Is E-Commerce Worth it For Micro-independent Retailers?
I recently had the opportunity to listen to one of the individuals who had a huge influence on me when I got into this business, Dave Ratner. Dave is a great guy and very entertaining, but as I listened to him speak, I once again realized how different our independent businesses are. Dave has seven stores, a line of pet food and serves our industry in so many ways. He has even testified to Congress about independent retailers’ issues and concerns. When Dave mentioned that the independents needed to add online purchasing to their stores, my heart sank.
I’m not anti-online. I admit, packages arrive at my doorstep a couple of times a week—but I hate it. The products I tend to purchase online are those I cannot find locally, but talk about your interesting dynamics. Can I not find these things locally because there is no demand in my area, or is there no demand in my area because they are so easy to find online? Makes my head spin.
E-commerce is not going anywhere. Want to talk about scary statistics? Amazon is more valuable than all major brick-and-mortar retailers combined. Amazon’s $356 billion valuation is so big, it’s larger than Walmart, Target, Best Buy, Macy’s, Kohl’s, JCPenney and Sears combined. Let that sink into your head.
Several years ago, Phillips Pet Food & Supplies launched Endless Aisles, which is a way for retailers to get involved with online commerce. One of my biggest problems, like most micro independents, is time. I work my retail store almost every day from open to close, so it is very hard for me to spend a lot of time messing with an online store. I was really excited about this program, and I tried it out for about a year.
The advantage to Endless Aisles is that Phillips has all the product information, pictures, descriptions and shipping logistics worked out. All I had to do was add a Shopify online store to my existing website, and then log in to Endless Aisles and select all the products I wanted to offer in my store. Endless Aisles took care of adding the products to the store, and if somebody purchased something, Phillips handled the fulfillment, which is where the real value comes from.
Most online pet stores offer free shipping over $49, and for a single location brick-and-mortar to ship a 25-pound bag anywhere is probably going to be in the $15 to $20 range because we don’t have the negotiated rates that Endless Aisles receives. I sold a 25-pound bag online, and it was around $6 to pack and ship via Endless Aisles. There’s not much margin on pet food, but even with the various fees I was able to get a few dollars profit. Another huge advantage of Endless Aisles and one of the reasons I don’t mind taking such a small margin is that you get paid before you receive the invoice from Endless Aisles, so, basically, you don’t have any money out.
Even with all the advantages that Endless Aisles provided, I still found this undertaking a money pit for my store. Although Endless Aisles is provided as a benefit to Phillips distribution customers at no cost, there are fees associated with it from Shopify, an e-commerce platform for anyone that wants to sell their goods online. If you don’t have a web guy on staff—and most micros do not—there are also fees to have someone set up the website to accept Shopify. If you want to have any chance of selling products, you will also have to invest in “pay per click” or other internet forms of advertising, which can get expensive, especially if you want to have a chance of showing up against the big boys.
As I was writing this column, I did a quick internet search for my No. 1-selling pet food, and the three top spots, which are the paid spots, were PetFlow, Chewy and Amazon. I would guess that the costs of those spots are probably in the $2 range. If you consider that fee and the fulfillment costs, I would probably break even at best. That pet food that I searched has a rigid minimum advertised price (MAP) policy, so every one of those companies that returned on my search had the exact same price. That means it comes down to name recognition. Where do you think “B.C.’s Pet Corner” is going to rank in a customer’s mind when they are looking at that list?
Why are micro independents being told to add internet sales to their stores if it’s going to be a money-losing proposition? I think it’s because those who are recommending it do not understand the micro independents’ operations. Those larger independents doing online sales are offering more products, and they expect to get a return on their investment because customers will be buying other products. Micro independents are usually very focused and only carry a handful of products they believe in. They don’t carry a lot of toys and other stuff that’s made who-knows-where with who-knows-what. But those are the items that have the highest profit margin on them.
Ultimately, I know why my online attempt failed; it’s because my heart isn’t in selling products to a faceless customer. I want that customer to walk in my door so I can meet him and ask about his pet and find the right products to help the pet live a longer, healthier life. I want her to check in with me every once in awhile so she can learn about the newest supplement, or about the latest pet food acquisition that might affect the quality of her pet’s food. Micro independents have a firm place in the future of pet food. Instead of waiting for a customer to stumble across our website or paying through the nose to get that customer to the site, we need to actively engage the customer who is walking in our store and foster a deeper engagement and a more personalized experience.
B.C. Henschen, a certified pet care technician and an accredited pet trainer, is a partner in Platinum paws, a full-service pet salon and premium pet food store in Carmel, Ind. His knowledge of the pet food industry makes Platinum Paws the go-to store for pet owners who want more for their pet than a bag off a shelf.