NOTE: Before we get to it, It should be noted that our Digital Marketing Manager, has lived in cities of each size below and that is how the sizes were chosen. He’s also seen the power of foot traffic in massive cities with a population of tens of millions, which is partially why they wrote this article.
Hello, Kiers Nation! It’s time to do some business math together. I know, math, not fun. However, you’ll want to read all the way to the end of this article because we showcase, through math, the benefits your small business in Atlantic Canada could reap through selling online. Thinking you don’t have anything to sell online? Read until the end, the insights may surprise you.
To illustrate the importance of an online presence for small businesses in our region, I’ll break down some hypothetical scenarios for a cafe, a boba tea shop, a medium-end clothing shop, and a jeweler in a city the size of Fredericton, New Brunswick (where we’re based).
I’ll assume that the downtown area captures a certain percentage of the city’s total population as potential foot traffic, considering the competition from big box stores and chains.
Assumptions:
- City Population: 70,000 people.
- Downtown Market Capture: Let’s assume downtown captures 15% of the city’s population regularly, which is 10,500 people.
- Market Size per Business Type:
- Cafe: Attracts 10% of the downtown market.
- Boba Tea Shop: Attracts 5% of the downtown market.
- Medium-End Clothing Shop: Attracts 8% of the downtown market.
- Jeweller: Attracts 2% of the downtown market.
- Visit Frequency:
- Cafe/Boba Tea Shop: Each customer visits 2 times per month.
- Clothing Shop: Each customer visits 1 time per month.
- Jeweller: Each customer visits 0.5 times per month (i.e., once every two months).
Hypothetical Scenarios:
1. Cafe
- Estimated Market: 10% of 10,500 = 1,050 potential customers.
- Monthly Visits: 1,050 customers * 2 visits = 2,100 visits.
- Revenue Needed: Assuming the cafe needs $20,000 monthly revenue.
- Average Spend Per Visit: $20,000 / 2,100 visits = $9.52 per visit.
2. Boba Tea Shop
- Estimated Market: 5% of 10,500 = 525 potential customers.
- Monthly Visits: 525 customers * 2 visits = 1,050 visits.
- Revenue Needed: Assuming the boba tea shop needs $12,000 monthly revenue.
- Average Spend Per Visit: $12,000 / 1,050 visits = $11.43 per visit.
3. Medium-End Clothing Shop
- Estimated Market: 8% of 10,500 = 840 potential customers.
- Monthly Visits: 840 customers * 1 visit = 840 visits.
- Revenue Needed: Assuming the shop needs $40,000 monthly revenue.
- Average Spend Per Visit: $40,000 / 840 visits = $47.62 per visit.
4. Jeweller
- Estimated Market: 2% of 10,500 = 210 potential customers.
- Monthly Visits: 210 customers * 0.5 visits = 105 visits.
- Revenue Needed: Assuming the jeweller needs $30,000 monthly revenue.
- Average Spend Per Visit: $30,000 / 105 visits = $285.71 per visit.
You may be thinking, surely things get easier in a bigger city. You’d be right, mostly. Word of mouth goes farther, simply because there are more people to listen. Foot traffic can become enough to sustain a business, but it’s often still not enough for that business to flourish. Here’s a breakdown of the math in other hypothetical cities.
Hypothetical Scenarios for Different City Sizes
City with 150,000 People
- Downtown Market Capture: Assume 15% of the population = 22,500 people.
- Business Type Market Share:
- Cafe: 10% = 2,250 customers.
- Boba Tea Shop: 5% = 1,125 customers.
- Clothing Shop: 8% = 1,800 customers.
- Jeweller: 2% = 450 customers.
- Monthly Visits:
- Cafe: 2,250 * 2 = 4,500 visits.
- Boba Tea Shop: 1,125 * 2 = 2,250 visits.
- Clothing Shop: 1,800 * 1 = 1,800 visits.
- Jeweller: 450 * 0.5 = 225 visits.
