Taking it Online or Offline- The New Definition of Location, and Why It Matters for Small Merchants

Location, location, location.  The mantra is storied as the most important aspect for choosing real estate, whether it be personal or commercial. For small merchants, it is critical to be where your customers are. But as technology continues to evolve, so does the definition of the word location. 

The internet, social media, and the growing availability of mobile payment technologies have connected buyers and sellers, making it possible for small merchants to reach consumers from all over the world. Most significantly, it has changed the entrepreneurial landscape and the way businesses operate.  Depending on a merchant’s products, marketing scheme and customer base, this could mean operating solely as an e-commerce business, maintaining a traditional storefront or creating a competitive mix of both.

Setting Up Shop - Online

Opening a digital storefront comes with many direct benefits for entrepreneurs. The most explicit is that it is significantly less expensive to create, build, renovate and operate a digital storefront than a physical retail shop. Online businesses can be automated, where shop owners do not have to be physically present at all times and instead, can focus on the product or maximizing their online presence.

Equally as important, is that retail customers are online and being online creates greater selling potential to untapped customers. Research firm, Forrester estimates that by 2014, U.S. online retail sales will grow to almost $280 billion – up from $155 billion in 2009. Having an online presence provides ease and convenience for consumers to shop anytime, anywhere without having to worry about store hours. Also, selling online allows small businesses to capture important customer data that can help merchants target the right audience more effectively.

There can also be challenges to operating an online business. The biggest hurdle is re-creating the right online experience. An online business is the first entry point for consumers to experience the product and requires small merchants to carefully consider the design, content and navigation of their online store. Websites that are cluttered and difficult to navigate can be a barrier, which could confuse and frustrate consumers.  However, when a digital storefront is designed to be user-friendly, it could bring customer engagement to new heights, create a unique and personal shopping experience and expose the business to millions of potential customers.

There Will Always be a Need for Stores

Although technology provides new avenues and capabilities for expanded sales, small merchant storefronts are still crucial to the development and growth of America’s economy and its local communities.  In fact, 75% of consumers feel that the ability to evaluate a product first-hand influences them most on whether or not they will make a purchase, according to a recent report by Forrester.

No matter how developed digital communication gets, there is no substitute for human interaction and personal service.  Local businesses are part of the neighborhood, and residents want to support them.  We have seen through our Shop Small and Small Business Saturday initiatives, which encourage consumers to shop at their favorite local businesses, that these small merchants are community landmarks, and connected to neighborhoods in a variety of ways. 

During the most recent Small Business Saturday, a group of small merchants in the Tribeca neighborhood of New York created their own “Shop Small” map, directing consumers to each other’s storefronts in a show of solidarity and support for the local stores that keep a neighborhood alive.

Consumers are also supporting the movement by showing their support online. The Small Business Saturday Facebook page has more than 3.2 million fans, many of which have recounted the meaningful and long-lasting relationships they have with small merchants in their communities.

There are many factors to consider when thinking about a storefront location. From a product perspective, one deciding factor is the relationship that the consumer has with the product.  Maybe a merchant’s items require a certain touch and feel, as the purchase is a significant investment for the customer either because of price or sentimental importance.  This is true for a variety of specific needs, including the bride-to-be trying on her first dress or the runner with a wide foot who is looking for the best shoe fit.  

Another might be that a merchant’s focus is immediate purchases, such as convenience stores, bakeries or delis.

Sugar Sweet Sunshine, a New York City cupcake shop, operates solely out of its Lower East Side neighborhood storefront.

“100% of our business is through our storefront,” said Debra Weiner, co-owner, Sugar Sweet Sunshine.  “We don’t just sell cupcakes - we sell a personalized customer experience that cannot be replicated online.  We get to know our customers, not only by name, but who they are, what their tastes are, and the cupcake flavors they would like.  It helps our business and it lets us create stronger ties within our community, and the only way we are able to do that is by being physically present.”

Social Media Helps Level the Playing Field

Whether your location is offline or online, it’s no secret that social media and digital interaction have changed the way businesses – large and small – interact with their customers.  Recent research from Deloitte indicates that 85% of consumers who have use a retailer’s app or website during a shopping trip made a purchase the same day.  These social and mobile tools give small merchants the ability to bring their unique relationship-based approach to an untapped base of potential customers.

Through chat features on websites, and free platforms such as Twitter and Facebook, merchants can communicate directly with customers, both in their local neighborhood and all over the world, to gauge demand and solicit feedback to improve their customer service.  Likewise, the explosion of smartphones has changed consumer behavior. Consumers are harnessing the power of the virtual community for real time recommendations and review sites such as Yelp can greatly impact a business. These online social tools help to connect consumers to offline merchants and vice versa.  Merchants can also utilize these platforms as advertising tools to develop a closer relationship between customers, the business and its products.

Ultimately, this levels the playing field for small merchants.  Now, mom-and-pop-shops share the same customer audience, communication platforms and sales possibilities as big-box businesses with multiple locations. With a little creativity, the impact can be both memorable and profitable.

Tips for determining online, storefront or both

The truth is that no two businesses are alike, and in the world of small merchants, nothing is black and white.  Some businesses operate and flourish solely online, others are fixtures within the community, and there are also ones that do both.

Warby Parker, a merchant that sells classically crafted eyewear at affordable prices, has developed a successful blend of online and offline. The company was established as an online business, but quickly found value in operating a small showroom out of the company's headquarters. The company has since expanded its offline retail presence through partnerships with boutiques in key markets and standalone Warby Parker storefronts.

"By operating both online and in-person, we can reach our customers using the channels that they prefer, and engage with them on their terms," said Neil Blumenthal, co-founder of Warby Parker. "We have worked hard to create a unique shopping experience for our customers, and are able to connect with them on a personal level both physically and digitally."

Each entrepreneur has to decide what is best for their business, and what type of location would most effectively attract the most costumers.  Below are a few tips to help you sift through the advantages and disadvantages of each direction, and find one that fits your business model and marketing scheme.

  • What is your initial budget?  Opening a digital storefront is significantly less expensive than renting, renovating and maintaining a physical one.  If your budget does not enable you to take on such an ordeal, maybe selling products online would be a more effective business model.  This way you can focus on other essential aspects of your business like advertising, and developing a superior product.  You could also use the less-expensive digital route to test the market, and see if you can build the customer demand to warrant taking on the risk of opening a brick-and-mortar business.
  • Who and where is the customer base you are looking to attract? Ask yourself: Where are they, and how are they going to hear about your store? – a 5-star restaurant most probably isn’t going to effectively gauge interest in its product by testing with a food truck.  If your customer base is infinite, is reachable online, and would prefer to make purchases online, maybe a digital storefront is the way to go.
  • What is the relationship that you want your customers to have with your products? Are your products the type of things that people come in knowing exactly what they want, or do they need to get a sense of the look and feel.  If your customers need a chance to look around and use your product before purchasing, then a physical storefront makes the most sense.
  • Does your business type have a hyper-local connection?  People who are invested in their communities are inclined to interact with businesses that are woven into the fabric of those particular regions.  If you are planning on developing a deep and meaningful relationship with locals most of all, then a physical storefront will best help you meet your community- and business-focused goals.


Just remember – taking the leap as an entrepreneur is an exciting journey, whether it is a virtual or physical one.

Edmond Jay is Senior Vice President, U.S. Small Merchants, American Express, the group dedicated to helping small merchants succeed and grow by providing a range of resources and tools that connect them with customers.

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