Connect The Dots

Best Of Both Worlds

Having second thoughts about burning the lease on your storefront and going strictly virtual? Know that there's another approach to the Internet, one that isn't all-or-nothing.

Consider Wine Country Inc. (http://www.winecountryonline.com), for example, which is 25-year-old Adam Chilvers' Winter Park, Florida, wine store as well as its Internet counterpart. Built around the tasty proposition that all the wines it sells are $19 or under and rated 85 or higher by a prestige publication (such as Wine Spectator), both the brick-and-mortar (opened in November 1998) and the online store (launched a month later) are profitable, according to Chilvers.

"Doing business on the Web is a dream. The costs are very low," Chilvers says. But he has no intention of shutting down his walk-in store, for several reasons. For starters, an online operation still needs some real-world warehousing for merchandise, and a brick-and-mortar provides that.

But the second reason is the clincher: "On the site, we sell to many customers outside our area, but we also get many locals coming into our store with shopping lists they've printed out on the Web." For those customers, the Web site is a great convenience: They hunt for wines they want online, at midnight or 6 a.m., then they can get in and out of the real-world store in a matter of minutes. "I'm happy with how the store and the Web site are working together to build this business. It's a good combination for me," says Chilvers.

Charlene Steinhauer, 36, goes further in endorsing the dual-channel retailing strategy. Stars Children's Wear, Inc., her Issaquah, Washington-based brick-and-mortar children's clothing and accessories store has been open for six years. "The business is very successful," she says, "and it's a steppingstone to what we're now doing online at ShopStars.com. A big plus for us is that we have established vendor relations and we can get the merchandise we want to sell, but a lot of online-only storefronts can't because many vendors are suspicious of them. They've been burned in the past by dot.com companies, but they know us and know we understand this business."

Maintaining a retail outlet has also helped Steinhauer keep up on industry trends. "By interacting with customers face to face, we've learned what they want in children's merchandise and how they want to buy it," says Steinhauer.

Even so, why did Steinhauer decide to start an online store when her brick-and-mortar operations have been on a steep upward growth trajectory? Advantages unique to online retailing drew her to launch ShopStars in late 1999, she explains. For starters, there's the ability to reach a wide audience. But another critical factor, says Steinhauer, is that "being online for us is about customer service. Our customers are busy--every parent is--and at our site they can shop at their convenience, 24 hours a day. We're open whenever they want to buy clothes or books or toys for their kids."

But, then, isn't this dual-channel strategy an unnecessary complication forcing entrepreneurs to focus on two distinctly different venues? The experts don't think so; in fact, many point to it as the way to proceed in the next century. "Don't close down a successful brick-and-mortar store to go online. Keep the storefront and add a Web site," advises Leslie Lundquist, author of Selling Online for Dummies (IDG Books).

And the logic behind this position? "There are tremendous advantages to be had by leveraging Net sales with a B-and-M," says Barton Weitz, a marketing professor at the University of Florida in Gainesville. Case in point: "You can use the store to promote the Web site," says Weitz. That means printing your Web address on bags, sales slips and advertising fliers. That can be a big step in overcoming the obstacle facing every dot.com today. "It's gotten very expensive to attract people to a site," says Weitz. "Stand-alone sites incur very high marketing expenses because they have to spend the money to get eyeballs."

Your customers' desires are another strong reason to maintain both types of operations rather than diving solely into online. "Different consumers want different things," says William B. Gartner, a professor of entrepreneurship at the University of Southern California in Los Angeles. "Some customers want the kind of personal interaction that can only happen in a traditional retail setting. For others, it's simpler to log on to the Net. The smart, consumer-oriented business makes it easy to buy, no matter the customer's preferences."

But there's a big, worrisome question that remains: Isn't all retailing heading to the Web anyway? Just last year, that was the buzz, but nowadays--with more dot.com's struggling and few breaking through to profitability--a kind of sobriety has taken hold, and experts are looking anew at the Web's potential as a marketplace. Explains Jackie Goforth, an e-commerce specialist with PricewaterhouseCoopers: "There are certain merchandise categories that will be slow to succeed online. Women's fashion, for instance. Shoppers will want to try the clothing on, to touch it. With other kinds of merchandise--commodities like consumer electronics--online retailing is the way to go."

As margins get squeezed tighter with hard-charging dot.coms fighting for market share by offering lower prices, it will become increasingly tough to succeed in a brick-and-mortar-only context. Merchants in endangered categories shouldn't panic, however, says Goforth. "We heard that catalogs would put traditional retailers out of business, and it didn't happen," he says. In fact, some catalog retailers eventually backed into opening brick-and-mortar stores. Now we hear that the Web will put B-and-Ms out of business, and that, too, probably won't happen."

"A lot of businesses are on the Web, but a lot more are not, and they're doing fine," adds Jonathan Palmer, a business professor at the University of Maryland in College Park. "What's important is for the individual business to make the decision that best serves its customers. Let customers shop the way they want to, and they will."

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This article was originally published in the March 2000 print edition of Entrepreneur with the headline: Connect The Dots.

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