The push for brick-and-mortar retailers to add e-commerce capabilities is coming full circle with e-tailers like Fab.com and Gilt announcing plans to add physical stores to their rapidly expanding ecommerce business models.
For many traditional and online retailers, channel selection has moved from an either-or to a both-and proposition, allowing them to better connect with today’s multi-channel consumers. But the transition from ecommerce to brick-and-mortar (or vice-versa) comes with more than its fair share of challenges.
And the most critical challenge may be the ability to fulfill and scale orders across multiple channels before taking the plunge into the physical store space.
While some ecommerce merchants are dipping their toes in brick-and-mortar waters by opening locations that essentially serve as showrooms, others are jumping in with both feet and launching physical stores that attempt to parallel the successful experiences they have delivered online.
But regardless of the approach, it’s critical for retailers to understand that there are significant differences between fulfilling orders online and in-store—and even slight miscalculations can have a ripple effect across other channels.
Here are the five must-know tips for moving into brick-and-mortar retail.
Clarify your objectives
Launching a brick-and-mortar store simply because other e-retailers are doing it is a recipe for disaster. Will you sell the same products in-store as you do online, or will the physical store feature a subset of your brand’s top online sellers? Is the store an outlet to get rid of excess inventory, or is it primarily a branding opportunity?
Each type of brick-and-mortar store has its own unique set of operational requirements and if you can’t clearly articulate your store’s purpose, it will be impossible to accurately align inventory, logistics and other functions to customer needs.
Implement inventory management tools
As a successful online retailer, you’re an expert at fulfilling orders from your brand website, online catalog and other e-commerce channels. But are you prepared to manage inventory in a way that ensures shelves are adequately stocked, especially in advance of weekends, holidays and sale events?
To properly manage inventory, experienced brick-and-order retailers use Point Of Sale (POS) systems that are integrated into warehouse management systems. Utilizing technology, you can gain discipline and visibility to inventory—key variables in your ability to pick, pack, ship and deliver inventory to store locations in a timely manner.
Consider how to handle customer orders for items not in stock in-store
It’s unlikely that your brick-and-mortar locations will stock every item that is available in your online store. In some cases, brands may not stock any items at all. For example, Fab.com’s first physical store in Hamburg, Germany, doesn’t offer any ready-for-sale items in-store. Instead, its physical store allows customers to interact with products before ordering online.
So to maintain the quality of the customer experience, you will need to identify ways to make the customer experience as seamless as possible, equipping in-store customers with easy online ordering opportunities and leveraging a centralized warehouse to fulfill orders placed from physical store locations.
What about location?
Location, location, location is the mantra of brick-and-mortar retail. But the location of your physical store(s) may be more important than you think, especially when you consider how it will impact your ability to cost-effectively manage in-store inventory.
If you open physical stores that are geographically distant from your distribution center, you need to anticipate higher shipping costs and longer transit times. At a minimum, you will need to carefully evaluate how added distances will impact inventory cycles, from re-ordering to packing to shipping.
Many retailers evaluate space requirements based on the square footage of the showroom. But depending on your inventory model, that could be your first major mistake as a brick-and-mortar retailer.
Although pop-up stores and other retailers often rely on just in time inventory models, most physical store retailers require at least some backroom storage space for excess inventory. The lesson? Determine the process you will use to replenish inventory before you select your space rather than trying to adapt your inventory model to space limitations.
The success of ecommerce merchants’ expansion into brick-and-mortar spaces depends on a wide range of factors. But by analyzing the distribution, inventory and fulfillment requirements in advance, online retailers can substantially improve the odds of a successful physical store launch.