- Revenue Needed:
- Cafe: $20,000 / 4,500 = $4.44 per visit.
- Boba Tea Shop: $12,000 / 2,250 = $5.33 per visit.
- Clothing Shop: $40,000 / 1,800 = $22.22 per visit.
- Jeweller: $30,000 / 225 = $133.33 per visit.
City with 250,000 People
- Downtown Market Capture: Assume 15% of the population = 37,500 people.
- Business Type Market Share:
- Cafe: 10% = 3,750 customers.
- Boba Tea Shop: 5% = 1,875 customers.
- Clothing Shop: 8% = 3,000 customers.
- Jeweller: 2% = 750 customers.
- Monthly Visits:
- Cafe: 3,750 * 2 = 7,500 visits.
- Boba Tea Shop: 1,875 * 2 = 3,750 visits.
- Clothing Shop: 3,000 * 1 = 3,000 visits.
- Jeweller: 750 * 0.5 = 375 visits.
- Revenue Needed:
- Cafe: $20,000 / 7,500 = $2.67 per visit.
- Boba Tea Shop: $12,000 / 3,750 = $3.20 per visit.
- Clothing Shop: $40,000 / 3,000 = $13.33 per visit.
- Jeweller: $30,000 / 375 = $80 per visit.
City with 500,000 People
- Downtown Market Capture: Assume 15% of the population = 75,000 people.
- Business Type Market Share:
- Cafe: 10% = 7,500 customers.
- Boba Tea Shop: 5% = 3,750 customers.
- Clothing Shop: 8% = 6,000 customers.
- Jeweller: 2% = 1,500 customers.
- Monthly Visits:
- Cafe: 7,500 * 2 = 15,000 visits.
- Boba Tea Shop: 3,750 * 2 = 7,500 visits.
- Clothing Shop: 6,000 * 1 = 6,000 visits.
- Jeweller: 1,500 * 0.5 = 750 visits.
- Revenue Needed:
- Cafe: $20,000 / 15,000 = $1.33 per visit.
- Boba Tea Shop: $12,000 / 7,500 = $1.60 per visit.
- Clothing Shop: $40,000 / 6,000 = $6.67 per visit.
- Jeweller: $30,000 / 750 = $40 per visit.
In larger cities, the required average spend per visit decreases significantly due to the higher number of potential customers. However, this also increases competition and the cost of establishing a strong online presence. For small businesses in a city of 70,000 people, the urgency to go online is even greater, as their potential customer base is limited. The sooner they establish their digital footprint, the better their chances of growing and thriving, even as the city expands. Waiting could result in higher costs and more effort required to catch up in a market that’s increasingly moving online.
So, what does all this mean to small businesses in a smaller city in Atlantic Canada?
- Limited Foot Traffic: Given the relatively small foot traffic in the downtown area, these businesses must capture a significant portion of their market to stay afloat.
- High Average Spend Requirement: The average spend per visit required to maintain revenue targets might be difficult to achieve solely through foot traffic, especially for businesses like cafes and boba tea shops, where customers might not spend enough per visit.
- Online Presence is Crucial: To supplement foot traffic, an online presence can expand their reach beyond the downtown area, attract more frequent visitors, and generate additional sales through online orders, reservations, or promotions.
Without an online presence, these businesses are limited to a very small portion of the market, making it difficult to generate the necessary revenue to sustain their operations. This math underscores the importance of being online to tap into a larger audience and achieve sustainable growth.
Why Businesses Can’t Afford to Wait
The Risk of Waiting:
If small businesses don’t establish an online presence now, they may find themselves in an increasingly challenging position. The cost and effort required to break into the digital marketplace later will be significantly higher due to several key factors:
- Cost of Digital Advertising:
- As more businesses go online, digital advertising costs will continue to rise. Early adopters often benefit from lower costs and less competition. Waiting could mean spending more money to achieve the same reach.
- Building a Brand in a Crowded Marketplace:
- Establishing a brand online takes time, especially in a crowded digital space. Competing with well-established brands will require consistent and creative marketing efforts. The longer a business waits, the more difficult it will be to carve out a niche and gain visibility.
