Are you thinking about starting an ecommerce business? The good news is that worldwide ecommerce sales are expected to grow to $4 trillion by 2020. In 2016, in the US alone, ecommerce retailers made $322.17 billion in sales revenue. As an ecommerce business owner, you’ll be joining a growing industry that many benefits. In this article, you’ll learn ecommerce advantages and disadvantages so that you can decide for yourself whether this is the right business model for you.
Ecommerce Advantage #1: Low Financial Cost
When you compare starting a brick and mortar store with starting an ecommerce store, ecommerce has a lower financial startup cost. Brick and mortar stores have to pay up to thousands to rent one of their store locations. Also, they have several upfront costs such as store sign, designing their store, buying inventory, sales equipment, and more. Physical retail stores also have to pay staff to work and run each location. They may also need to hire security staff depending on the product value in the store. However, ecommerce stores only pay $3192 a year on Shopify at most for virtual ‘rent’ which also includes an easy to use ecommerce platform, hosting, free themes, great apps like Oberlo, and a few other great perks. Depending on what type of ecommerce business you run, you may only need to hire employees when you grow to a certain level. If you choose to dropship, you won’t need to buy bulk inventory. Your store logo is often more affordable than a store sign. Your business expenses are generally much lower than running a brick and mortar store.
Ecommerce Advantage #2: 24/7 Potential Income
Online stores are always open for business. With your ads, you can attract someone at 11 p.m. or 4 a.m.. Most brick and mortar stores are open between 9 a.m. to 9 p.m. By being available at all hours, you can attract people who would normally pick up a product in stores, if the store were open. You can also attract those who may have odd work schedules or who don’t have time to shop in-person. For a customer to order at night, you don’t need to have employees working the night shift to ensure all orders get processed, unlike a brick and mortar store which would likely also need night time security.
Ecommerce Advantage #3: Sell Internationally
With ecommerce, a small brand can sell to customers around the world better than a brick and mortar retailer based in a small city. You have the ability to discover your audience whether they’re in the U.K., South America, or neighbouring countries. If you choose to dropship from AliExpress, many products offer affordable ePacket shipping or free standard shipping. This allows you to price and ship your products competitively to a worldwide audience.
Ecommerce Advantage #4: Easy to Showcase Bestsellers
While you can design a brick and mortar store to sway people to buy certain products, it’s easier for a customer to find the best-sellers in an online store. The reason why you want customers to buy your best-sellers is because they’re proven. Other customers have already bought them and been happy with their order. If you want to showcase new products to customers you can include them in your upsell, email marketing or retargeting ads.
Ecommerce Advantage #5: Personalized Online Experience
You can personalize the online shopping experience. You can segment email lists based on purchases made, location or even how much money a customer spent. You can also easily retarget a customer who visited your store showing them an ad for a product they added to their cart and forgot about. If your online store has a login feature, you can have a welcome message appear such as ‘Welcome back (name).’ You can also offer product bundles where the customer gets to pick and choose which products they’d like to include. You can also personalize upsells based on what the customer has looked at or what you think they might like.
Ecommerce Advantage #6: Affordable employees
One of the benefits of ecommerce is that hiring employees is affordable. You can choose to outsource work to countries where the cost of living is much lower. You’ll need fewer employees in an ecommerce business than a brick and mortar. Employees would need to be at all locations at a brick and mortar from day one. Yet, with ecommerce, you don’t need to hire employees at launch. You can start and run an ecommerce business all by yourself when starting out.
Ecommerce Advantage #7: Easier to Encourage Impulse Buy
When running an ecommerce store, getting your customers to make an impulse buy are easy. If you have an attractive product photo, one with vibrant color or human emotion, you can create ads that drive impulse buys. You can also execute a range of scarcity tactics such as countdown timers or showcasing limited quantities.
Ecommerce Advantage #8: Easy to Retarget or Remarket to Customer
It’s easier to retarget customers in your area when running an online store than if you run a brick and mortar. You can create a Facebook pixel. You can use the Shoelace Shopify app to retarget your browsers who visit your store but don’t buy. In ecommerce, you can retarget people who add to cart but don’t abandon and don’t buy or who visit a blog post and never buy. You can collect email addresses easily with an effective pop-up or lead magnet and continue marketing to your customers after you’ve made the sale.
Ecommerce Advantage #9: Customers Get a Less Invasive Experience
Some people dread walking into a brick and mortar store as they’re forced to interact with the store’s employees. Whether learning about a promotion or being asked questions throughout the shopping experience, some may prefer online shopping as it can be a little less invasive making it one of the best benefits of ecommerce. If a customer wants to contact the store owner, they can click on a live chat feature, email or send a Facebook message.
Ecommerce Advantage #10: Gain Access to Customer Data Easily
Compared to selling in brick and mortar, you can easily gain access to customer data. Most people feel uncomfortable giving away email addresses or postal codes to physical retailers. In ecommerce, you can get your customer’s name, mailing address, e-mail address, and phone number. That means you have at least three different ways to communicate and build a relationship with them. You can even have them fill out surveys, share their birth date with you, and more. If you ask them to create an account, you can obtain even more information from them to better serve them.
