Starting an Online Retail Business – Focus on the Business Fundamentals

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Over the last eight months, I’ve been looking at the landscape of online business to consumer retailing from the point of view of a new business, primarily because I’ve been immersed in the process of launching an online store, and particularly from the perspective of a fashion retailer of girls clothing.

There’s been a fair amount of criticism of online stores from existing bricks and mortar retailers, some of which is reflected in the suspicion we initially faced from our suppliers. I think this is because a lot of people set up online stores thinking it will be cheap, which it can be, but the results often end up looking pretty ordinary. Based on the feedback we’ve had from designers and agents I suspect that many of these startups lack the capital backing to get past the first couple of seasons, with them often reneging on indent orders, which has subsequently discredited the idea of online retail startups within the industry.

From an operational expenses point of view we do not pay the exorbitant Sydney retail rents, nor do we employ sales-people to sell our clothing and from a capital expenditure perspective, we do not pay for fit-out or the many other requirements for fashion bricks-and-mortar stores. Having said that, before anyone thinks that opening a professional online store can be done cheaply, think again. To be done well (and let me say it is always a work in progress and there are always things that you want to improve), you will need similar levels of funding and certainly as much time.

You’ll need to pay for specialized skills, have or develop them yourself or lean upon friends and family with them. It really helps or is perhaps essential to have a person with an extensive IT background close to you (unless you have the capital to pay others, in which case it still wise to be very, very nice to them). Graphic designers and editors, photographers, models, printers and marketing professional and those with fashion retail skills are also good to have around as a website will need them. As you can see, it takes a village to raise a business, and we haven’t even starting to talk about developing the actual website, the equipment needed for ongoing photography and warehousing or even setting up the company structure or trademarks.

The advantage of online retail for girls clothing, isn’t so much in the initial setup costs, but more in the ability to scale the business easily and cost effectively as the business grows. Online retail also allows you to reach a larger, more global audience and is more resilient to the vagaries of landlords and local planning regulations. None of these benefits are really worth the effort however, unless the online retail presence is backed by a commitment to success, a solid business plan, adequate capital backing, financial prudence, and a belief in future. Online retail may be a relatively new practice, but the disciplines, and foundations of business success remain the same.

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