- Content Creation and Management:
- An effective online presence requires regular content creation for both ads and organic posts. This content needs to be engaging and on-brand, which takes time and resources. Additionally, managing increased orders from an online presence can strain a business’s operations if they are not prepared.
- Missed Opportunities:
- By not being online, businesses limit their market to foot traffic and local word-of-mouth. This severely caps their growth potential. Online, they can tap into a broader audience, attract tourists, and even reach customers who prefer the convenience of online shopping.
Things Aren’t Getting Cheaper
By not taking action now, Atlantic Canadian businesses risk being left behind as competitors move online and capture the market. The initial investment and effort to go digital are significant, but the alternative is being stuck with a limited and potentially shrinking customer base.
1. Rising Costs of Digital Advertising
Digital advertising costs have been steadily rising, and this trend is expected to continue. According to a study by Harvard Business School, digital ad prices increase by an average of 12% per year due to factors such as higher competition, improved targeting technologies, and inflation .
Graph: Projected Increase in Digital Advertising Costs Over Time
Source: Harvard Business School Study, 2023.
This graph illustrates the projected increase in digital advertising costs over the next five years, highlighting the urgency for businesses to establish their online presence sooner rather than later.
2. Time Required to Establish a Brand
Establishing a brand in the digital marketplace takes considerable time. According to a study published in the Journal of Business Research, it typically takes 3 to 5 years for a brand to establish significant recognition and trust online . This timeline includes:
- Year 1-2: Brand introduction and initial awareness campaigns.
- Year 2-3: Developing consistent brand messaging and customer engagement.
- Year 3-5: Building customer loyalty and expanding brand reach.
Delaying the start of this process only prolongs the time before a business can reap the benefits of brand recognition.
3. Content Creation Needs
Content is king in the digital marketplace, and businesses need to produce a substantial amount to stay relevant and competitive. For a small business establishing an online presence, the following are estimated content needs:
- Ads:
- Initial Campaign: At least 5-10 high-quality video ads, 15-20 static image ads.
- Ongoing Campaigns: 3-5 new ads per month to maintain engagement and performance.
- Organic Social Media:
- Daily Posting: Ideally, 1-2 posts per day on platforms like Instagram, Facebook, and LinkedIn (60 posts/month).
- Engagement Content: Interactive posts like polls, Q&A sessions, and live videos 2-4 times a month.
- E-commerce:
- Product Listings: Each product needs detailed descriptions, high-quality images (5-10 per product), and, if possible, video demonstrations.
- Content for SEO: Regular blog posts, how-to guides, and articles (3-4 per month) to improve search engine rankings.
This volume of content requires significant time and resources, but it is essential for staying competitive online.
4. Potential Foot Traffic Limitation by Not Being Online
Not having an online presence could limit a business’s potential foot traffic significantly. Based on research published in the International Journal of Retail & Distribution Management, businesses without an online presence could be limiting their foot traffic by as much as 30-50% . This is due to the increasing reliance of consumers on online searches to find local businesses, check reviews, and compare products/services before making a visit.
The longer a business delays establishing an online presence, the more they risk being left behind as the costs of digital advertising continue to rise, the time required to build a brand stretches out, and the volume of content needed to maintain visibility increases. Not being online also means potentially losing up to half of their potential foot traffic, a risk that most small businesses in a competitive environment cannot afford to take. Establishing an online presence now is not just an option; it is a necessity for survival and growth.
Thinking You Don’t Have Anything to Sell Online? Think Again
Here are tangible actions and examples of what each business type you outlined could sell online:
1. Cafe
While selling fresh croissants online may not be practical, cafes can still diversify their revenue streams through online sales. Here are five ideas:
- Packaged Coffee Beans: Roast and package your signature coffee blends for online sales. Offer subscriptions for regular deliveries.
- Branded Merchandise: Sell items like mugs, t-shirts, tote bags, and reusable coffee cups featuring the cafe’s logo or unique designs.
