Does it make sense to open a retail store in 2018?
The short answer is YES! However, you don’t want to be a dinosaur.
In this episode of the podcast, I share my thoughts on the future of retail, and how to prepare if you don’t want to be left behind.
Mentioned in this Podcast:
eCommerce Lifestyle Podcast Show Notes : The Future Of Retail
Table of Contents
- Why are Retail Stores Closing? The Future of Retail
- How Modern Retail is Sustainable
- Build Community to Compliment Your Online Store
Why are Retail Stores Closing? The Future of Retail
What’s up, everybody. Good morning. Anton Kraly here. Welcome to the eCommerce Lifestyle Podcast. A quick heads up, if you haven’t been to ecommercelifestyle.com yet, be sure to head over there. That’s where you can get all the previous episodes that I’ve recorded. That’s where you can get involved in the conversation, comment on these episode, let me know your thoughts, and let me know what you want to hear more about. So with that being said guys, today I want to talk about something that came up on a recent interview that I did, and it was an interview that I did for a podcast that was … I guess you can call it, kind of like the Four Hour Work Week type thing. Not Tim Ferriss’ podcast, but discussing those types of things, right? So business automation, how to invest, how to get started for cheap, lifestyle design, that whole thing.
It was interesting because the host of that podcast isn’t an eCommerce guy. He’s again, more of a lifestyle business guy. He wasn’t as familiar obviously, with different things that are happening in the world of drop shipping, in the world of Shopify, in the world of selling physical products online. So one of the things that he had said to me during this interview as he was interviewing me was, “Anton, the people,” he’s from the U.K., he’s from London. He was like, “The people that are down here opening new stores on the high streets, they’ve got to be out of their minds, right? Why would anyone do that? Why would anyone put their money into one of these retail locations.” And I was like, “Well, maybe, but hold on a second ’cause let’s discuss why, and why it still could make perfect sense to open a retail store even now in 2018 when all the headlines you see are Toys R Us is going out of business, Sears is closing all their stores, et cetera, et cetera, et cetera. All these major retail stores are closing.”
Now the reason in my opinion that so many are closing is because they’re dinosaurs. They’re still doing it the old way. The model they have, as far as being retail first and having these massive stores everywhere just isn’t sustainable anymore, but there still is a time where retail definitely makes sense. You just have to kind of shift your mindset in how you think of it a little bit. Also another interesting stat for anyone that thinks retail is dead, I heard this at Shopify Unite, their annual partner conference just a couple months back when I was there from the CEO of Shopify. He was saying, Listen, there’s … What is it? I want to see there’s 500,000 retail stores closing a year. I might have that wrong. It’s either a year or a month, I don’t know. But basically the stat was for every one retail store that you hear about closing, there are 3 new ones opening.
So for every 500 that close, there’s 1.5 million that are opening their doors. Retail, traditional retail, is still growing as well. The thing is, the people that are doing it right are using it again, in a non-traditional retail sense.
So let’s take a couple examples all right? Let’s just say you wanted to start a new retail store in your local town. Maybe you’re, whatever, your in New York City and you love pets and you want to open a pet supply store. Well, if your business plan for your pet supply store was to walk around Manhattan, find the perfect street, sign a lease, buy all your inventory, build out the store, do all your local marketing, blah, blah, blah, then yeah, I think that’s a terrible idea. That’s something that I don’t think is gonna be sustainable and that’s something I don’t think is gonna last. That’s gonna be one of those 500,000 stores that eventually closes their doors, probably sooner than later okay? ‘Cause that’s the old way of doing retail. That’s the retail that’s dying.
How Modern Retail is Sustainable
Now let’s look at the future of retail differently right. What if you have a brand that you build online, and it could be anything, but I let’s stick with the pet supplies. Let’s just say you sell all the newest pet toys, or healthy pet food and whatnot, and you build it online first, so your main channel of distribution is your website, which of course means then you can sell to your whole country, or to the world. You focus on ads, you bring everyone in, and that’s the money maker right? Okay. Good. Now where does retail fall into that? Traditional retail, offline retail. Well there’s a few different ways you can make this work and one could be if you have products that people are just loving and they’re sending you a bunch of Instagram photos, and they’re tweeting at you, and they’re posting on your Facebook wall because they just love your pet supplies. Well then maybe it makes sense to do popup stores.
To take over a different location for a day, a weekend, a week, a month, whatever, and let your fans know about it, where they can go and you have all your pet supplies, maybe toys set up, or dog foods that all these dogs could try, and you use it, this is where it gets really important, you’re using it more as marketing than you are as a sales channel. Yes, you can make sales there, yes it could be profitable, but that expense, your rent, should be more of a marketing expense instead of a rent expense so that is the major shift, right? Now it doesn’t just have to be a popup shop. It could be something more long term. I’ll give you another example. Let’s just say that you sell watches.