Ecommerce Advantage #11: Able to Process a High Number of Orders
If you choose to dropship, you can process a high number of orders with ease. As your business continues to grow, you might choose to hire employees to help with order processing. In brick and mortar stores, long line ups can deter people from shopping. With ecommerce, there’s no waiting time. A customer can place orders on his or her own schedule with no delays allowing you to accept a high number of orders.
Ecommerce Advantage #12: Can Scale Business Quickly
One of the benefits of ecommerce is that it’s easy to scale the business quickly. You can increase your ad budget when ads are performing well without having to worry too much about keeping up with the demand, especially if you dropship. With brick and mortar stores, if your store needs to grow in space to accommodate new products or add more cashiers. You’ll need to find a bigger space, renovate and wait for your lease to end. This delays your ability to scale. If you create informational products, you run into a challenge again as it takes time to create ebooks, courses, and more. With dropshipping, you can add new products to your store without having to worry about shipping products or holding inventory allowing you to grow quickly.
Ecommerce Advantage # 13: Can Grow Business Organically with Content
With ecommerce, you can grow organic traffic and sales with content creation. From making videos to writing blog content, you’ll be able to optimize your store to drive more traffic and sales without having to spend more money. A brick and mortar retailer would need to market to their customers to encourage visits or ensure they’re located in a high traffic area to get more shoppers. With ecommerce, you’ll be able to not only get traffic organically through content creation, you’ll be able to monetize those customers with retargeting ads.
Ecommerce Disadvantage #1: No One Can Buy During a Site Crash
The worst of the ecommerce disadvantages is that no one can buy from your store if your site crashes. That’s why it’s important to ensure your website is hosted on the right platform. For example, if you’re paying the minimum hosting fee and get a surge in traffic from a high converting ad or a television shout-out like Shark Tank, your site will likely crash. Fortunately, Shopify offers free hosting in their monthly fee allowing you to have one of the best servers on the market. In recent memory, there was only one time where sites were down. However, ecommerce stores weren’t the only affected. Twitter, Spotify, Soundcloud, and more were affected by the crash. The issue was resolved the same day. Yet, site crashes on Shopify are so rare that it’s likely not to cause problems in your business.
Ecommerce Disadvantage #2: Customers Can’t Try Before They Buy
While this is currently a problem for many retailers, this won’t be a long-term problem. With augmented reality, more stores are starting to add AR elements to their store to allow customers to try products on. Augmented reality companies like Holition and Augment, offer solutions for businesses to create a more interactive experience with your customers. If you own a cosmetics store, you can check out Sephora’s Virtual Artist app for an example of a beauty retailer with an augmented reality experience.
Ecommerce Disadvantage #3: Ecommerce Is Highly Competitive
Finding a niche without a lot of competition while also being profitable can be challenging. The reality is the best niches are often the most competitive that’s why people are drawn to them. The more competitive a niche is, the more expensive ads for that niche are. There are a couple of ways around this. First, you can go after a different audience than your competitors. If all your customers are getting competitors through Facebook ads, you might try ranking organically in search. If all your competitors are using Pinterest, you might try Instagram which is also a very visual platform. Second, if your ads are expensive, you can send traffic to blog posts and retarget your customers who visit them to create lower cost ads.
Ecommerce Disadvantage #4: Customers Can Be Impatient
In a brick and mortar store, if a customer has a question a salesperson is on the floor ready to answer them. However, in ecommerce, most businesses delay responding to customer inquiries. The reality is most customers expect a response from a business within the hour on social media. If you delay in responding to their message, they can become aggravated and shop somewhere else instead. You need to be online 24/7. You can hire customer service representatives who are trained to make your customers happy via Upwork.
Ecommerce Disadvantage #5: You Need To Ship Your Products
Customers consider shipping times to be one of the worst ecommerce disadvantages. In a brick and mortar store, a customer can purchase a product quickly. But, with online shopping, most customers receive their products in a week or more. While Amazon offers same day shipping, it wasn’t a profitable model until they created Amazon Prime. It only became profitable because they have tens of millions of Prime members. The solution is to be transparent with your customer. Let them know when they can expect packages when they place an order.
Ecommerce Disadvantage #6: Physical Retail is Still More Popular Despite Decline
Even though one of the benefits of ecommerce is that it’s growing, physical retail still owns most of the market share. In 2014, the retail industry had accumulated over $22 trillion. Yet, ecommerce had only made $1.3 trillion worldwide. Having an online store in the early stages allows you to become a leader in your niche. Yet, most money made is in physical retail stores. Hence, why Amazon, despite being the biggest online store, is now creating brick and mortar stores. But, keep in mind that $1.3 trillion in sales isn’t a small number. There’s still a lot of potential that online retailers can cash in on.
These are a few of the ecommerce advantages and disadvantages you need to consider while running an online store. Do you have any other questions about ecommerce? Let us know in the comments section!