If you own an online business, you’ve probably considered opening a physical shop at one point or another. When things are going well, opening your own brick-and-mortar store can seem like the natural next step for growth.
Many businesses have made this transition successfully, including household names like Gymshark and Glossier. But should this be the next step for your business, or not?
In this article, we’ll highlight the pros and cons of brick-and-mortar stores, before covering some of the main things you’ll need to consider when moving into commercial premises – featuring advice from the UKBF community.
Firstly, it can be a lot more convenient. By shopping in-person, customers can avoid delivery time and costs. If they need to return anything, it’s a lot easier for them to do it in person, as well.
Secondly, customers can see the products they’re buying in real life. This can help them establish whether goods are high quality and what they’re actually looking for – which is certainly a downfall with ecommerce shopping.
Going in-store also gives customers direct communication and first-hand support from store workers, resulting in a much improved customer service.
All of this leads to a more seamless and efficient customer journey, resulting in better customer loyalty, retention, satisfaction and ultimately, sales.
As a result, there are now a lot more costs associated with ecommerce. One UKBF member comments in this thread how skyrocketing prices of advertising on Google are making it even harder to remain competitive.
“I remember the days when you could get your most generic search terms for 5p per click on Google! Now you can pay as much as £3 per click. Just when you think it can’t get any higher, someone else joins the game and up it goes again,” says HFE Signs.
As well as extra costs from driving traffic, other online selling fees are on the increase. For example, UKBF member SeanOF notes in this thread how rising seller fees on Amazon are causing his profit to stagnate.
“I've recently been looking at our numbers and noting that our turnover is up but our profit isn't. This is due to all the extra costs of driving traffic and then paying fees (e.g. Amazon).”
Even if you run your own ecommerce website, there are still maintenance costs you need to cover. This includes the domain, website hosting, marketing costs and general upkeep of the site.
It’s a big and high-risk commitment, so it’s not a decision you should be taking lightly. In this thread, UKBF member MBE2017 advises meticulously checking your figures to decide if this is the right step to take.
“Since we are entering a very serious downturn by any standards – do you really need the overheads? Check your figures carefully, and check them again.”
Before you open commercial premises, take a step back and think: is there a single location where all (or at least a lot of) my customers are? If you can’t think of an obvious answer, then it may be a good idea to hold fire on opening a brick-and-mortar store.
A licence is typically the best option for small businesses and start-ups as they have minimal fees, a small deposit and are generally maintained by a landlord. Securing a short-term licence will also give you greater flexibility, so that you can test the waters out on opening your first store without too much of a commitment (both in time and money).
Leasing, on the other hand, is generally over a time period between three to 25 years. In this time, you’ll need to pay rent which can vary over the leasing period. You will also have to pay for any general internal maintenance and repair work.
Buying a premises outright is a long-term and hefty investment, so won’t be viable for a lot of small businesses. However, owning your own premises gives you a lot more control over what you can do with the property, as you don’t have a landlord to consult with.
In-store fulfilment is essentially where you use a retail store as a miniature distribution centre. This method enables ecommerce orders to be delivered much faster, reduce shipping costs and increase product availability.
This option was suggested as an alternative to opening a physical shop by UKBF member Ray 272, in this thread.
“A shop for an online brand is one way, but perhaps fulfilment would be better for an online brand. With fulfilment, you can free up your time to develop your brand and have someone else handle your stocks and ship your orders.”
Many businesses have made this transition successfully, including household names like Gymshark and Glossier. But should this be the next step for your business, or not?
In this article, we’ll highlight the pros and cons of brick-and-mortar stores, before covering some of the main things you’ll need to consider when moving into commercial premises – featuring advice from the UKBF community.
The pros of opening commercial premises
Here are a couple of reasons why you should consider opening your own physical store.Improved customer loyalty, retention and satisfaction
Despite online shopping becoming increasingly popular, many customers still value having in-store options.Firstly, it can be a lot more convenient. By shopping in-person, customers can avoid delivery time and costs. If they need to return anything, it’s a lot easier for them to do it in person, as well.
Secondly, customers can see the products they’re buying in real life. This can help them establish whether goods are high quality and what they’re actually looking for – which is certainly a downfall with ecommerce shopping.
Going in-store also gives customers direct communication and first-hand support from store workers, resulting in a much improved customer service.
All of this leads to a more seamless and efficient customer journey, resulting in better customer loyalty, retention, satisfaction and ultimately, sales.
