Is “Going Online” the Solution for Benny’s?
When Benny’s announced their closing earlier this year, people throughout south-east New England were shocked. A staple for automotive parts, household goods, and toys the family-owned discount chain is closing all 35 stores by the end of 2017.
The prototypical response to the closing was “I love Benny’s, how could the close? I haven’t been in forever, but they’re such a great store”. And therein lies the problem, with great prices available online, shipped to your door, large format discount stores are loosing more foot traffic everyday. Desperate shoppers said they shouldn’t be so quick to throw in the towel — that they should adapt to the changing market and go online too, but is there room for another regional discount store on the eCommerce landscape?
There are two options for Benny’s to continue online: direct to consumer (their own site) or through existing marketplaces (eBay, Amazon, Walmart.com, etc.). Direct to consumer would give them better margins overall by leaving out the middleman. Marketplaces offer a large customer base from the start and support in promotions.
Direct to Consumer
To go direct to consumer would require reworking their operations, technology, and marketing processes.
Right now, they have a big warehouse that functions to move pallets from their suppliers to the correct stores. They would have to transition a segment of their warehouse into a fulfillment area where pallets are broken down and picked from. Managing inventory at this level is much different than the pallet level they are used to. It would also require more space, as they would no longer be moving stock out to stores.
A technical team would need to be put into place to set up an eCommerce site and manage the transfer of orders from the site to fulfillment. A lot of this is pretty simple to implement, but it requires constant work to keep up to date with changing technology and creating a good customer experience.
The technology is in place and the warehouse is ready, but none of that matters if people don’t come to the site. They are already working with a diminished customer base, and they will now be competing directly against some of the biggest beasts in the game. What it would come down to is differentiation of services. Two day shipping and free returns are expected basics at this point, but it is unlikely that they have the margins as a discount retailer to offer these.
Operating through marketplaces would require some technical updates, but their operational side would largely stay the same as the marketplace operator, Amazon for example, would do the final fulfillment. However, the fees charged for this can be quite sizable. For Fulfilled by Amazon (FBA), these fees can exceed 30% of the sale price.
Through marketplace though, Benny’s would lose what people love about them most right now — their brand. They would no longer be the local store that offers products at a great value. This would be an extreme divergence from everything that they represent as a company.
Is Going Online Right for Benny’s?
The best thing Benny’s can do at this point is to get out while the getting is still good(ish). Going direct to consumer would require a lot of changes that they do not have the specialization in. Going through a marketplace would likely eat through their entire profit margin and they would lose what they represent as a company.
It may be easy to open up a small online shop, but to do it at a large scale takes a large investment. If there are other local store out there that you like, make sure you continue to support them and make them feel like closing is not their best option.