The Trend of Small Retail Moving to the Web

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The Discovery Channel’s brick-and-mortar retail stores are all closing. Discovery Communications will retain its online store, as online sales are up 144% in 2007.

Why? Cost savings. A Washington Post article points out:

“We realized we could reach millions of people without having to build out an independent chain of stores, have a staff, pay for the lights and air conditioning” and absorb other costs associated with maintaining stores, [CEO David] Zaslav said. As a unit within Discovery, the stores booked about $130 million in revenue last year but had a net loss of about $30 million, according to a Discovery executive who spoke on condition of anonymity because the figures are not publicly reported. The savings from closing the stores could run as much as $75 million per year, the company estimates.

I am already seeing signs of this same trend playing out with smaller retailers.

Increasingly I see small retailers who are giving up their physical locations and moving to “online only.” And it’s partly for the same reason: you can save a lot of money if you don’t have to pay for rent, utilities, and staff.

In fact, in my May 29, 2007 radio show my Today’s Trend segment (where I spend 4 or 5 minutes outlining a trend affecting small businesses) was on this very topic. Here is the text of that Today’s Trend segment:

* * * * *

Today’s Trend is the migration of small retail toward the Web.

Not long ago I was driving through my small town in Ohio when a sign in a storefront caught my eye. It was for an accessories shop and it said, “We’re moving.”

Now, I know what you’re thinking. What’s the big deal about that, right? Retail businesses move all the time.

Ah, but this was different. You see, instead of giving a new physical address for the store, it gave a website address. It said: We’re moving to www – dot … and then gave the URL.

That same day I drove one more block and saw yet another “We’re moving” sign. And once again, it gave a Web address rather than a physical location.

It turns out these two retail stores — both small, specialty retail businesses — were moving not to new physical locations, but were moving online. They were giving up their brick and mortar retail outlets to become online etailers.

Two signs in a small Ohio town do not necessarily a trend make.

Yet — when you think of a small Ohio town, it actually explains the motivation behind this kind of migration to the online world — and explains it very well.

Now this little town is picturesque with a lovely town square and strict zoning codes requiring all storefronts to adhere to the Victorian standards under which the buildings were originally built. But the problem with the square is that it does not get much foot traffic. Not many buyers.

And for specialty or niche-interest shops — as these were — it is much easier to find large numbers of buyers online, where you can draw from customers all over the country, even all over the world, who are interested in your particular specialty. In other words, you can find more customers interested in a niche online, than you can in a small town. In a small town, the numbers of people interested in that particular niche may be few and far between.

And obviously, without the overhead of a brick-and-mortar store, you may even make more profit at the end of each month.

Finally, let’s face it: a retail shop requires long hours by the proprietor, who can feel trapped in the store if he or she can’t afford to hire help (or at least not many people to run it). So in a way, moving to online etailing can be liberating, not to mention dropping money to the bottom line.

Everywhere we turn we see stories of small retailers being driven out of business by huge companies like Wal-Mart. But what about the flip side: retailers who move to Web-only and find it can be a liberating — even growth — move for their businesses?

Statistics show that small retailers account for more than 40% of online retail sales figures (at least during the big Holiday season).

So my point is, instead of crying over the loss of small retail storefronts and assuming that it’s 100% bad news, consider that things may simply have changed. More and more, small retail is about an online-only approach. Instead of thinking about loss of small retail, look at the growth of small etailing and online sales.

And that concludes Today’s Trend.

12 Comments ▼

Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

12 Reactions

  1. I believe that not only are cost savings a factor – but the bottom line is that the reach is greater online than in a physical location. How are you going to reach millions of people from a physical location – just makes sense to take it to the virtual world.

  2. Actually- only is it not all bad news, it is good news- for all the web design shops, ecommerce tool providers and everyone else in the economy that will benefit as a result of more retailers moving online. I would say this is a net positive, if anything.

    Matt
    CapForge.com

  3. I meant to say “Not only…” above. Once again, the “brain faster than fingers” problem! :)

  4. Chris, I totally agree. People always ask me why I don’t have a store for my candles. I have to explain that the costs would far exceed my profits. I do however invite people to my home for pickups or if they want to sniff anything. For a small business, you just get more bang for your buck.

  5. I am fortunate to work with some successful small businesses who are doing very well due to the scale of the internet. What is a niche in one community becomes quite a market when you look at the entire universe and these guys are beating the big boys all the time with service and selection excellence!

  6. Let’s face it. You are in business for profit and the internet is the way to go. I would have to think that the majority of people today shop on line. It saves the customer time and the company money.

  7. Another positive spillover will be couriers and logistics companies… items bought online by remote customers will have to be shipped and delivered.

  8. With the state of the economy as it is and the high prices of fuels,online sales will explode as people will not have disposable income to take multiple trips to b&m stores.

  9. am glad for this upward trend but i want to know more about the changing retail trends.

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