LEARNING CURVE
When you’re a small business, e-commerce is tougher than it looks.
A chair sits in the middle of Holiday Market, a specialty grocer near Detroit, and if customers are lucky, they will find Tom Violante Sr. sitting in it. The 91-year-old founder still comes to work most days — and he knows where everything is in its 60,000 square feet.
“He asks everyone if they found what they wanted,” said his son, Tom Violante Jr., who operates the store with his sister and brother-in-law. “If they haven’t, he’ll tell them which aisle it is in, how many steps it takes to get there, and where it’s located: knee-, head- or bellyhigh.”
That is the type of customer service the store, in Royal Oak, Michigan, is known for. So when Tom Violante Jr. began considering offering online grocery shopping, he wanted to provide that same level of care. He did not expect the service to be a huge revenue generator, but he saw the future coming as online brands such as Chewy and Winc wooed his customers away. In 2019, he assembled a team to build an online platform that could handle the store’s 60,000 items.
He was glad he had when the pandemic hit.
“When we first started, we were so busy, people couldn’t get a pickup slot for a week, but we wanted to get it to within two days,” he said. “Now we’re at same-day pickup.”
On a ledger of pandemic winners and losers, Holiday Market is in the positive column thanks to online shopping, which helped push the store’s overall revenue up 20 percent in 2020 compared with 2019. In fact, e-commerce is what prevented a catastrophic year for U.S. retailing. Instead of ending in a deep trough of red, online shopping pushed overall retail sales up nearly 3.5 percent, to $5.6 trillion, compared with the previous year, according to the research firm eMarketer. E-commerce alone grew by 33.6 percent in 2020.
But Holiday Market’s success is an outlier for small merchants; the boom mostly helped big business. Ten large retailers accounted for 68 percent of all U.S. e-commerce sales last year — and Amazon alone represented more than half of all online sales. Big e-commerce businesses also absorbed nearly 60 percent of all warehouse space available last year, according to real estate analysts at CoStar Group.
“The big just got bigger,” said Andrew Lipsman, principal analyst with eMarketer.
For small businesses, he said, the benefit was wildly uneven. There were winner sectors — such as grocery, health and fitness, and direct-to-consumer brands — but apparel boutiques and other specialty retailers, especially those without existing e-commerce platforms, struggled.
“The pandemic accelerated the growth of online commerce,” said Loren Padelford, vice president of Shopify, the e-commerce platform that predominantly serves independent retailers. “It woke a lot of people up to the idea that if you have to close your physical door, you need to have a digital door.”
For brick-and-mortar stores considering e-commerce, success is not always as easy as posting a website and watching orders flow in. Even at Holiday Market, there were significant logistical challenges — like where to store all those online orders and keep them cool. Violante had to gut one of the prep kitchens to make room for new freezers and refrigerators dedicated to storage. In addition, he has to pay employees to shop the order, organize items and bring them to the curb.
“It’s very expensive to have an online shopping program,” Violante said.
Online shopping accounts for about 8 percent of all sales at the store, and there are 15 employees and one manager dedicated to the service. But Violante’s vision is not to be the best online grocer; he wants to be the place customers come for a great experience and use online ordering as an amenity.
“If everything is delivered, how are you going to sit down and spark up a conversation with people?” he asked. “Losing that truly frightens me. So we’ll be more like a food hall you see in the big cities, a place where there are common areas and community where people can talk to each other.”