Many of Crowd’s customers have one or more brick-and-mortar stores in addition to an online store. This makes them multi-channel retailers. They come to us with tremendous plans to grow their business online, but sometimes their brick-and-mortar stores hamper the growth of their online stores. In this post, I’ll explore the merits of running brick-and-mortar stores separately from online stores. For the sake of simplicity, I’ll use the term ‘multi-channel’ here to refer to companies with both brick-and-mortar and online stores.

Physical Stores Can Hold Online Stores Back.
Too often, traditional retailers build online stores as an afterthought. While the physical stores have lots of trained staff with great facilities for customer service and inventory, the online stores are typically understaffed, lack their own inventory or customer service, and are plugged into the same POS system as all of the physical stores. As a result, the online store is usually seen as an extension of the in-store buying experience, but never reaches its potential for growth. Furthermore, getting the needed resources into the hands of the online division can be a struggle because managers of online divisions often report to executives who have no idea about the online business.viagra medicine

Online Stores are Completely Different.
Let’s think about the ways in which online stores differ from physical stores:

  • People. The skills needed to successfully manage an online store are completely different from those needed to manage a physical one.
  • Places. From warehouses to offices to servers in clouds, the online store has different – and often lower-cost – physical requirements than a physical store which requires quick access to inventory and foot traffic.
  • Products. The products that are popular online can be very different from those that sell in a physical store. Also, online stores may have larger inventories.
  • Promotions. Online advertising and promotions take the form of AdWords, Twitter, Blogs and Facebook. The message must be clearly communicated via text and images rather than salespeople and in-store signs.
  • Prices. Web-only promotions through sites like, Groupon and Gilt Groupe mean online prices can vary significantly from in-store prices.
  • Potential. Unlike physical stores, online stores can and do sell worldwide all day and all night. Their ability to scale is limited only by demand for the product and the company’s ability satisfy customers.

  • There you have it – everything about an online store is different from a physical store, and yet countless companies (new and old) seem to think they can add an online store without building a significant online division. Once a company starts down the path of a multi-channel model, they will undoubtedly encounter some of the following  fundamental challenges:

    Multi-Channel POS Is A Nightmare.
    Having an integrated POS (Point of Sale) system that tracks inventory and sales for both the online store and physical stores is the business owner’s dream, but it also an expensive nightmare. It’s expensive because, to do it right, you need to use one of a few proprietary systems owned by IBM or Microsoft that are difficult to update and expensive to maintain. It’s a nightmare because these systems are less flexible than custom-built systems, prohibiting innovation.

    For smaller companies, reconciling online sales with in-store sales can be confusing and time-consuming. Because the online store is so different from the physical one, the reconciliation process is like comparing apples to oranges. The online store operates 24 hours a day, and all sales are electronic. There is no “end-of-day reconciliation” and no one needs to bring cash to the bank’s drop box. Reporting online is far more accurate since all the transactions are recorded down to the last detail. Not so with the physical stores.

    Inventory Is A Pain.
    Physical retail stores need their inventory to be nearby for frequent restocking of shelves. ‘Nearby’ often means on the premises, which is expensive real estate. If the online store’s inventory is commingled with the physical store’s inventory, it becomes practically impossible to keep track of what’s in stock. And if the store’s inventory runs out, then store clerks usually have no qualms about raiding the online store’s inventory to satisfy a customer.

    Multi-Channel Fulfillment Is Slow.
    It’s unfair to ask in-store clerks to pack and ship products for online sales. They didn’t sign up for that less-than-glamorous job, and they should instead be doing what they’re best at – selling. Furthermore, when fulfillment is the responsibility of in-store clerks, we introduce a huge opportunity for human error. Sales can be dropped, and customers can be pissed off.

    Multi-Channel Customer Service is Lousy.
    Customer service is just as important online as in physical stores, yet the customer service strategy for online stores is often overlooked or underestimated in the multi-channel model. On many online stores, the phone number leads to corporate headquarters, where the overworked e-commerce manager is expected to take the call. The e-commerce manager is probably in a meeting, so the customer sits on hold.

    There Is a Solution.

    The closest thing to a magic bullet is forming a separate company for each channel. Companies serious about selling online should form a separate company for online sales; fund and staff that company; and promote the current e-commerce manager to Director. Or better yet, hire someone with real experience running a stand-alone online store. Give him or her the ability to hire, manage inventory, buy products, offer customer service, and market in a way that is consistent with the overall brand but optimized for online sales.

    Business owners might balk at the cost and complexity of running another company; h owever, running multiple companies under one corporate umbrella is common and inexpensive relative to the benefits. In the United States, new companies can be founded for well under $5,000. If you can free yourself from expensive proprietary POS and inventory management systems by separating physical stores from retail stores, then the separation will be worth it.

    Things To Avoid:

  • Understaffing the online store by giving the entire job to one or two people;
  • Handling shipping from physical stores;
  • Using one POS system to track both online and in-store sales;
  • Commingling in-store and online inventory; and
  • Having your physical store employees handle customer service for online shoppers.

  • Things To Do:

  • Form a separate company for the online store;
  • Let hiring, customer service, inventory management, and procurement all happen separately for the online business;
  • Fund the separate company well enough to staff it with competent people; and
  • Keep the brand experience consistent, but recognize that online sales are completely different from in-store sales.