Meet the SMEs abandoning bricks and mortar for online-only

Establishing a shop in the heart of a city requires a significant financial investment. Philip Waterfield, director at estate agents Strettons, says in central London commercial rents are high, and climbing. “A few years ago in the West End you might have been paying £30 per square foot per month and now it is £40 per square foot because there is greater demand than supply.”

Small business owners can find themselves priced out of the high street. However in an increasingly digital world, having a bricks-and-mortar store isn’t always a necessity. In fact many startups are opting to be e-commerce-only ventures.

Charles Baden-Fuller, centenary professor of strategy at Cass Business School, University of London, estimates that 90% of all businesses are not on the high street. “Online-only is very attractive because the high street is an expensive place to shop,” he says.

Neil Whitehead, founder and director of Seed Pantry, which specialises in urban and small-space gardening, has found that running an online-only business can help broaden his customer base. “Gardening traditionally appeals to an older generation, so by running an online business I’m able to attract younger people. We use a lot of social media marketing and we interact with our customers too; 60-70% of our customers are aged between 25 to 45,” he says.

But what about the older generation - are online-only businesses alienating older shoppers? Whitehead doesn’t think so. He says 10% of his users are over the age of 65. According to a report by Ofcom, the proportion of people aged over 65 that are accessing the internet is rising - it reached 42% in 2013. Meanwhile over-65s is the fastest growing age group on Facebook.

Cost benefits

For Will Clark, co-founder of online estate agent Sell My Home, the major benefit of being online-only is that it cuts costs. “It goes without saying that from a business perspective, one of the greatest benefits to being an online-only business is the reduction in overheads. We have an army of well trained and extremely professional agents, but we just have no physical presence on the high-street.”

Steven Watson, founder of subscription service for independent magazines, Stack, agrees: “Today, I’m working out of my spare room. Anything that I can’t do from my laptop, I outsource. We have a warehouse in the East Midlands distributing magazines, and another location in Kent taking care of the mailing lists.

“Online works for my business because independent magazines can be so difficult to find. The internet has enabled us to expand our reach, more than a bricks-and-mortar location could. We currently have 2,200 subscribers, who all get a different independent magazine each month.”

Outsourcing

Being online means it’s possible to learn as you go and adapt your business accordingly, says Watson. “The beauty of the web is that you can get something up almost immediately, but from there the fiddling and tweaking never stops. I had my branding and website done in five months, and I just kept thinking and tweaking as I went. You can move quite fast and figure things out as you go.”

Many businesses find social media to be an essential marketing tool for their online-only ventures. Clark says: “I think it’s naive to ignore social media. Half the battle is getting your brand recognised, getting the number of followers you need. Instagram and Twitter are important, sure, but we also find that YouTube, guides and video content have been important for us, too. I take a lot from seeing how something works, and the infographics we put up certainly help to educate.”

As well as communicating virtually, it’s also important for online-only businesses to be contactable by phone. “Having a physical presence on the other end of the phone is so important when you’re dealing with such high value items like houses, and until the brand becomes more well-known, it’s important that the potential customer can speak to you,” says Clark.

Watson agrees, and often calls customers to check that the magazine has arrived in one piece: “Sometimes postmen bend them or they don’t arrive, and I’m a voice on the phone that customers can chat to. As a result of this interaction we added “Do not bend” stickers on to the envelopes.” Watson also highly rates getting out of the office: “I could easily sit in my spare room with my laptop for three days, but I do events, speak at places, which gets me out and helps me spread the brand name.”

Mike France, co-founder of Christopher Ward, which sells luxury watches, says being online means you can get to know your customer base well. “We know that 2% of our customers are medical doctors. This is because we can communicate with everybody who buys our products.” France believes that the reach is much greater with an online-only business: “We ship to 108 countries. This would be logistically impossible for a smaller business if we were a bricks-and-mortar organisation.”

If these are the benefits to being solely online, what are the downsides? Both Clark from Sell My Home and Watson of Stack say bricks-and-mortar has its charm.

“It’d be great to have a pop-up and invite people in for a drink or an event in the evening,” says Clark. Whitehead likes the idea of having somewhere to tell the story of Seed Pantry with customers, but thinks that he can do that online just as well. “It would be nice, but I really don’t think it would extend our reach.”

France, who used to co-own the Early Learning Centre, says that he’d “never say never” to having a bricks-and-mortar store. However: “I’m a big believer in focus, and we have so many more customers to tap into online, that I don’t think we’re ready to stop focusing online yet.”

This content has been sponsored by Xero, whose brand it displays. All content is editorially independent.

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