Businesses can no longer ignore the power of e-commerce.
Just last year, online businesses were responsible for a whopping $2.3 trillion in sales.
And that number is expected to double by 2021!
The opportunities presented by e-commerce are endless. But selling online comes with its own set of challenges.
It’s important to look at both sides of the coin to find out if e-commerce really is a good fit for your business.
This article will help you understand the basics of e-commerce, how it can help your business, and its potential drawbacks.
What is E-Commerce?
Before we jump into the pros and cons of starting an online business, let’s find out what e-commerce is all about.
E-commerce is a business model that involves buying and selling products and services online.
While some businesses exist purely online, brick-and-mortar stores can also set up online “branches” to let customers buy from them through the internet.
E-commerce marketplaces, like Amazon and eBay, also offer buyers and sellers a platform that enables online purchases and transactions.
Now, here’s the deal. Throughout the world, customers are increasingly choosing to shop online.
And businesses need to keep up.
For most sellers, e-commerce looks like an attractive option. But is it right for your business?
Here are the top advantages and disadvantages of e-commerce you need to know before you decide to sell online:
The Advantages of E-Commerce
Thousands of entrepreneurs launch online businesses every year. And for good reason, too.
Here are some of the top benefits of starting an e-commerce business:
Let’s face it. Renting out a space for a shop is costly, which is why you need a lot of capital to set up your own brick-and-mortar store.
Fortunately, that’s not the case with e-commerce. You don’t need to spend thousands of dollars on rent, staff, shop renovation, maintenance, etc.
Buying virtual space to sell your items is much cheaper.
Shopify, for example, costs approximately $3,000 per year. Even if you don’t have a lot of investment, you can easily start selling online!
Platforms like Shopify actually let you set up your own virtual storefront. Their extensive customization tools let you brand yourself instead of just selling products.
This is what Penguin Books’ site on Shopify looks like:
Even if you don’t use an e-commerce platform like Shopify, it’s still very easy to set up your own online store. All you need to invest in is a domain and reliable hosting.
2 Open for Business 24/7
The best part about the internet is it never sleeps. And neither does your online store.
E-commerce businesses are accessible 24/7, which is great for both brands and customers.
People prefer shopping online because they can do it whenever they want. For businesses, this means you’re always open for business. You can fulfill orders and make sales at 3 in the morning!
When your online store doesn’t shut down at night, you don’t have to pay for extra resources to keep it open.
It also means there’s more potential for buyers.
For global brands, this means being able to cater to a large client base, regardless of the country/time-zone they are in.
3 Hire Fewer Employees
The idea that businesses cannot exist without employees is changing. In fact, many online stores are operated by a single owner. No extra hands needed!
That’s because managing an e-commerce business is super easy compared to a physical one. Everything you need is available online at your fingertips, including marketing, analytics, customer services, and more.
For new entrepreneurs, managing an online store single-handedly is a great way to minimize cost.
But once your business starts to grow, you can always get more people on board to help you out. With online stores, you can hire employees from virtually anywhere in the world. And you don’t even need a lot!
Hiring virtual assistants, copywriters, graphic designers, and other remote workers can take a lot of responsibility off your hands.
Plus, outsourcing employees is also cheaper than hiring full time employees. It can help you save tons of money, which you can invest in more important things – like growing your business.
4 Access to a Global Market
There are over 4 billion internet users globally. Online retailers can tap into a gigantic market from anywhere in the world.
Millions of people in nearly every country go online each day and are increasingly turning towards online shopping.
Think about it.
With a brick-and-mortar store, you can only sell to customers who can physically reach your location. Your online shop, on the other hand, can cater to buyers from any part of the world.
Once your e-commerce store is off the ground, you can offer international shipping and reach a bigger market by targeting multiple countries at once.
The e-commerce giant, Amazon, ships to numerous countries. In fact, that’s a major reason why it’s one of the largest online retailers in the world!
5 Easy to Collect Customer Data
One of the many perks for consumers shopping online is that they don’t have to deal with a salesperson breathing down their neck. Without being invasive, online retailers can gather consumer data, a solution that benefits both parties.
