The world of online retailing is beckoning.
It’s no real secret that Australian businesses are turning to the internet more and more in order to turn a profit. Demand for value and service is so far exceeding the ability of local retailers to supply, while those who can supply are able to make some serious cash.
Maybe you have worked in retail before, maybe even owned your own store. Yet between the stress of managing staff members and the overheads associated with rent and utilities, running a traditional store doesn’t seem as attractive as it once did.
Opening up shop online might seem like the ideal alternative, and who am I to discourage you? However, it is worth pointing out that there is quite a bit to consider before you dive in, and those people who charge into the market unprepared can end up wasting a lot of time and money.
Never fear! Power Retail is always compiling the best in news, information and tips so you always have the ultimate online retailing guide with the click of a button.
We’ve been busy compiling and collating previous research from our ‘Getting Started’ and ‘Diary of a Start Up’ articles, combining it with up-to-date information provided by industry leaders. This has enabled us to produce our brand-new, Online Retail Entrepreneur’s Guide.
In this article, we discuss the very first thing you will need to consider before spending a cent on setting up your new business: What to Sell?
Sometimes coming up with an original idea seems like a near-impossible task, but by following these simple steps, you’ll be on your way in no time.
Identifying a Niche
The ability to find a gap in the market is the best way to start developing a sure-fire business model that succeeds. The best part is: identifying a niche for yourself is actually quite simple. It relies on an ability to network and communicate.
For many entrepreneurs, brilliant ideas are funded by conversations with peers. Everyone loves to complain about their issues; perhaps your business can provide a solution to one of them? Take the time to converse with and listen to friends, family and colleagues.
If you come across a possible idea, ask the people around you what they think of it. Would they buy your product online? What would make them want to shop with you as opposed to an online competitor, or a bricks-and-mortar store?
Ivan Lim, founder of online bespoke men’s suit store, Vinspi.com.au, says it is important not to be afraid to share a concept with people whose opinion you respect.
“A lot of people are afraid of sharing start-up ideas because they think it might get stolen,” Lim says. “If you’re committed to the idea, however, getting feedback is worth the risk that someone might steal it.”
Use the internet. Research other organisations and what they do. If you’re thinking of starting an online retail store, figure out what you like about the stores you’ve purchased from in the past. What are these stores doing well? What could they do better? Your business might be able to specialise in a product that you’ve had trouble purchasing in the past.
“Use Google’s keyword tool, AdWords,” advises Lim. “It helps to see how many times specific searches are done every month. So if you’re thinking of selling table lamps, you can research the term ‘table lamps’ or ‘buy table lamps’ and see how often people make those search queries. Be sure to use Exact Match when defining your query in order to get accurate results.”
Consider using social media as well. Sites such as Twitter, Facebook and Google+ are a great way of seeing what products are being discussed and also what people are having trouble finding. You will quickly get an idea of where your competitors are, as well as gauging how large their market presence is. Will you be able to offer something unique?
Jane Cay, founder of Birdsnest, a digital women’s clothing store, says that finding a niche is about “research, research and research”.
“Our niche is providing customers with a way of shopping online that addresses all their key motivations for going clothes shopping,” Cay says. “There was a huge amount of offline retail experience required to understand our customer, so start there.”
“If you have a viable business idea and there is no competition, then congratulations,” says Lim. “You’ve hit the jackpot!”
Which Products Sell Well Online?
Even with very little experience on online purchasing, you’ll quickly discover the true extent of the kinds of products that are on the market. There are no limits to what can be sold, from stationary to stepladders and perfumes to pet supplies. Even white goods and audio-visual equipment are currently being sold in huge numbers via the internet.
However, not every type of product will be relevant, and what will work largely depends on the level of scale and scope required to get your business up and running. This also means being very familiar with working to a budget.
“It’s a lot easier to control shipping costs if the product can be easily packaged and delivered,” says Lim.
Large, bulky items like refrigerators can cost quite a lot to ship from one side of the country to the other, let alone internationally. So considering delivery methods before settling on a given product is very important.
Also think about how expensive the product will be to purchase. The higher the price tag on an item, the less likely people are to buy it.
“It’s not to say that higher ticket products can’t be sold online, or that lower priced items are better,” says Lim. “Be mindful that higher value products require more trust in the seller, which in turn leads to longer sales cycles and more tactical online marketing efforts.”
“The products that sell best are the ones that solve a customer’s dilemma,” says Cay. “The service is as important as the product itself.”
Plan For Competition
“Generally speaking, start ups should avoid high competition industries,” Lim advises. “Go for niche products where competition is lower and a more passionate customer following can be carved out.”
While it is difficult to weigh into the online market when offering a similar product and price as your competition, it’s important to consider how things could be done differently. Any sort of value you can add will give you an edge over competitors. Really focus on what competitors aren’t doing, rather than what they are.
“With Vinspi, we decided on men’s suits because value could be added by offering a tailored fit at an affordable price compared to expensive off the rack suits,” says Lim. “Kogan may have gone into the highly competitive television market, but it offers lower prices because it controls manufacturing. The theme is the same, make sure you can add value to product that customers will appreciate.”
Preparing for the Next Step
Once an idea has been settled on, it is time to start fleshing out a business model, while at the same time beginning to source stock. Firstly, make certain you have sufficient cash flow for the type of business you seek to implement. Be careful to guarantee that your research is strong enough to ensure the product you order is going to sell. If you go all-out early on, you may end up with a lot of dead stock on hand. As things progress, keep an eye on your bookkeeping and make sure everything balances.
“My recommendation is to talk to suppliers,” Lim says. “They’ve been in the business longer than you have and will have an idea of what products are popular. Take more of those products and only minimal amounts of the others. Think big but purchase small in order to let your cash flow drive further buying activity.”
“Ensure you have good advisors if budgeting and cash flow management aren’t your strengths,” advises Cay.
It is also important to begin paying close attention to technology. What do you want your website to achieve and can existing technology match those goals? Start researching what sort of solutions are required early so you have a good idea of the costs involved.
“The right systems for managing stock on hand are critical,” Cay says. “There is nothing worse than selling an item that you don’t actually have.”
“Don’t be afraid to call companies, ask questions and do your due diligence. Technology is at the core of e-commerce so it’s important to be on top of it,” says Lim.
Staying Positive and Open-minded
Keep in mind that this guide is to serve as a rough roadmap from which you can gain inspiration and direction. Creativity and motivation can only come from one place: you. In having said that, be prepared to make tough decisions. The online retailers that fail are the ones who aren’t prepared to cut their losses and adapt when something isn’t working. Your ultimate goal will always be to keep customers satisfied and to that end, always be trying to put yourself in their shoes.
Next week we discuss how to research and co-ordinate a supply chain in Power Up: The Online Retail Entrepreneur’s Guide – Sourcing and Suppliers.
Seeking more information on how to get an online retail venture off to a flying start? See our complete A-Z guide, Power Up: The Online Retail Entrepreneur’s Guide.