Competition and costs for ecommerce are on the rise
If you’re selling online, you’re probably aware of the fact that it’s getting increasingly difficult to reach new customers. With more and more businesses being launched daily, there’s simply a lot more brands out there that you need to compete with.As a result, there are now a lot more costs associated with ecommerce. One UKBF member comments in this thread how skyrocketing prices of advertising on Google are making it even harder to remain competitive.
“I remember the days when you could get your most generic search terms for 5p per click on Google! Now you can pay as much as £3 per click. Just when you think it can’t get any higher, someone else joins the game and up it goes again,” says HFE Signs.
As well as extra costs from driving traffic, other online selling fees are on the increase. For example, UKBF member SeanOF notes in this thread how rising seller fees on Amazon are causing his profit to stagnate.
“I've recently been looking at our numbers and noting that our turnover is up but our profit isn't. This is due to all the extra costs of driving traffic and then paying fees (e.g. Amazon).”
Even if you run your own ecommerce website, there are still maintenance costs you need to cover. This includes the domain, website hosting, marketing costs and general upkeep of the site.
The cons of opening commercial premises
Unfortunately, with every peak comes a trough. So, here are some of the negatives that come with having your own brick-and-mortar store.It’s a big financial commitment
To put it simply: running your own store is very expensive. There are a lot of overhead costs such as rent, bills, utilities, staff wages, maintenance costs, insurance and more.It’s a big and high-risk commitment, so it’s not a decision you should be taking lightly. In this thread, UKBF member MBE2017 advises meticulously checking your figures to decide if this is the right step to take.
“Since we are entering a very serious downturn by any standards – do you really need the overheads? Check your figures carefully, and check them again.”
There’s less reach
It might sound obvious, but you won’t be reaching the same number of customers in a physical store than you would online. Because of this, you’ll need to keep your ecommerce store up and running, otherwise you will lose out on customers who aren’t in close proximity to the store.Before you open commercial premises, take a step back and think: is there a single location where all (or at least a lot of) my customers are? If you can’t think of an obvious answer, then it may be a good idea to hold fire on opening a brick-and-mortar store.
What to consider before moving into commercial premises
Premises location
- Where are your customers based? Can they reach the area easily?
- Has the local area already got a lot of competition?
- How expensive is the area? Prime locations will come with a higher price tag.
- Is the location close to your suppliers? If not, what extra costs will you be paying to transport your stock?
- Is the location suitable for the staff you will need to hire?
The capabilities and appearance of your premises
- Every business will have different requirements from their commercial store. Can the premises deliver what you need from it? For instance, storage, parking, toilet facilities, disability access or waste disposal.
- Does it look clean, safe and modern? If not, customers may be discouraged from shopping with you.
Legal requirements
- Do you need planning permission?
- Does the property need a special licence? For instance, you’ll need a licence if you sell alcohol.
- Does it have the appropriate safety measures? For instance, fire safety, safety of electrical equipment, security or gas safety.
The costs
- Cost of rent
- Service charges and utility bills
- Cost of business rates
- Staff wages
- Insurance costs
Should you licence, lease or buy?
If you decide to go ahead with securing your own commercial premises, then there are three different kinds of contracts you can sign: a licence, a lease or buying it outright.A licence is typically the best option for small businesses and start-ups as they have minimal fees, a small deposit and are generally maintained by a landlord. Securing a short-term licence will also give you greater flexibility, so that you can test the waters out on opening your first store without too much of a commitment (both in time and money).
Leasing, on the other hand, is generally over a time period between three to 25 years. In this time, you’ll need to pay rent which can vary over the leasing period. You will also have to pay for any general internal maintenance and repair work.
Buying a premises outright is a long-term and hefty investment, so won’t be viable for a lot of small businesses. However, owning your own premises gives you a lot more control over what you can do with the property, as you don’t have a landlord to consult with.
Consider in-store fulfilment
A final thing to note is that, rather than opening your own physical store, you could consider in-store fulfilment.In-store fulfilment is essentially where you use a retail store as a miniature distribution centre. This method enables ecommerce orders to be delivered much faster, reduce shipping costs and increase product availability.
This option was suggested as an alternative to opening a physical shop by UKBF member Ray 272, in this thread.
“A shop for an online brand is one way, but perhaps fulfilment would be better for an online brand. With fulfilment, you can free up your time to develop your brand and have someone else handle your stocks and ship your orders.”