You can control the way you serve your customers based on their needs using analytics. It’s easy to track their online journey and gain insight into their purchase preferences.
You can use this valuable information to improve overall customer experience and send targeted promotions.
Moreover, while shoppers are hesitant about giving their number or email to physical retailers, they do so easily during checkout when they shop online. You can use that information to connect better with your customers (hint: email marketing).
6 Personalized Experiences
The great thing about customer data and e-commerce analytics is you get to deliver personalized experiences to your customers.
A feat that’s not as easy to achieve when it comes to physical stores.
Unlike physical retail outlets, your online store can be optimized to deliver the best experience to each of your customers.
For example, you can show recommended products on your website to every customer based on their unique browsing activity or past purchases.
You can even let customers create an account on your store and log in for a personalized experience. This also makes delivering personalized customer service easier.
Localizing your website for a specific country also allows you to deliver a better shopping experience to customers in different countries.
Amazon has localized its site for various countries including China, Japan, India, Turkey, Canada, etc.
From a unique localized URL to the country’s native language, Amazon’s Turkey website offers its Turkish clientele a highly personalized experience.
7 Retarget Potential Customers
In physical retail, if a customer abandons their cart at checkout or leaves without buying anything, you can’t really do anything about it.
In e-commerce, you can.
Retargeting is a useful marketing tool that can help get back potential customers – specifically those who never finished their purchase or only browsed through your website.
Here’s how Levi’s encouraged cart abandoners to finish their purchase:
Not only does their email remind customers to checkout, it also incentivizes them to do so with a 25% discount! Notice the 48-hour deadline – it instills a sense of urgency in the customer and encourages immediate action.
Online customer support is much less invasive than face-to-face interactions.
Behind a screen, customers feel more comfortable asking any questions they might have hesitated to ask in person.
Also, it’s so much easier to simply click on a live chat button or dial a number and receive immediate help than to wait for the manager or a busy salesman for support.
9 No Checkout Delays
You know what customers love about online shopping? There’s no need to wait in line at the checkout counter!
Your e-commerce business can process multiple orders from customers all over the world at any given time.
It’s a win-win for both your customers and your business – you get to make sales 24/7 without delays and your customers can check out without wasting their precious time.
Just make sure your checkout process is optimized to offer customers a great experience and to ensure they don’t face any inconvenience. The easier your checkout process, the higher your conversion rate is likely to be.
For example, eBay’s checkout page is super simple and easy to use:
Focus on offering convenient online payment methods, like PayPal and credit card. And enable autofill fields to make it easier for repeat customers to fill out their information every time.
10 Eliminate Need for Inventory
In an e-commerce business, you can physically store your products anywhere you want. As long as you can get it shipped to your customers on time.
Most online stores dropship their products, which eliminates the need for production, inventory, and all the costs associated with it.
No need to stick to a back room for stocking items. Simply forward the order to your supplier and let them take care of packaging and shipping!
Also, your dropshipping store can feature unlimited products, and you can always categorize them to make sure your customers find what they’re looking for easily.
New arrivals and sale items also become easily accessible. Take a look at this Forever 21’s home page.
The new arrivals and season sales are immediately shown to the customer.
In e-commerce, customers can always stay updated on the latest deals and products without you needing to rearrange your entire store.
11 Easier to Encourage Purchase
Impulse buying isn’t easy to encourage at a physical retail store – it mostly just annoys the customers.
But with an online business, you have tons of tools at your disposal that make it easier to get customers to buy from you right away.
For example, attractive images and videos of your product can make it look more appealing than it would seem sitting on a shelf or hanging on a rack.
But this is just one of the ways you can encourage impulse buying online.
Shopify apps, like Countdown Cart and Sales Pop can help you boost your online sales by creating a sense of urgency and leveraging social proof.
For example, you can display “Limited Stock” or “Only 1 item left in stock!” next to a product to compel customers to hit that checkout button ASAP.
Based on the customer data you have, you can even upsell items if a customer shows specific interest in a category or product.
The Disadvantages of E-Commerce
E-commerce is great, but let’s be realistic.
No business model is ever perfect. And selling online comes with its own set of challenges.
