Dirks On Strategy

Beating A Recession – 12: Blow Up the Brick & Mortar! February 23, 2009

Want to save a significant amount of annual expense and increase your profitability…and lower your cost of goods and services so you can remain competitive?  Sure you do.  However, many of us are still married to the concept of having a retail or service space to conduct business. I’m challenging that right here and now.

First, instead of investing dollars in ‘brick and mortar’ retail or service space, invest heavily in transferring your ‘place of business assets’ to your website and create an intranet that allows your employees to work remotely.

The growing trend is for businesses to move their infrastructure investments into creating a better user experience on the web and being able to conduct their business via the web.  Invest and make your website so customer-friendly and seamless to use (navigation and purchase-orientations) that you no longer relay on a ‘physical’ presence in order to be able to conduct business.

Case in point.  I have a friend of mine who recently decided to close down her retail shop that sold hiking and camping equipment.  It wasn’t too long ago that she had expanded her ‘brick and mortar’ presence to increase her retail space.  Then the economy took a hit and gas prices jumped.  She then decided to close the retail business.  However, she didn’t give up.  She had maintained that retail space for over 10 years and had built up relationships with her customers, who were both local and national.  She already had a pretty good website that contained excellent information of value to her customer base.  On top of that, she and her husband have a gigantic amount of expertise (intellectual capital) built up based on years of experience in the outdoors.  Why waste those assets just because the retail space was bleeding the business?

So she decided to invest time into expanding their website so that customers were still able to come and tap into their expertise and knowledge but also make purchases on the web. She is in the process of transforming her business onto the web and creating a customer experience that made them popular for many years.  Note: She’s still refining the website to her satisfaction so I promised her that I wouldn’t reveal it.  Once she is operational, you’ll hear about it via this blog.

Before you say, “So what? Isn’t everybody doing that?”…the answer is no, few local business invest in creating a robust and powerful web vehicle to sell their expertise and products.

Sure, most businesses have a website (and there are a bunch that still don’t!) but the website was usually built as cheaply as possible.  Some are just awful and look like they were pasted on construction paper then slapped on the web (I wouldn’t bother then).

Here are a few things I want you to consider, even though it might creep you out to think of operating your business from your website:

1.  Can I sell what I’m selling now without having to carry the burden of a retail or office space? The common reaction is, “what?  and have no place for my customers to touch and feel the product?”.  Yup…that’s exactly right.

Let’s say you own a health food store.  Banishing the ‘brick and mortar’ seems like a trick, right?  I’m mean, customers are used to coming in and asking you what you recommend for this or that issue that affects them, right?  People like the personal service and the expertise you might have in the area of health foods and herbs that are designed to help with an ailment of some kind.

What if you could create that same personalized experience on your website?  What if you had the ability for people to ask you the same questions in realtime…both online and the phone?  You could ‘chat’ with them and make a few product recommendations.  Then they can purchase your goods either right from your easy to use and super secure website or via phone order.

2. Let’s take a shot at a service based business. No products but selling services.  Let’s say you are a CPA and have a few partners with some additional specialty accountants on the staff.  Most firms of this description would rather jump in front of a moving bus before giving up the office space.  What are they spending on space?  $3,000…$5,000 a month? Whatever it is, it’s a pretty hefty sum and doesn’t include the utility bills, liability insurance, etc.  that tack on additional expense.

Who said you have to carry expensive office space?  You do.  However, I’ll bet most of your business is conducted by phone and you probably meet them at their place of business for the face-to-face meetings that are needed (and sometimes necessary).  But what if you invested instead on the infrastructure that allowed your partners and other expert staff to work from the comfort of their own homes?  Shocking, huh?  I understand that nervous twitch you just got from the thought but I have to tell you that this kind of transfer of ‘conduct of business’ is already underway.

Listen folks, the technology is already here that allows you to work remotely and securely from any location that has access to high-speed internet.

What I’m suggesting here is that you close down your offices and work from a distributive environment.  Need to house files?  Sure.  You could still maintain some dramatically limited office space if you need to house phyisical files?  But what if you optically scanned those docs and made them available on a securely-accessed site, so you peeps could still work?  Yes you can.

I’m hard pressed to find too many businesses that couldn’t make this change from ‘brick and mortar’ retail or office space to a web-based, distributive work environment.

Let’s take a quick look at just a few of the key advantage:

1.  Dramatically reduced expenses (after an initial investment for upgrading your distributive work environment and your website experience) means you have more capital to work.  Freeing up cashflow is critical in any economy, let alone this one we’re in now.

2.  Lower operating expenses means you can re-direct those funds to build up cash reserves, lower you cost of goods/services, hire more people, and expand your product/service offerings without worrying about the cost of doing these same expansions with the limitations of the usual retail or office space.  Note: unless you can arrange drop shipping directly from the manufacturer or distributor of your products, you will of course need to access some physical storage space for warehousing and distribution of product to customers.  Usually that kind of space requirement is far less expensive to maintain than a premium retail space.

3.  No geographic limitations anymore.  Wow.  This is my favorite one of all.  The infrastructure investments you make to create a website that is customer-centric, user-friendly and seamlessly allows people to buy from you means you can do business any where in the world.  Think of that kind of website married to a distributive work environment takes the shackles off your ‘local’ business.  You’re not local anymore.

4.  You can now take the infrastructure savings of reduced or eliminated reliance on ‘brick and mortar’ and apply that to a powerful and robust marketing budget to expand both your ‘local’ and web-wide ability to sell products and services.

Take a white sheet paper out and begin thinking through how you could design a way to conduct business without the ‘brick and mortar’.  Force yourself to think it through with the attitude of “How can I do this” versus “How many excuses for not doing it can I come up with?”.

In succeeding postings we’ll take a look at some businesses that have been doing just this…and doing it well.