Local business navigates the Internet for growth
Thursday, June 13, 2013 5:58 AM
By Alex Woodring
OTTAWA - Tom Gustwiller has been in the clothing business for 50 years and for the last 14 of those 50, he has seen the Internet side of the business grow.
"The biggest change I have seen would probably be the Internet," said Gustwiller.
As the digital revolution rages, the local mom-and-pop shop can often be a casualty. And of all the money spent online, clothing ranks number one for Internet sales. For shops like Gustwiller's clothing, however, taking their business online has been an essential aspect to building inventory while keeping sales up in a town of 4,460 and a county of 34,499.
"I would say over half of our sales are done over the Internet," said Gustwiller. "With the Internet sales it has given us the volume and capability to carry more things. This is a pretty big store for a town of this size."
The Internet may be a large portion of Gustwiller's business, but the web presents a whole new myriad of problems that small businesses have to deal with.
"The biggest problem is that we are not working out of our house and we are not a billion dollar business," said Gustwiller. "They expect our website to work like a Kohls.com so they have very high expectations."Gustwiller would describe his business as a "tweener" which means it is in between the businesses that sell out of their home and big corporate businesses.
Disadvantages for shops like Gustwiller's is the price of shipping fewer packages.
"These big companies might ship a couple hundred thousands packages in a day whereas we won't ship nearly that amount," said Gustwiller. "So we may have to pay $8 or $9 to ship a package and they could ship for $5 or $6. And they are so big they get their merchandise alot cheaper to begin with."
Another aspect to Internet sales is the debate on Internet sales tax. As Internet sales continue their seemingly exponential growth, so to do state's deficits. The Internet sales tax proposal would have shoppers pay sales tax on the majority of online purchases. OVERSET FOLLOWS:The bill, known as the Marketplace Fairness Act, was approved in the Senate with a 69-27 vote on May 6. The bill is currently awaiting a vote in the House of Representatives.
A main debate over the bill is its effect on smaller businesses with an online presence. Shops around the county, such as Gustwiller's, would struggle with the complicated and intricate task of differentiating the coupious and perpetually evolving world of state's sales tax.
"Right now, anything we ship out of state we don't have to charge sales tax," said Gustwiller. "If it is shipped in state we have to."
"But we are just small enough that if they were to start making us charge sales tax for all those different tax rates it could put us out of the Internet business," he said. "We can't afford to have the type of staff to charge 4600 different tax rates."
The red tape does not end with taxing obligations. Gustwiller's online sales also come through Amazon.com. as well as their main website. Many small to mid-size stores will have products listed on the world's largest online retailer which takes a 15 percent cut of the sale.
"We get a decent amount of business out of that," said Gustwiller. "However, Amazon.com is very strict."
Amazon.com has a strict return policy for outside vendors which can add to the cost of selling on the site.
"We will get a shirt back wadded in a ball with no package, no tags and no label," said Gustwiller. "All they have to say is that the shirt didn't fit and we have to give them a refund."
Gustwiller's can seldom resell the shirt and still fronts the shipping cost.
"Even if we didn't see anything wrong with a product, with amazon you have to take it back and we are out $18 after shipping and didn't sell anything," said Gustwiller.
A cost of an online presence that is the little known to the public is the task of bidding. Websites bid for search terms in order to have easily found merchandise and websites.
"With our regular website we bid for search terms," said Gusterwiller. "Google and Yahoo! got smart and started charging for search terms. Spending on the bidding can go upwards to $1,ooo a day."
Bidding can cost money and at times result in a lose. Companions bid high dollar amounts on search terms. The higher the hits the more money spent. However, hits do not guarantee sales.
"It can cost you per hit," said Gustwiller. "But it does not depend on whether they buy it or not."
All of these factors result in very high overhead which results in small margins.
"You see packages going out and you think you might be making a lot of money but after costs, it is lower than expected," said Gustwiller.