Going offline: How to make a smooth transition from e-commerce to the high-street

After a decade-long rush to take businesses online, many are now looking to return to the high-street in the form of pop-up shops to promote their brand: but it isn't without its challenges.

How businesses sell and consumers buy a product or service has been completely transformed by the internet. According to reported figures, online sales reportedly rose by 17% in 2014 whereas offline retail sales were down by 11% so with this trend likely to continue, the internet is a crowded place and staying relevant and innovative is paramount.

Consumers have a wealth of information at their fingertips and their buying process will begin online with reviews, comparisons and product knowledge, all of which will have a significant influence on their final decision.

Those businesses at the forefront of innovative consumer engagement methods are introducing an offline offering to their online presence and are mixing and experimenting with technology by integrating showrooms, storefront and web.

Online to offline

For example, China’s Baidu is reportedly investing more than $3bn in its online-to-offline business Nuomi over the next three years. However, there are a number of important aspects to consider for online businesses wanting to take the plunge into occupying a physical presence.

Diversifying into offline creates opportunities for more consumer engagement which in turn can build stronger brand loyalty. Brands have a great opportunity, through the use of analytic technology to gather hugely valuable, deep data on their customers.

However, becoming an omni-channel business creates challenges to ensure that the consumers’ online experience seamlessly translates to a unified message during the in-store experience. This requires extensive planning.

Technology in store has also become an increasing priority as consumers look for a unique and engaging experience. Augmented reality, 3D printing and wearable technology in store are some of the tools that certain brands have started to use and their presence is likely to increase.

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Other technology to consider is what payment systems to use which may be significantly different to online systems and require extra investment.

Pop-ups have been a huge trend (and one that is here to stay) as a great way for a brand to dip its toe into the offline experience. The short term leases minimise the risk for the business, but provide a great way to engage directly with customers, particularly with the added use of data technology.

In moving offline, choosing the right location for the business is paramount. Different communities will require different inventories, styles and store formats and integral to it all will be a strategy to drive online sales, all of which requires investment.

Pop-up brand exposure

The ability to relocate a pop-up store offers brand exposure to new customers without a capital intensive expansion or having to honour a commitment to a long lease agreement if things don’t turn out as planned.

Through analytic technology, an offline presence enables a brand to gather hugely valuable data on its key customers and it provides an opportunity to experiment with products while gathering instant feedback.

Financially, businesses should seek advice on negotiating lease terms and premiums and budget for capital works, factoring these costs into cash flow forecasts. The business should keep detailed records of the fit out work to maximise a capital allowance claim.

Other costs to factor into the most critical management reporting tool, the cashflow, are systems to manage inventory, gearing up on sales staff, staff training (especially if the team to date have never had to deal with consumers face to face) and what technology to invest in.

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In gearing up for an offline move, a company should have clear metrics on sales conversion to cover the upfront investment that is required in setting up their offering. Once up and running, actual performance should be closely measured against the budget, requiring an agile strategy to drive sales if performance is not as first planned.

New contractual challenges

For those international platforms moving into an offline UK venture, they may be employing UK individuals for the first time and as such putting in place employment contracts, operating a payroll and registering with HMRC is essential.

Meeting minimum wage requirements will also be critical in setting up UK operations. Another additional cost and complication to factor in is pensions auto-enrolment which will affect new employers in 2016 or 2017, depending on when PAYE income is first payable.

Setting up shop is not something to be complacent about. It is important to remember that if there is a successful online model already in place, the offline presence will be there to raise awareness of the overall brand and drive sales. This is why ensuring brand and consumer experience consistency across both mediums is key: not succeeding here will be detrimental to the overall brand image and offline move.

Whether it be a pop-up offering or a more permanent store concept, significant awards await those businesses that can successfully unify both online and offline offerings.

Further reading: What are US VCs looking for from European start-ups?

Praseeda Nair

Praseeda Nair

Praseeda was Editor for GrowthBusiness.co.uk from 2016 to 2018.

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