The Massive Shift to Non-Store Retailers
Posted: 07/27/2021 | Author: Jim Lochner for Creatives On Call | Tags: Thought Leadership
COVID forced many retailers to take a hard look at their store networks. In 2020, struggling brands like Bed Bath & Beyond, Victoria’s Secret, Kmart, Walgreens, and H&M were particularly hard hit by the pandemic, leading to the permanent closure of a large portion of their brick-and-mortar stores. Over 30 major companies like GNC, Pier 1 Imports, Tuesday Morning, Men’s Wearhouse, and JC Penney were forced into bankruptcy. In addition, some brands like Lord & Taylor and Stein Mart boarded up all of their stores and moved to an online-only model. As many as 10,000 stores may close in 2021, a new record, and roughly half of all remaining mall-based department stores could shutter by the end of 2025. Mall owners are even converting empty big-box stores into housing. On the flip side, a record number of non-store retail businesses registered during the pandemic. Teams that deal with this strategy are our specialty.
74% of new retail businesses since April 2020 have been non-store retailers. With the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020, the number of weekly business applications for non-store retailers grew from 5,070 to 20,370, with a weekly average of 13,200. While the additional weekly $600 in unemployment insurance in 2020 helped the personal savings rate reach nearly 34% in April, the highest on record, a tax deduction of up to 20% of qualified business income also helped give budding entrepreneurs the financial breathing space they needed to set up a business.
Advantages of Non-Store Retailing
Some types of non-store retailing have been around for decades—direct selling (think Amway, Tupperware, door-to-door sales), telemarketing, automatic vending, and direct marketing. But online non-store retailing has proved a boon for entrepreneurs before and during the pandemic. Why?
- Lower business/overhead costs. Traditional retailing requires a physical brick-and-mortar store. Non-store retailing requires few resources.
- Better and easier access to the market. If you’ve got a warehouse or other storage solution for your products, you can set up your business with a simple online shop and start selling.
- Market growth. Non-store retailing gives you the world at your fingertips, with access to international and local customers.
- Customer information. Thanks to the very nature of online selling and analytics, non-store retailing provides you with invaluable customer information that brick-and-mortar stores can’t offer. Yet.
Challenges of Non-Store Retailing
While setting up a non-store retail business is relatively simple, it takes more than “build it and they will come.”
- Customer trust. It can be tough to break through the online noise if you don’t have any prior market reputation. And as with any business, building trust takes time, especially online. A strong marketing strategy is crucial.
- Advertising costs. Digital marketing can be costly. Less than 10% of consumers click on ads, and pay-per-click (PPC) ads can run anywhere from 10¢ to $5–$10 per click in extreme cases.
- Structural costs. From a website and inventory to social media and ads, a non-store retailer can’t be a one-stop shop. Hiring experts to manage all of these can prove challenging and costly. (HINT: Creatives On Call can help!)
- Security. You need to stay on top of e-commerce laws and provide a secure, trustworthy checkout process for your customers. A poor checkout, delivery experience, or security breach can take a toll on your business.
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Total non-store retail revenue in 2020 reached $941.5 billion. North America accounted for 38% of the e-commerce and other non-store retailers market, buoyed by a 77% year-over-year growth in non-store retail businesses. The global e-commerce and other non-store retailers market is poised to grow to $2641.1 billion in 2021 and $4333.82 billion in 2025. By making non-store retailing part of your business strategy, you’ll be in great shape to grab your share of that growth.
Need help with your non-store retailing strategy? Creatives On Call has experienced creatives standing by to assist with website design and production, content creation, customer experience, and more. Give us a call!
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