Often we are asked, “Should I sell my product online or in the stores?” Well, you may not have much choice! You may have to sell your product online simply because the stores won’t take it. They may not have room. You may not be able to meet their price. You may not even get the chance to present to a buyer. So why try? Why not be satisfied with online sales? They are certainly simpler, with less overhead, and larger profit margins. Online sales are taking off, aren’t they? Isn’t this the wave of the future? Not necessarily.
Forbes published a recent article which is a real eye opener about the massive popularity of bricks and mortar over online sales. Shoppers prefer stores 9 to 1 over online shopping. So, before you make a potentially fatal decision, read on.
Bricks and mortar stores have several advantages that still make them highly desirable to even the top online brand builders:
1. Physical Inspection. Shoppers can see, feel, and physically compare your product to others in person and on the spot.
2. Large Purchases. Chains and box stores can take large shipments improving your purchasing power with efficiencies of scale.
3. Large Receivables. With bigger checks, you can help your cash flow, reduce your costs, improve your profitability, and grow your market.
4. Billboard Displays. With faster sales you can justify more faces of your label, thus improving your branded presence in the store. This can ultimately justify floor displays, further multiplying your brand image.
5. Broad Distribution. Having your product in multiple stores gives your brand more geographical coverage and recognition.
6. Notion Buyers. Now you can grow your brand with purchases from customers who stumble upon it when they were in the store for something else.
All of these advantages can accelerate your brand building and growth capabilities. Online sales, on the other hand, face several built in challenges:
1. Price Race to the Bottom. Shoppers are more interested in the lowest price for a product and not necessarily interested in the features and benefits. It is harder to sell your product based on quality, especially when you are new and unknown.
2. Sell on a picture. Shoppers have experienced disappointment before when they bought on the basis of a picture and not “the real thing,” making them reluctant to repeat this “mistake.”
3. Delivery Costs. If your product is relatively heavy or inexpensive, the cost of shipping can discourage customers. Who would pay $5 to have a $10 item delivered? And who wants to shop for, order, and have delivered a hundred items when they can buy all at once from one store in their own neighborhood?
4. The Price Trap. The price you post online cannot be lower than what a retailer could sell it for, unless you have no plans for ever selling at retail. Also, your online price must be less than other like products available online.
You must have an online presence for information purposes, store locator, and direct sales (if your price does not prevent bricks and mortar opportunities). Many physically product online sales programs get their products discontinued in stores that cannot compete with the online price.
So, yes, it’s more difficult to get into the bricks and mortar stores. Yes, it’s more expensive and, it’s less profitable per unit. But if you are able to get your branded product on that coveted retailers’ shelves, you will have the opportunity to build your brand faster while enjoying the benefits of larger cash flow to grow your business and your brand.
Who Are We.
Having built and sold a bestselling national brand, we appreciate the value of brands and everything it takes to make them successful. Companies are valued by their brand equity. Achieving and maximizing brand equity requires tremendous respect for all your customers, from your wholesaler to your end user.
Starting in our laundry room with no money and no knowledge of the industry, we built the famous Barefoot Wine brand. We learned a lot they don’t teach in school and much of it the hard way. Although our success was in consumer products, our real world experience will be helpful to anyone looking for information and advice about brands.
We have written the New York Times Bestselling Business Book, The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand, which chronicles the history of the famous brand from its inception through its acquisition. Our book is now required reading in schools of entrepreneurship across the country. We hope this book will provide inspiration and encouragement for all those contemplating starting a brand or wanting to improve their existing brand.
Michael Houlihan and Bonnie Harvey
-Barefoot Wine Founders