Checklist for online businesses getting a storefront

By Terence Lee, SGEntrepreneurs

Don't count on renting a storefront to revive the flagging sales for your online business and compensate for a weak business model: You might end up digging yourself a bigger hole. Rather, going retail may be prudent only if your online business is doing very well.

So if you're considering whether to head in that direction, here's a checklist compiled from the experiences of retailers who've made that step, and well as blogshop owners who chose not to.

1) Make sure you have a strong online fanbase

If your online business does not have loyal customers, then it may not be wise to transition offline. For KissJane, which aggregates blogshops in two physical locations, it can rely on the branding of its myriad of partners. Tracyeinny, on the other hand, was able to leverage on its strong fan base to offset the lack of human traffic in their first outlet in Pearl's Hill Terrace, Chinatown.

Ng Chong Kee, co-founder of KissJane, suggests that blogshop owners build a strong niche for themselves by focusing on a particular style. Only by doing so can they differentiate themselves from the thousands of blogshops out there.

Jeannie Pang of Tracyeinny believes good customer service is paramount. Customers must feel that you're reliable and always ready to respond to their requests and complaints.

"Accountability is damn important. If you failed or neglected to deliver a product, you'd better admit it," she says.

2) Make sure you won't be burnt financially

The amount of money you need to invest in going retail is no joke. For prime locations, expect to fork up around S$200,000 (US$166,653) in upfront rental, deposit (which will only be returned at the end of the lease), renovation, and other costs. Even in places like Chinatown, monthly rental can cost around S$3,000 (US$2,499) a month, in the case of Tracyeinny.

Depending on the contract, lease commitment can be as short as six months or as long as three years for many shopping malls.

So it really helps to work out the sums, know what you're in for, and plan accordingly. Jeannie made sure she had at least S$18,000 in the bank account, or six months of rental liquidity, before committing to a lease. This precaution made sure that in the event the endeavor didn't do well, the overall business would not be adversely affected.

3) Ensure you have a healthy revenue stream for your business

Jeannie ensured that the profit margin from her online business was strong enough before embarking on her retail project. She also made sure that she had a sizable sales volume as this meant that she won't need to pass the increased costs from the retail business to the consumers.

To generate a healthy profit margin, online retailers should not be afraid to charge a premium for their products. As a rule of thumb, a shirt that costs S$15 should be priced at around S$30, says Jeannie.

4) Consider starting small, such as at a flea market

Before committing to that hefty three-year lease in a swanky shopping mall, why not take smaller steps first? If you're confident about your brand's drawing power, opting for less-than-ideal locations may not be a bad idea, since rental is cheaper and the lease is shorter.

Working with companies like KissJane may be an attractive proposition, since you're only paying for a rack as opposed to the whole space, although you'd have to figure out a way to get ahead of the waiting list.

Finally, you can opt for flea markets to get a taste of what it feels like to operate in a retail environment. There are plenty in Singapore, and they don't cost a lot to get involved in. Zouk Flea & Easy and Flea Fly Flo Fun, for instance, will only set you back around S$50 per slot.

5) Make sure you are willing to commit more time and effort to your brick and mortar business

Sure, going retail may reap in heaps of profits, but you'll have to work harder for it too. Vincent Goh and Tan Yi Fong of Ministry of Retail, which specializes in Korean fashion, prefer to keep their lives simple and so decided not to set up a physical store of their own. And they've apparently done well so far, with Yi Fong becoming one of the top five earners in her university.

In addition to managing inventory, rental, and other facets of a retail business, there's human management, which require a lot of effort, as Jeannie asserts. She had to hire six salesgirls to manage operations and train them well since they represent the brand.

"Sometimes when they do something wrong, I go mad like a volcano!"