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www.IndependentRetailer.com MANAGEMENT
Competing With Web Stores
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IT’S A dog eat dog world out there, from a retail perspec- tive. As online sales continue to grow, and more consumers continue to move their buying online, it’s increasingly diffi cult for brick and mortar retailers to compete. The main reason is that web retailers have one big competitive advantage: they don’t have a store. That lack of property means over- head is lower, resulting in lower prices. As an independent re- tailer, you have that overhead, which means your margins are going to be squeezed, leaving precious few profi t dollars after your costs. Standard retailing metrics
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are built on a keystone markup mentality, marking everything up 100 percent, resulting in a 50 percent cost of sales and 50 percent that can be allocated to expenses, with any leftover becoming profi t. Yet the esca- lating costs of operating a brick and mortar store, along with the conversion to online retail- ing, have thrown the notion of the keystone model into the annals of retail history. Larger retailers that manufacture their own goods (think GAP, Die- sel, Guess, Pottery Barn and so many more) are operating at gross margins of seventy or eighty percent or more. That
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