Maybe you’re listening to my thoughts on the future of retail and you own a luxury watch company and you sell them online, and maybe they’re even sold in other stores, you have them, whatever. They’re in Nordstrom’s, they’re on other people’s websites and the business is doing great, should you then think, “Well let me go open a store because I want to increase my sales, and I bet if I had a store in SoHo, then my sales would, whatever, double.” I would say no. This is from me as a business owner, so this is my opinion here. I would say, no, you shouldn’t do it simply as a way to increase your sales. Where it would make sense to do it is so now your watch company right? And let’s say you did that, you opened a small retail shop in SoHo. Now on your website, you could have photos of this. You could tell people, “Hey, come in and check out our new watches.” You could do launch parties there. You could have people come in and again, try them on, post photos on Instagram, “I’m at Anton’s watch company in SoHo. Check out this new watch.” Right.
So again, you’re not doing it simply as a way to blow up your sales. You’re doing it as a new marketing channel. So that rent shouldn’t be thought of … I mean, obviously where it goes on your balance sheet, is in rent but think of it as that marketing expense okay? ‘Cause that is where you’re gonna get the value from it. There’s a ton of different people that do this different ways. Okay, here’s another example, how you can shift retail into your business without being retail first. So literally right now, I’m five minutes away from the gym in the morning. I go to Onnit, and if you’re listening to this and you are, I don’t know, someone that listens to the Joe Rogan Podcast, even occasionally, you’ll realize every single episode of the podcast in the advertising section, he advertises for onnit.com, O-N-N-I-T. And he does that because well, he owns it. He’s a part owner in it, but he’s advertising to go to their online store and buy their supplements, and buy their kettle bells, and buy their battle ropes, and buy their merchandise, and all that other stuff, right? ‘Cause they’re online first. They’re a multi eight figure business, and almost all of their sales come from their website. That is their thing. But they’re an Austin based company, which is where I’m living right now, in Texas. And they opened a gym here, which is called the Onnit Academy.
Build Community to Compliment Your Online Store
And the reason, in my opinion, now this is what I think after been going there for a few months now, I really think they did it because it just helps to build, really you can call it their tribe, you can call it their cult, you can call it their community, whatever you want. But now people in Austin that are fans of onnit.com and of their products can go to this gym, they can work out with the Onnit trainers, they could feel like they’re more part of the community. They can know they’re getting quality products, working out with quality people, and in this gym that they built here … So yes, I’m sure that does make them some money, but nothing compared to the multi eight figures their website does. But they also have a retail store in the front of it where they sell their merch, where they sell their supplements, where they will make you smoothies and what not.
So It’s just, again, a way to … They’re using this retail store not to turn their, I don’t know what it is, let’s call it $40 million business, into an $80 million business, but they’re using it to have again, just a better community and more people talking about them, and more content they can use on social media, and more things they could talk about in their YouTube videos and show on their Instagram and really more ways they can make other brand deals ’cause they could bring into their gym to film videos and it just builds and builds and builds, right? So, not your traditional retail. The guy, Aubrey Marcus who owns Onnit, didn’t just think, you know what? I want to sell supplements so I’m gonna go around Austin downtown and I’m gonna find a store that’s open and I’m going to build a supplement store. No, he built a website that crushes it and then they have this kind of retail, hybrid type store as an extension of that online business.
So, if anyone’s listening to this right now and you already are a traditional retailer, right. Maybe you already have that pet supply store that’s been in your family for decades or that you opened a few years ago and you’re trying to get into online retail now and you’re kinda confused, maybe you even have a business that is traditional retail that’s losing a bit of money and you’re like, ah what should I do? I would recommend and advise that you make a total mindset shift and think about how you can, even now transition most of your business to online. Be online first and then use the offline retail space as an extension of your online store. Again, think of it as a marketing expense but the majority of your revenue should be coming from your online presence, especially if you want to be around long term.
That’s the way the future of retail is gonna work. That’s the way it’s already working, and it’s only gonna be more so in the future. One more quick example, another way you could do this is if you even have a warehouse now, let’s say you are online only and you just have your own warehouse that you ship from, you could turn your warehouse into that pop-up shop, right? On weekends, you could do events there, you could open up a bunch of boxes and bring people in, bring your community in maybe once a month, once every couple weeks and just again, build that brand. Build that tribe. So, with that being said guys, I just pulled up at the gym and my personal training session starts in one minute so, good timing. But hope you found this episode valuable and useful and as always definitely go check out ecommercelifestyle.com, check out previous episodes. Please leave a comment, let me know your thoughts, love to hear from you and I’ll see you guys in the next episode of the eCommerce Lifestyle Podcast. Thanks everybody.