It’s always a good idea to look at both the pros and cons before making such a big decision for your business.
Here are some potential drawbacks of e-commerce every entrepreneur should be aware of:
Technology can malfunction. And if your site crashes, your store pretty much “shuts down” until it is back up again.
Site crashes are often unexpected and can take some time to fix. In this duration, your business is at a full stop.
To ensure your online store doesn’t crash often, make sure you have reliable hosting and efficient IT support at all times.
With e-commerce on the rise, the competition is sky-high. Especially when it comes to popular niches, like fashion, beauty, and home.
One reason for that is e-commerce has very low barriers to entry. Anyone can set up an online store – it requires barely any investment or prior experience.
There are thousands of brands online, and it can be pretty difficult to stand out for a new store. For a simple search like an online fitness store, you get millions of results.
This means your customers have access to multiple stores at the same time, and can switch in a second if they find a better price or quality somewhere else.
Moreover, competitive niches also mean more expensive online ads. To work around this, brands can try to focus on a specialized audience, or invest in different platforms for advertising than their competitors.
If your competitors are mostly advertising on Facebook, for example, you can try going in a different direction with Instagram or email marketing.
Another way to bring down ad costs is to get organic traffic through search engine optimization and content marketing. You can always pair your organic strategy with some paid ads to boost your results.
3 Security Concerns
One of the major reasons why many people are still hesitant to shop online is their concern for safety.
Most customers still feel uncomfortable making online transactions and putting out their personal and credit card information on the internet.
It’s important for online stores to communicate to their customers that their payment methods are secure and that any information they enter will be safe and protected.
A great way to do that is to use trust badges from reputed companies to make your customers feel more comfortable. A security certificate on your webpage can also make them feel safe while entering their details.
4 Customers Can’t Try Before They Buy
Customers who like to try on stuff or get a feel of it before they buy typically prefer physical retail.
Naturally, this is a disadvantage for online businesses. Also, it can lead to problems with the purchase if an e-commerce store fails to meet customer expectations.
Thankfully, technology is catching up.
Sephora’s Virtual Artist app lets customers try on different make up brands on their photo to make their purchase easier:
You can try on different colors on your face right from your phone!
Augmented reality has made ‘try before you buy’ much easier for most online stores, especially in the beauty and fashion niches.
5 Difficult to Build Trust
Online businesses lack personal touch – which makes it difficult to establish credibility behind the screen.
The massive competition, with a lot of businesses selling low-quality or scam products online, makes the task even more difficult.
But even though building trust and creating brand awareness online is difficult, it’s not impossible.
Businesses need to understand that establishing a credible online presence takes time. Focus on consistently providing your customers with top quality products, use social proof to your benefit, and word will get around.
6 Shipping Times
The biggest disadvantage of e-commerce is that shipping takes time.
When you go up and buy something at a physical store, you get to take the product home right away.
With e-commerce, you might need to wait a couple of days – maybe even a week.
This might drive away customers who want to get their hands on a product immediately. They’d rather just get up and visit a store nearby.
Offering urgent or same-day delivery services can help you make more sales.
Bath & Body Works offers multiple delivery options to cater to a wider audience:
People who want something immediately might be willing to pay a premium for it, so you can always charge a bit more.
7 Other Technical Issues
Yes, we did talk about site crashes. But those aren’t the only technical issues you can face!
With an online store, there’s a lot that can go wrong. Poor internet connection, loss of data, bandwidth issues, malware, and hacking are some of the issues that can potentially arise.
To minimize technical issues and their effects, you need to have strong IT management. It’s always best to outsource your technical management to a reliable, dedicated team.
Conclusion – E-Commerce VS. Physical Retail
We can’t deny that e-commerce comes with its own challenges.
But it doesn’t mean selling online isn’t worth it.
Most challenges of e-commerce can be overcome with efficient planning and management.
Moreover, with so many customers switching to online shopping, it’s almost a necessity for businesses to have an online presence.
This article will help you understand both the advantages and disadvantages of e-commerce, so you can make an informed decision for your business.
Do you have any questions about e-commerce? We’d love to help you out. Feel free to let us know in the comments below!
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