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….
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.
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.
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.