting ‘the gaming industry’.

The public will complain about online retailers, but then refuse to pay more than MSRP or for the space they use to try out games and socialize in B&M stores.  They’ll buy from Amazon, yet continue to talk about ‘supporting local businesses’.  Retailers complain about online stores but then use eBay to get rid of their additional stock or run online stores themselves.

Distributors at least are mostly up-front about their motivations – they just want your money; and often would sell to you if they could.

If There’s One Thing…

Can’t we all just get along? There’s a lot to love in this business, but this aspect of it is just frustrating and disheartening.  Some days, I really do just want to go evil. Then I take a deep breath, tell myself it’s just business and get on with being the best damn game store we can be.

Selling Online : A Primer

I recently have had a few friends and acquaintances look into selling online.  It’s a complicated business, partially due to the fact that the information needed to set-up an e-commerce store properly is relatively specialised knowledge and the various players out there are incentivised to keep potential customers in the dark.  I thought I’d write a beginner post to point people in the right direction; since I do know a little about this.

In my mind; there are basically 3 major ways to sell online

1) Electronic Markets

You can put eBay, etsy and the Amazon Marketplace in this category.  Heck, even BGG’s marketplace falls quite neatly in here.  Electronic Marketplaces generally generate revenue by charging stores a listing fee and/or a final sale fee.  Listings generally expire, forcing sellers to relist constantly (generally; for a price).

This is probably the most popular form for sellers; and it works great if you have only a few products to sell.  Electronic Markets provide a ready-made customer base; taking care of the visitor problem for sellers. However, it’s worth realising that these Electronic Markets are incentivised to make money for themselves; and quite often the best way to do so is to encourage competition between sellers.  Which means that your hard won fans are incentivised to go ‘looking’ at the competition.

2) Software-as-a-Service Shopping Carts

SaaS Carts are a middle-ground where sellers can get the full functionality of an online store; but may avoid many of the IT issues that owning a hosted shopping cart would require.  Many of these carts provide drop and drag professionally designed themes, fully integrated payment gateways and slick marketing and cross-selling features.  Cost is also often quite reasonable when you start-up – anyway from $15 up; with many  not even taking a % of your sales anymore.

On the other hand, this is really an intermediate solution.  It’s great if you have only a few products to sell; but you often end-up out-growing these services very fast due to Bandwidth or Storage restrictions if you’re successful.  Still, it’s a great stepping-stone and if your business is only partially going to be on the web; these systems offer great middle-ground.

3) Hosted Shopping Carts

That’s what we have at Starlit Citadel.  We run the software, are fully hosted on server space we’ve rented and deal with any design and code issues ourselves (or through our developers).  There’s a lot of options once you go down this route; from clamp-on shopping carts to WordPress (don’t, just don’t) to full shopping cart software like Magento & Zencart.

This is probably the most flexibly solution; customers you create are branded to your store like a SaaS cart but you have the option to introduce (or not introduce) new design / code changes as you see fit.  You aren’t held to a 3rd party’s development cycle (okay, only if you’re running an Open Cart system; but why wouldn’t you?) but you then have to deal with all the intricacies of the design and coding process.