Retail startups are rad

This guest post by Michael Fox. Michael is a co-founder of the design your own women’s shoe business Shoes of Prey. He blogs about the adventures of running a startup at

5 reasons why retail startups are rad

Prior to starting Shoes of Prey, Mike Knapp and I were working at Google and were brainstorming industries that would be good for an online startup. We settled for online retail and here are the 5 reasons why:

1. There is so much room for innovation
Retail is an industry that’s 1000’s of years old and while there have been innovations, there hasn’t been an enormous industry changing event in that time. Online retail has the potential to change the industry more than anything else in it’s history.

Whether it’s offering products in a way that has never been possible before, like Pandora do with music, the brilliant use of customer and sales data at Amazon to suggest highly relevant products to customers, a new retail model like offering only 1 product (Woot) or deal (Groupon) per day, or tearing up old business models as Alice is attempting to do with grocery and Apple did with music retailing, online retail has enormous potential for innovation and there are so many ideas out there waiting to be executed.

2. Online retail is a growing industry
Figures can vary depending on exactly what is classified as ‘retail’, however online retail still makes up only a small percentage of total retail sales, in the order of 5%-6% in the US and less in countries like Australia. This is only going to grow.

3. An online retail business is easy to monetise
In addition to the difficulty of getting people to use your product, many online startups face the problem of how to make money from their business. Take Twitter and FourSquare. They’ve each built a fantastic user base, but they now face the challenge of working out how to make money from their product.

Like countless retail businesses for 1000’s of years, an online retail business sells a physical product so there is no need to develop a whole new business model for the business to be profitable.

4. There’s not a great deal of competition
The lure of getting rich quick by hitting on a winner in Apple’s Appstore or building the next Google or Facebook draws most top developers into those spaces resulting in a huge amount of competition. Most good web developers, when brainstorming what sort of business they want to start will avoid anything that involves a physical product like the plague.

If you and your team have the skill set to build a great website, and manage physical operations like sourcing physical goods and a physical supply chain, then you’ll face a lot less competition in the online retail space.

Of course you’ll potentially face some competition from traditional retailers moving into the online space, but particularly in Australia, that’s happening at a very slow pace. To help minimise that risk, but an innovative spin on your product and odds are you’ll stay well ahead of most traditional retailers.

5. The industry is small enough that you can have an impact early on
Online retail, particularly in Australia, is only just starting to develop. There are a number of industry groups and websites that have only recently started like Internet Retailing, Inside Retailing and Power Retail. Because these sites are relatively new it’s not too difficult to get coverage from them. It’s a similar story with conferences and industry awards. If you do something new and interesting in the online retail space you’ll soon be presenting at conferences and find your startup a finalist amongst some fantastic industry players.

If you’re thinking of doing an online startup I’d recommend considering online retail or applying a similar thought process to the industry you’re thinking of launching in.

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Time to share your thoughts:

If you run a startup, I’d love to hear about the factors that influenced you to choose the industry you operate in?

4 Comments Retail startups are rad

  1. Steve Sammartino

    For me Michael, I wanted to do my startup in the on-line space, for one reason: Low costs. I figure that low costs give us more time to get it right, and that’s what I’ve found we need more than anything “Time” – It also allows us to invest in human capital instead of financial capital, which can also build some good ground level brand equity. Founder based equity. has been more successful than my previous startup do to the cost factor I think.


  2. Jasper

    working in the Retail team at Google and account managing Australia’s largest retailers I can only reinforce Michael’s points. They are slow to move but this is happening and you can expect to see more sophisticated ecommerce offerings from our much loved Aussie retail brands over the next couple of years. The key to success I think is having a point of difference not based on price and focus on niche opportunities where you can really become the best in the world at what you do! The opportunity exists now – but for how much longer?

    Cheers Jasper

  3. matthew

    yup, very convincing. another thing to mention is that in online retail, the fact that there’s an established business model makes traffic generation that much more realistic.

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