Retail Entrepreneurs: Should You Open a Storefront or Go Online Only?

It can be perplexing for many small-business owners to decide whether to open an online store or a physical retail location – or both. An online presence can cost money when it comes to creating virtual infrastructure, while a brick-and-mortar shop can bring in its own expenses when considering rent and utilities. Besides cost, there are other pros and cons. I spoke with two small-business owners who've had to make those choices. 

From Kitchen Crafts to Retail-Ready

Prior to 2013, if you had mentioned soy wax candles to Linda Takano, you would have gotten a blank stare. Takano was a longtime software engineer before becoming a new mother taking time at home with her daughter when a friend nudged her. 

“I have this creative friend who recommended making my own candles,” she says. “I had no idea what I was doing, but she told me I’d figure it out.”

After hours of watching instructional videos, she started making candles in her kitchen, then selling them at school craft fairs under the name LULUMIÈRE. Within a few months she had a stall at Pike Place Market near her home in Seattle. One day, a local boutique owner asked if she did wholesale. Takano immediately said yes.

“I then hung up and [researched] how to do wholesale,” she says.

In addition to wholesale, Takano had an e-commerce site, but soon making candles out of her home became too much – she needed a workspace. In 2021 she found a retail spot and opened LULUMIÈRE’s first brick-and-mortar location near the University of Washington.

"People are willing to leave their homes, but you need to figure out what would make your shop unique enough to visit." —Linda Takano, founder, LULUMIÈRE

These days, the shop is booming – some customers visit to refill candles, others to purchase new candles, and others still to participate in a candle-making workshop.

“I’d say 25% of my business is from the brick-and-mortar location, wholesale is 50%, and the rest is online sales,” Takano says. 

A Wine Shop with Local Fans

More than 780 miles south in Napa, California, Prashant Patel is another small-business owner well-versed in brick-and-mortar as well as e-commerce. He and his wife took over Back Room Wines, a shop on Main Street, in 2017. While the store's physical presence was well known since it had opened in 2002 under a different owner, its online experience needed a reboot.

“The online piece had dated infrastructure, and it would take 15 minutes to process an order,” says Patel, who also runs a web development company. “Now it takes about a minute to process.”

As far as business split, Patel says 60% of the company’s revenues come from the brick-and-mortar shop while 40% comes from its online presence.

By the Numbers: Brick-and-Mortar and Online

Takano and Patel’s experiences with physical and online retail reflect what many entrepreneurs are experiencing these days. According to the Small Retailer Report, a September 2023 American Express survey of 500 small-business retail decision makers with between five and 500 employees, retailers are investing more this year in both in-person and online shopping experiences than they were last year – 46% versus 43%, respectively.

Like Patel did in 2017, many retailers are planning to update their tech (IT, software, and hardware) in the next six months. The survey found 55% of small-business owners wanted to invest in updating their tech in 2023, compared with 17% in 2022.

Additionally, some retailers are looking at in-person shopping as a way to encourage customer loyalty (53% in 2023 vs. 49% in 2022). 

Should You Open a Storefront or Be an Online-Only Business?

For small-business owners (or aspiring entrepreneurs) trying to figure out if they should open a brick-and-mortar or online location, what are the deciding factors?

According to Patel, every business “should have an online presence.” He says it can be important for potential customers to browse inventory. While Back Room Wines does have a lot of local customers, he says many of them “pre-shop online" before visiting the store.

Takano also sees tremendous value in having a robust online presence. 

"At the end of the day, a lot of people shop online," she says. "Making it easy to buy your products is always a good thing. It's another sales channel and can really help grow your customer base." 

Not sure if you have the money to invest in a website? Takano recommends small business owners who sell crafts like her start a shop on an online platform first.

"It's a great way to start and low risk," she says. "People can search, in my case, for 'soy wax candles made in Seattle' and find me, rather than searching through Google."

But what about brick-and-mortar? The cost can often be much higher than creating a website. When should entrepreneurs take the leap?

If you're selling something physical like Takano’s candles, she recommends first going to craft shows and farmers markets and looking at patterns to see what people are interested in and tend to buy. From there, you can design a business strategy around what people want.

Patel says the decision to open a physical shop can come down to math.

“You have to break it down to see how many units you need to sell in a month, in a week, in a day, and also factor in the cost of employees,” he says. “The key with brick-and-mortar is to make sure you have repeat customers. You do that by making sure they had a good experience during their first transaction and then carrying that experience through on your email list. I’ve even sent one-off personal emails to customers, which can make a huge difference.”

When it comes to in-person shopping, Takano says it can be important to create an experience customers couldn’t get online. For her business, that can involve smelling candles, being in a beautiful shopping space, and engaging in workshops.

“Remember: people are willing to line up for blocks for a good donut,” she says. “People are willing to leave their homes, but you need to figure out what would make your shop unique enough to visit.”