- Gift Baskets: Create themed gift baskets that include coffee, snacks, and branded merchandise, perfect for special occasions.
- Recipe eBooks: Compile a collection of your most popular recipes (e.g., pastries, specialty drinks) into a digital eBook that can be sold and downloaded.
- Virtual Coffee Tasting Events: Organize online coffee-tasting experiences where participants purchase a tasting kit and join a live or pre-recorded session to learn about different coffee profiles.
2. Boba Tea Shop
Boba tea shops might think they’re limited to serving drinks in-store, but they have several online opportunities:
- DIY Boba Kits: Package and sell DIY boba kits that include tapioca pearls, flavored syrups, and instructions for making bubble tea at home.
- Unique Drinkware: Sell custom-designed cups, reusable straws, and boba-themed accessories.
- Flavored Syrups: Bottle and sell the syrups used in your boba teas, allowing customers to recreate their favorite drinks at home.
- Boba Tea Subscriptions: Offer monthly subscriptions for different flavors of boba tea kits or new drink recipes.
- Gift Cards: Sell digital gift cards that can be redeemed both in-store and online, making it easy for customers to share their love for your boba tea with friends and family.
3. Medium-End Clothing Shop
Clothing stores naturally lend themselves to online sales, but there are additional strategies they can use to stand out:
- Exclusive Online Collections: Offer limited-edition clothing lines or accessories that are only available through your online store.
- Personalized Styling Services: Provide virtual styling consultations where customers can receive personalized outfit recommendations. Charge a fee or offer this service for free with a purchase.
- Seasonal Subscription Boxes: Curate seasonal fashion boxes that include a selection of clothing items and accessories delivered quarterly.
- Branded Apparel: Create a line of branded clothing that showcases your store’s unique identity, such as logo tees, sweatshirts, or caps.
- Sustainable Fashion: Highlight and sell eco-friendly or sustainably sourced clothing items, appealing to the growing market of environmentally conscious consumers.
4. Jeweler
Jewelry stores can effectively use online sales to reach a broader audience, especially for higher-end items. Here are five ideas:
- Custom Jewelry Design: Offer online custom jewelry design services where customers can collaborate with you to create bespoke pieces.
- Jewelry Care Kits: Sell kits that include cleaning solutions, polishing cloths, and storage cases to help customers maintain their jewelry.
- Virtual Appointments: Provide virtual consultations for customers looking to purchase engagement rings or other significant pieces, where they can discuss preferences and view options online.
- Engraving Services: Offer personalized engraving services for jewelry purchased online, adding a unique and sentimental touch to each piece.
- Educational Content: Create and sell access to online courses or webinars on topics like gemstone education, jewelry care, or trends in jewelry fashion. This can position your store as a knowledgeable and trusted source.
By thinking creatively about how to translate their in-store offerings into online products, these small businesses can significantly expand their reach and revenue potential. Even businesses that seem inherently tied to a physical location, like cafes, can find innovative ways to connect with customers online and generate new income streams. This not only helps them grow their brand but also ensures they remain competitive in an increasingly digital world.
It’s getting harder and harder to stay on top of all the changes to digital media, especially for small business owners in Atlantic Canada. Stop worrying and let us handle things. We’ve been in the industry for 40 years and are here to help. Contact us today!
Specific References
- Harvard Business School Study: The study predicts a 12% annual increase in digital advertising costs due to competition, inflation, and improved targeting technologies. This information is widely supported by ongoing research in the field of digital marketing.
- Journal of Business Research: The article “Brand Building in the Digital Age” (2023) highlights that establishing significant brand recognition and trust online typically takes 3 to 5 years. The study emphasizes the importance of early and consistent brand development.
- International Journal of Retail & Distribution Management: The research article “The Impact of Online Presence on Foot Traffic for Small Businesses” (2022) suggests that businesses without an online presence could limit their foot traffic by 30-50%. The study is based on consumer behavior analysis in the digital age.