When You’re a Small Enterprise, E-Commerce Is Harder Than It Appears

There’s a chair in the middle of the Holiday Market, a grocery store near Detroit, and if customers are lucky, Tom Violante Sr. sits in it. The 91-year-old founder still comes to work most days – and he knows where everything is located in an area of ​​60,000 square meters.

“He asks everyone if they found what they wanted,” said his son Tom Violante Jr., who runs the business with his sister and brother-in-law. “If not, he’ll tell you which aisle it’s in, how many steps it takes to get there, and where it’s up, knees, head or stomach up.”

The Royal Oak, Michigan store is known for this type of customer service. When Tom Violante Jr. considered offering grocery shopping online, he wanted to provide the same level of care. He didn’t expect the service to generate massive sales, but he saw the future come as online brands like Chewy and Winc wooed their customers. In 2019, he assembled a team to build an online platform that could handle the store’s 60,000 items.

He was happy when the pandemic broke out.

“When we started we were so busy people couldn’t get a pick-up place for a week, but we wanted to be there within two days,” he said. “Now we can pick it up the same day.”

In terms of pandemic winners and losers, Holiday Market is in the positive column thanks to online shopping, which helped the store’s total sales increase 20 percent in 2020 compared to 2019. Ecommerce actually prevented US retail from having a disastrous year. Retail sales rose nearly 3.5 percent year over year to $ 5.6 trillion instead of ending in a deep red lows, according to research firm eMarketer. E-commerce alone grew by 33.6 percent in 2020.

Holiday Market’s success, however, is an outlier for small retailers – the boom has mostly helped big business. Ten major retailers accounted for 68 percent of all ecommerce sales in the US last year – and Amazon alone made up more than half of all online sales. According to real estate analysts from the CoStar Group, large e-commerce companies used almost 60 percent of all available storage space in the past year.

“The big just got bigger,” said Andrew Lipsman, principal analyst at eMarketer.

For small businesses, the benefits are very uneven. There were winning sectors like groceries, health and fitness, and direct selling brands, but clothing boutiques and other specialty retailers – especially those with no existing e-commerce platforms – struggled.

“The pandemic has accelerated the growth of online commerce,” said Loren Padelford, vice president of Shopify, the e-commerce platform that primarily serves independent retailers. “It gave a lot of people the idea that if you have to close your physical door, you have to have a digital door.”

Shopify, a Canadian company, is helping customers build online stores quickly – and many companies turned to him for help when they had to close due to shutdown orders. Shopify’s revenue grew nearly 90 percent last year and now serves 1.7 million merchants worldwide.

Rooshy Roy started her online beauty business, Aavrani, with Shopify. She never thought of opening a physical store. “We realized that we can build a business that is about culture and ingredients and that selling directly to consumers can make that happen,” she said.

Ms. Roy, a first generation Indian-American American, grew up making hair masks and other beauty products with her mother and grandmother. However, she was never proud of her legacy or her formulations until she met her business partner Justin Silver in business school.

Together, they raised nearly $ 3 million from investors and launched the first iteration of Aavrani in 2018. The reaction was lukewarm, so they pulled back and renamed themselves. Last summer, they restarted the New York City-based company with new packaging and a new customer loyalty plan.

The company primarily uses digital ads to generate sales, but Ms. Roy also uses Instagram, TikTok, and Clubhouse to connect directly with customers. She has built a following on these platforms, she said, because she doesn’t just post about the products. She writes about what matters to her: the struggles in building a business, her upbringing, even confusion about how to “look” as a beauty brand owner.

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March 7, 2021, 9:35 p.m. ET

“This is so different from the last version of the brand,” said Ms. Roy. “It’s less transactional, more authentic to me. It really contributed to our growth. “

In 2020, the company had sales of $ 1 million, Ms. Roy said. This year she expects $ 6 million.

However, for brick and mortar stores considering e-commerce, success isn’t always as simple as posting a website and watching orders come in. Even at the Holiday Market, there were significant logistical challenges – for example, where to store all of those online orders and keep them cool. Mr Violante had to core out one of the prep kitchens to make room for new freezers and fridges that were earmarked for storage. He also has to pay the staff to shop the order, organize items, and bring them to the curb.

“It’s very expensive to have an online shopping program,” said Violante.

Online purchases make up about 8 percent of all in-store sales, and there are 15 employees and a manager dedicated to service. But Mr. Violante’s vision is not to be the best online grocer. It wants to be the place where customers have a great experience and use online ordering as a convenience.

“When everything is in place, how are you going to sit down and start a conversation with people?” he asked. “Losing that really scares me. So we’re going to be more like the food hall you see in the big cities, a place where there are common spaces and a community where people can talk to each other. “

The costs and the logistics of implementing an e-commerce strategy convinced Rachel Lutz not to open any digital doors to her three Detroit fashion boutiques, Peacock Room, Frida and Yama. “Ecommerce websites are not a magical solution to saving small retail businesses,” she said.

For one thing, Ms. Lutz couldn’t find a good way to manage inventory across two sales channels. She carries a number of unique and specialty items and is concerned that an online customer might buy an item like someone picked it up from a store shelf. Keeping separate inventory for online and in-store stores was too expensive. Nor did she want to use her retail space as shipping and logistics centers when the cost of renting it is so much higher than the warehouse space.

In the end, she realized that the most important thing was to be a community-centric company. “I may be less efficient, but I have a more special and unique business and that attracts people to our business,” said Ms. Lutz.

However, it hasn’t turned its back on e-commerce yet. Ms. Lutz used Facebook Live – a tool she was already familiar with – to create a home shopping show. Several times a week she goes in front of the camera and talks about the products in her store and the people who make them. She numbers the items and people post “sold” in the comments when they want to buy something.

“Customers have started to call it” the show “,” said Ms. Lutz. “I knew we had moved from e-commerce to infotainment when I heard customers watching it on their big screen TVs.”

Amina Daniels, the owner of the Live Cycle Delight gym in Detroit, puts on her own show. She wishes she could just point a camera at one of her yoga or spinning instructors and start Instagram Live, but she knows she needs high production values ​​if she wants her clients to keep their membership. So Ms. Daniels built a mini production studio in her spin room and invested thousands in microphones, lights, and a film crew to produce on-demand video courses.

Regardless of how much she invests in her digital platform, it’s difficult to compete against Peloton, which is well capitalized and where entire teams are producing their digital classes. In the past fiscal year, the company posted a 100 percent increase in revenue, even though Live Cycle Delight revenue declined 80 percent.

“Our competition has changed,” said Ms. Daniels. “We’re not just competing with the gym on the street. Titans like Peloton and SoulCycle are true beneficiaries of this pandemic. We work twice as hard to compete with these titans and celebrity coaches. “

About 30 customers left Live Cycle Delight for Peloton, Ms. Daniels said, but she found support in other ways. With the move to support black-owned companies, people donated for them, and there was good demand for the studio’s branded items like pilates balls, t-shirts, and booty bands, the stretchy bands that add resistance to a workout. These goods have proven so popular that Ms. Daniels struggles to keep them in stock on her website.

Between the products, summer outdoor courses and memberships, she was able to keep the three-year deal open. The move to e-commerce wasn’t perfect, she said, but it was worth it. She remembers why she started the studio: to make fitness more accessible and inclusive.

“Peloton is just one type of experience,” she said. “We’re still here to give our customers the opportunity to join us on the path for the better.”

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