Why Ecommerce Startups are Flocking to Retail while Corporations Flee
Prospects for commercial enterprises seem grim across Ireland. In 2010, The Journal reported that one-in-ten, or roughly 24,000 commercial properties were sitting vacant. By 2013, the number grew to one-in-eight, encompassing 26,500 properties.
The latest statistics from the Independent indicate there are now around 28,000 vacant properties, and more shops close their doors every day. Austins of Derry, BHS, Brantano, Blue Inc., and a dozen more large companies have already made it to the Centre for Retail Research’s list of businesses that have gone bust in 2016, and we’re only three months in.
Despite Business Woes, Startups are Entering the Retail Sector
These spaces are opening up, and remaining vacant, largely because large corporations with their outdated business models can’t make it in today’s economy. Traditional commercial leases run for 10 to 15 years, and with the massive inventories that corporations must carry, the footprint of their shops must be fairly large as well.
Ecommerce startups, on the other hand, don’t need such large spaces, and with pop up retail emerging, they’re often able to secure a space for six months or less. Considering that the cost of a space often accounts for 10% of a business’ overhead, newcomers are at a distinct advantage being able to make use of a smaller commercial footprint.
Moreover, labour costs typically account for 10 to 20% of a company’s overhead, but because the typical ecommerce entrepreneur follows a different staffing strategy, and may only have a physical presence for part of the year, these costs are also reduced.
Take for example, the New York-based Bonobos. Although it largely operates online, the company has launched “Guide Shops,” which provide consumers with a personally-guided tour of their products and enables them to try on various items to verify fit and size.
However, with limited inventory on hand, the footprint is very small. The Guide Shops also serve as a marketing funnel, promoting the brand with brick-and-mortar establishments and sending people directly to their ecommerce shop.
Better Inventory Management Helps Start Ups Win Big with Pop Up Shops
In a previous blog, we talked about Amazon’s brick-and-mortar strategy. One of the greatest advantages they have is warehousing and distribution.
This is exactly what today’s ecommerce startups are doing as well. It’s a cohesive experience, in which consumers can pick up an item in the store or they can have it shipped to them. These minor hubs can also serve as mini-distribution centres, enabling retailers to save on shipping costs.
Close-Knit Departments Further Spur Innovation and Integrate Experiences
One of the beautiful things about online businesses is how their teams function. Looking at Google, one of the best-known corporations, employees are mixed together in their offices, not divided by departmental tape.
The company has also gone to great lengths to create hubs throughout their office spaces, so that people from different departments will mingle. Whether grabbing a cup of coffee, or playing a round of darts, it’s all about mixing it up at Google. This corporate atmosphere is common amongst ecommerce startups, where the company’s entire team, from marketing, to development and even distribution, will work in a common area. As ideas are exchanged throughout the day between departments, better strategies and ideas are formed.
This kind of collaborative management is taking centre stage and shaking up the way brick-and-mortar operations are handled in the process. The final result is a cohesive experience, carefully crafted to immerse and excite consumers.
Until now, retail has been rather stuffy, stuck in its old ways. Ecommerce startups that are grabbing pop up shops are not just creating a new type of experience for their customers, they’re changing the way large corporations handle business as well.
With 28,000 vacant commercial spaces in Ireland alone, it’s clear that ecommerce has plenty of opportunities to expand their reach and grow with pop up shops. The real question is whether corporate enterprises will catch onto the model before it’s too late.