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Friday, 6 June 2014

Should you launch your own e-store, or sell through an existing retailer?

Just two days ago, Leo Coffee a hugely popular Chennai based retailer of coffee and spices, announced the launch of their website and e-store. As a loyal customer, I have been waiting since at least a year for their truly excellent coffee and coffee beans to be available online. So, the moment that the brand's Facebook Page announced the launch of the site, I clicked on the link and went to buy myself some Espresso Blend beans. I was in for a disappointment.

Not only did I have to hunt to find coffee beans (they were inexplicably buried under the institutional sales section - not that they cannot be there, but they should be in the consumer section too!) but the e-store was not ready. No shipping to Mumbai, the site informed me, and directed me to an online feedback form. 

As a customer, eager to order my favorite coffee, it was an incredible let down. But it also made me ponder a more important question. Should you really invest in your own e-store or online sales channel? Or should you ride on an existing e-tailer?

At first glance, the answer might seem simple. A large and established retail business (like Leo Coffee), with high brand recognition should set up its own store. And a small, more entrepreneurial set up should retail through existing channels. However, this is not necessarily true.

According to me, Leo Coffee has a lost opportunity cost of not catering to outstation customers like me. Rather than invest and wait for the long drawn out process of building a website, they should have started retailing long ago through channels like e-grocery chains, Amazon etc. They could have easily invested the money saved, in digital advertising like Facebook Ads targeting people like me who include coffee prominently in their interests, thus reaching out and announcing their online presence to more people. Their potential customer base is huge, and accordingly, the scale of the set up needed to manage an online business is huge. If by orientation, they are a traditional retailer focused on producing great coffee (which is fantastic), then they need not waste their energy to reinvent the wheel.

On the other hand, we were recently approached for advice by a prominent designer, who wishes to open her own retail store. As an entrepreneur who designs, manufactures and markets her own range of home decor products, her hands are full. Yet she has taken on the additional task of designing her own e-store using one of the many storefront services available. For a fixed monthly fee they will take care of the logistics, payment gateway and more. The extra effort is worth it for her, because a design brand needs to build a certain image - and presence on a mass site, say Amazon or eBay, would be counter-productive to her image. She needs to stay niche and exclusive, not mass, so it makes sense to have her own e-store. If she partners with e-tailers, they need to be in sync with her image, like Suzanne Roshan's Home Label.

The question of whether to invest or partner with an existing site, is an important one, and needs to be debated by each business in the context of the brand, the customer and the category. What would you do if you are a multi-brand OTC/ FMCG company? Some of your brands may never need a dedicated online sales channel (If I needed a headache tablet  I would call my local chemist rather than wait for an online store to deliver). However specific brands may benefit from a dedicated channel. I am browsing the baffling world of protein supplements and I find myself favoring brands which integrate the product information, reviews and storefront. I might still purchase from a HealthKart because the product is cheaper there, but the dedicated store front is providing me with some reassurance about an unknown brand.

One of the services we offer at Bright Angles is a comprehensive online marketing strategy that tailors your solution to your customers' unique needs. What will benefit your brand  - a robust social media presence, an exclusive storefront, visibility in leading online stores, a mobile app..and is it important to be in a brick and mortar store as well? We can help each client to arrive at the best solution for their business.