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Question added to topic Ask EntrepreneurFebruary 18, 2014

Why Not Every Retailer Should Go Online Only

I am assisting my father in starting a business selling diamonds to local buyers. He has worked in the jewelry business for 30 years and has established connections that allow him to obtain diamonds of a higher quality than retail stores for a lower price. Our goal is to keep a very low overhead (no physical location or small office, and little to no stock). The diamonds will be ordered and received within a few days based on the buyer’s specifications. We plan to advertise initially by sending e-mails and letters to past clients, linking to our Facebook page and a company YouTube video. Credibility is important in this business and wondered if the Facebook page is enough of a digital presence. Also, we wondered how important a physical location and in-person visits are, or if we could do our consultations (for large purchases of $5,000 or more) through e-mail or over the phone.

While I’m generally an advocate of moving brick and mortar businesses and services online, there are certain industries that can’t yet consider an online-only model. The jewelry business is one of those industries. Instead of selling solely online, I would recommend also having a physical presence or at least in-person consultations.

First, only about 6 percent of all US retail sales occur online. The market has come a long way, but still most buyers prefer to purchase in person. Second, the jewelry business requires that the seller educates the buyer. This is very difficult to do via phone or email. You’ll need to explain the product and how great it is in person for the buyer to understand the value. Third, due to the expensive nature of diamonds, buyers will want to see and feel it before they spend thousands of dollars.

Related: Choosing a Retail Location: 3 Priorities You Might Be Forgetting

In terms of your online strategy, Facebook & YouTube may not be sufficient. While I understand you’d like to keep overhead low, I don’t think it’s in your best interest to rely solely on a Facebook page and YouTube video to support your online presence. A professional site builds trust in your customer base, essential for people spending thousands of dollars on your product. It’s really not that expensive at all to create an online presence with just a website that has limited functionality. There are many low fee turnkey web platforms such as Wordpress that can be very easy and cost-effective. Eventually, if you do intend to sell your product online, you’ll need to create an e-commerce site anyway.

Related: From Facebook to Foot Traffic: Building a Bakery's Social Network
 

Ryan Himmel, CPA and registered securities analyst, is the founder and CEO of BIDaWIZ.com, a professional network for small businesses and entrepreneurs to obtain trusted advice and services from a team of CPAs, Enrolled Agents, Financial Planners & Tax Attorneys.  His team provides answers to the many finance and tax questions that small businesses encounter every day. Ryan has been quoted in The Wall Street Journal, Forbes, Fox Business and Crain's New York, among other publications. Ryan also regularly contributes to the community with his finance and tax blog.

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