Downtown Bozeman Business Internet Usage

Tuesday Mar. 1st, 2011

Eighty-two private businesses were surveyed in downtown Bozeman in January 2011. Most companies in the survey sample are retailers selling durable goods. The purpose of the survey is to review current internet usage by private business in the area. Of those organizations surveyed fifty-five percent have internet presence. Thirty-five percent of Bozeman companies have an E-Commerce Store.

Out of the forty-five local companies with a website over sixty-four percent allow online purchases of their products. This is a very solid percentage (sixty-four percent) of companies using their website to sell merchandise online. If the Bozeman market is any indication, it would appear that the paradigm is reaching a point-of-no-return regarding E-Commerce in the United States. According to the U.S. Census Bureau News Report, E-Commerce increased by over 14% in the 3rd quarter of 2010 versus that same quarter of 2009. During that same quarter Brick-and-Mortar (B & M) retail sales grew by 5.8%. Growth in the E-Commerce sector is outstripping B & M by 243%.  E-Commerce is a force to be reckoned with by business leaders at every level. (http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf)

Leaders failing to comprehend the substantial pace at which this sales method is growing are already loosing ground to competitors. This current trend is so significant that business leaders who avoid the expense for marketing online may soon be unable to compete at their current level of revenue. Competitors taking the time, energy, and expense to ensure product availability online are reaching a viable audience. Target audiences with a preference for online shopping can shop with the more progressive business leader.

In the recent past even retail giants missing opportunities to compete have disappeared completely. A very well known case is the F.W. Woolworth’s Company. This chain permanently closed for business in July of 1997. The closure of Woolworth’s is largely attributed to competitors gaining ground on the same target market. Woolworth’s was one of the largest retail chains in the world. Today a competitive advantage can be gained so quickly that even the slightest edge can easily generate greater market share for companies willing to capitalize on the opportunity.

A local example of extreme success here in Bozeman, MT is the company getngreen.com. Getngreen.com is a company that had little specific B & M presence until now. In February 2011 they opened their first B & M downtown. However, the company started in 2006. According to referenceusa.com Getngreen.com reached $3.7m for the year ending 2009 without any B & M. This is a company with only 3 paid employees and minimal B & M presence on which other retailers have so long depended. Items sold by Getngreen.com are highly unique. Still, any retailer in the Bozeman market can loose revenue when competing for the same audience. For many consumers today, the convenience of online shopping is too easy when it comes to B & M versus E-Commerce Stores.

One local company is expanding into a B & M location 300% larger than their current spot. The look is quite deceiving. Only 20% of this company’s gross revenue is derived from in-store sales. How can they afford to expand? B & M expansion is possible because 80% of this small company’s sales are derived from the internet giving them the ability to expand their physical side.

This type of trend is one that catches many business leaders by surprise. Companies dependent solely on their physical retail presence can slowly begin loosing gross revenue for unexplainable reasons. While maintaining the usual business practices and even using more tools than usual to bring in new sales, sales continue to drop. What has happened?  One leading cause in light of this current trend could very well be loss of revenue to competitors. More importantly, even competition outside your local geographic market can take away from company revenue. If revenue is being lost due to sales migrating to competitors that use E-Commerce Stores, part of your company’s strength has already been lost. The important thing to recognize is to start now and gain ground as quickly as possible.

Even grocers are capitalizing on the E-Commerce sales model. There are twelve sizeable grocery stores in the Bozeman Montana market. These are shown in the chart below. What are these companies doing when it comes to brand awareness of their name, product offerings, and service online? The graph reveals that the majority of grocers (67%) have a website.

A growing number (forty-two percent) of grocers are selling product online. The trend for grocers in Bozeman is continuing to move toward selling durable and non-perishable goods via E-Commerce Stores. Of those grocery stores with an online presence the percentage of E-Commerce usage reveals that simply having an informational website alone is of little value when it comes to generating maximum revenue.

A majority (sixty-four percent) of all Bozeman grocers with ownership of a website use an E-Commerce “Store” as an avenue to obtain higher gross revenue. If this current trend continues the tipping point will soon be reached by Bozeman area grocers where more than fifty percent will be selling to their target audience online. Stores without this customer convenience face continuing loss of market share locally, nationally, and to a limited extent internationally. The reason is that the consumer can now order for shipment to anywhere possibly even out of the country. The possibility exists for an international student from MSU to order a product for a relative from a local retailer, online, leaving the shipping to the company.

The prediction is that this trend will continue moving in a very aggressive fashion (see U.S. Census Bureau Statistical Chart) and retailers without a completed brand image (via internet) will begin to loose more market share than necessary. Retailers capitalizing on every avenue for product sales (especially availability of current E-Commerce solutions) will continue to grow and flourish leaving competitors without E-Commerce behind.
The question in a lot of business owner’s and leader’s mind is how to accomplish building a solid E-Commerce platform with the least out-of-pocket expense. Traditionally, web developers have practiced price skimming. Skimming is where the prices charged for an introductory product or good is the most the market will yield, rather than charging reasonable rates to the end user. Skimming often dissipates once technology catches up to market demand. For instance, a brand new laptop now costing a little as $350 would have been over $1,000 in 2003. Web development is at a similar point now where design companies are much more reasonable than in previous years. One company online offers a package of unlimited inventory (5,000+ items) to be placed online for as little as a $220 per month support fee.

The American consumer has traditionally appreciated the ease of convenience. After sampling a few retail customers in the area, Teague Analytics, LLC discovered that even Bozemanites can be annoyed when the option for purchase online is unavailable. A website that simply offers information is seen as inferior to a competitor carrying the same product lines with online availability. The time is growing short for leaders to step into the realm of online competition. The more time wasted focusing on “business as usual” the greater the potential loss of a loyal target audience.  Customers who once shopped faithfully will at the click of a button choose a competitor’s product simply for the sake of convenience.

Teague Analytics, LLC is operated by Brent Teague. You may contact him at (406) 595 – 0127 or Brentteague40@yahoo.com