Are you thinking which is a better investment between starting an online store vs brick and mortar business? If YES, here is a detailed comparison to help you.
When an entrepreneur wants to start a business, he can choose to operate online, from a physical location, or a combination of both. In today’s world that is driven by technological advances, a lot of people believe that the brick and mortar business is going extinct.
However, the truth still remains that offline sales are 10 times bigger than online sales in the United States, but online shopping is growing at a significant rate. Researchers predicted a 15 percent growth in U.S. sales and total value for online shopping between 2016 and 2017, while offline only saw a 4.5 percent increase.
Starting an Online Store Vs Brick and Mortar Business – Which is the Best?
About 51 percent of Americans prefer eCommerce, and 49 percent prefer heading into an actual store. However, a larger portion of millennials (67 percent) prefer shopping online over offline.
Even though starting an eCommerce store can seem like the easier option due to the lower overhead costs, there are several factors to consider when comparing. For instance, some types of products like jewelry, furniture and clothing sell better in person.
This is mainly due to the fact that people will prefer to see, touch and sometimes even wear them before they make the final commitment of buying them. Be that as it may, if you run your ecommerce store properly, you can save thousands of dollars that would have otherwise been spent in leasing a physical location and all the other costs that come with it.
Brick and mortar businesses have been in existence far longer than their online counterparts because the option of having a viable online presence has only been available for the last few decades. With both types of business models, there are numerous advantages and disadvantages.
It is up to you to determine the best way to turn your vision into reality, and your hard work into profit. To decide which is right for your business, here are some of the pros and cons of online stores and brick and mortar businesses.
Pros of Starting a Brick and Mortar Business
a. The location can speak for itself: this is one of the main advantages a brick and mortar business has over an online store. Your storefront serves as a marketing tool in and of itself.
The particular site where your business is located is very important, and when you choose the right location, customers will organically walk into or drive by your store. Between the natural curiosity of those in the area and personal referrals and word of mouth, having a great location can help you build your brand locally from the bottom up.
b. Impulse buying: Another major benefit for brands that operate brick and mortar business model is the way consumers spend their money while shopping.
According to research, 40% of shoppers spend more than they had planned to while shopping in stores, while only 25% of shoppers do so when shopping online. A classy storefront and superb display of goods can influence customers to buy items that they did not initially budget to buy and they are much harder to ignore than online ads.
c. Intimate customer experience: no matter how convenient eCommerce stores are, they just can’t match the customer care potential of brick and mortar businesses. For instance, if you have a question about a product that you see in a store, it is a lot easier to ask a salesperson in the store.
Getting advice online can be fraught with difficulties. It goes without saying that your employees have to be readily available and knowledgeable to help customers in the store, but more retailers seem to be coming to this conclusion and investing in customer service. It’s within this landscape that entrepreneurs can truly craft a unique experience and express their brand creatively, converting first-time customers to loyal brand advocates.
d. Brick and mortar assumes brand legitimacy and longevity: online stores are increasing in popularity and more people feel more confident to spend money online. However, people still harbor some form of skepticism towards eCommerce. For instance, a lot of people will find it hard to enter their credit card details into a website that they don’t really know that well no matter how much the items may appeal to them.
A brick and mortar business has this air of legitimacy surrounding it which can makes people trust them even if they are new. Face-to-face interaction is also a big plus as well – there’s value in staffing your store with knowledgeable, friendly people that keep customers coming back for more.
e. Speedy delivery of goods: when you buy an item from a brick and mortar store, you can walk out with that item immediately unlike with eCommerce stores. Until ecommerce can find a less expensive solution for same-day or 1-day delivery, in-store shopping will continue to win on this point.
Cons of Starting a Brick and Mortar Store
i. High startup and operational costs: in order to start up a brick and mortar business, you will have to put in a substantial upfront investment which translates into a greater risk from the get go. If the business should fail, you would have lost a lot more than the cost of setting up a website. Rent and employees can lead to much higher startup costs for brick and mortar businesses.
If you are just starting out, then perhaps you should consider trying out lower cost alternatives to test the market. For instance, if you are offering dance lessons, rent out a space within another facility such as a fitness center, which is less expensive than renting out a dedicated studio. For physical products, consider starting out with pop up shops, booths, kiosks or a flea market.
ii. Permanency within a changing landscape: Locations are supposed to work for you, however because your store is stylish and inviting does not mean that your neighbors are following suit. You have no control over what goes on around your store, and what may have been an up-and-coming thoroughfare 5 years ago, could easily turn into no-man’s land in the blink of an eye.
iii. Schedule inflexibility: owing and managing a brick and mortar business is no small work especially in the beginning. Someone has to be present in the store at all times in order for the business to function properly. Online business is not that time consuming in this aspect, and to some extent can be automated.
Pros of Starting an Online Business
1. Low startup cost: granted, in order to set up your ecommerce website, you will need to make some investments, however the amount of money you will have to put in is quite small when compared to the cost of starting a brick and mortar business. You don’t have to worry about expense such as rent and utilities and as such you can get your business up and running quickly, with little capital investment!
As a matter of fact, you don’t even need a website. Services such as Amazon, eBay, and Etsy are just a few ways to sell your products or services with almost no investment at all. In the event that the business should fail, you would not have lost a lot and as such, people tend to have more freedom to try new things when there isn’t quite so much to lose.
2. Online stores are convenient: The ability to browse on your own time without outward sales pressure makes eCommerce a very appealing choice. With products delivered directly to your door in a day or two, the convenience of the whole process is attractive and addictive.
3. Schedule flexibility: owning an online store gives an entrepreneur the liberty to work from anywhere and anytime they wish. Not having to commute to work saves a lot of time. Even if your commute is short, it usually takes you an hour or two to prepare and then go to work and back. Working at home offers conveniences and freedoms that you don’t get from running a brick and mortar business. You can decide to come to work in your pajamas for days in a row; nobody knows and nobody cares.
Cons of Starting an Online Store
a. Marketing intensive: even though an online store is easier to set up than a physical store, but the reality is that after you have set up your shop, no one will know that you exist. It’s not like there will be people causally strolling by and then decide to check out your shop and in addition only so many friends can like your Facebook page.
In a bid to surmount this, eCommerce stores have allocated more resources, budget and time to marketing in order to let customers know who they are and that they are open for business. In order to increase popularity, online store owners will have to make use of SEO, pay per click advertising, social media management and content marketing.
b. Less legitimacy and consumer trust: without face to face interaction, building a meaningful relationship with your clients will be an uphill task. As such, you will need to go the extra mile to give customers confidence in your store and assure them you’re a trustworthy brand.
If your online presence doesn’t grab their attention in the first few seconds, consumers move on and most likely won’t return. You’re just another blip in their Google online history. A scary thought to be sure, online retailers need to provide potential customers with as much knowledge and information as if they were standing inside a physical store, just in less time.
In conclusion, making the final decision on whether to start an online store or a brick and mortar business depends on a lot of factors. The two models have their advantages and disadvantages so when considering which model is the best, there is no one size fits all.
For instance, if you do not have a lot of money set aside to start your business, then setting up an online store may be the best for you. If an entrepreneur has enough funds set aside, then a combination of an online store with a brick and mortar business may just bring the best result.