We often come across the question of whether e-commerce or retail is best for a business. E-commerce is a replica of business that enables individuals and companies to sell their services or products via the internet. On the other hand, retail refers to the brick and mortar businesses, in which individuals sell their goods or services from person to person in shops, malls, and localities.
According to Statista 2021, total retail sales, both online and offline, amounted to 24.2 trillion USD, out of which 19.1 trillion USD was generated by the brick and mortar retail channel and around 4.9 trillion USD was generated by the eCommerce sales channel. In the same year, global retail sales accounted for a growth of 9.7% as a whole and eCommerce accounted for around 19.6% of total retail sales.
The digital form of business has seen a great increment specifically in this pandemic. But at the same time, the heavy revenue generated from retail cannot be ignored. In this article, we will discuss different factors that will help you know what is best for your business between eCommerce and retail.
- Which Has Lesser Prior Investment?
- Which is Easier to Maintain?
- Which Has Better Profitability in Future?
Ecommerce vs Retail, What's Better?
In the following points, we will discuss a comparison between eCommerce and retail from different perspectives:
Which Has Lesser Prior Investment?
Starting an eCommerce business may sound like an expensive process but with proper planning and execution, one can start running it on a budget. The investment required to start your eCommerce business in India is nearly 5-10 lakh rupees. It includes building your business website, hosting, domain, sales and management tools, web development, and advertisements.
Investment in setting up a retail store can be an expensive process. A retail store has to invest in various things before selling its product. These include building, buying, or renting a store, paying license fees, hiring staff for multiple positions, paying location tax, investing in filling up the store with sufficient items to attract a customer, and other necessary resources relating to business and government. All such expenses make setting up a retail store far more expensive than starting an eCommerce store.
So, comparatively, the cost of investment is lower in the case of eCommerce than in retail. The advantage of owning an eCommerce store is that it reduces the cost of setting up a brick-and-mortar store or hiring delivery staff. This is because eCommerce stores send their manufactured products to branches such as Amazon, FedEx, Ship Bob, Flipkart, etc. for order fulfilment. After this, it is the responsibility of these branches to pack, track and send the order to the buyer.
Which is Easier to Maintain?
It is easier to maintain eCommerce compared to a retail store. But there are still some complications that need to be checked from time to time so that the store can run smoothly. For example- you need to maintain a warehouse or any proper space to keep the products safe and accessible for dropshipping. Since you are not directly connected with your customers, you will have to keep a check on analytics to track customer experience and discover their new tastes and likings. You will also need to keep a check on the timing of product delivery to avoid negative feedback from customers.
The retail business is considered to be a bit more complicated in terms of maintenance. This is because for various reasons like there is a need to maintain a proper brick-and-mortar store and inventory, and maintenance of an adequate communication balance on both sides in real-time with suppliers and customers. Also, you have to keep a regular check on your staff if they are handling the customers politely. You will have to train them and make them more knowledgeable about the services and products you are offering so that they can deal with the customers pleasantly and accurately.
It is easier to modernize the stock in an eCommerce store. But this task becomes pretty difficult with retail stores as for updating products, you need to set up meetings with suppliers now and then. So, in case of ease of maintenance, eCommerce is a better option for your business.
Which Has Better Profitability in Future?
With eCommerce comes a great benefit which is unlimited access to customers. Once you are over the internet, there is no limit to the number of people you can reach. Ecommerce allows you to showcase your products and services to a large number of people, therefore, no limitation to any particular locality. Moreover, you can always expand your business and attract new customers via smart and modern marketing techniques. These include offering free shipping, discounts, gift cards, reward points, etc. All this ultimately ensures better sales and thus, better profits.
Retail stores do not have very wide access to the customers as they have limitations due to their fixed location. However, this does not mean that there are no benefits of a retail store. Even in today's time, many customers do not feel satisfied until they can touch and feel the products themselves. So, the customers who are still skeptical about online shopping contributes to the sales and profits of retail stores. Moreover, there are fewer chances of online fraud with retail shops, as the customer doesn't need to provide their personal information including emails, mobile numbers, bank details, etc.
In this case, eCommerce will be the clear winner because the products and services of eCommerce stores are visible to a huge audience which makes for a large potential customer base and thus, better sales and profits.
We compared e-commerce and retail stores based on investment, performance easiness, and profits obtained. Although there are factors like trusted quality and physical interaction that make retail stores better than eCommerce ones. But after making an overall comparison and looking at the future of the digital world, we concluded that eCommerce stores are the best way to expand your business and earn more profit in the future since it offers a wider reach with less investment.
However, you can also take another way which is you can opt for omnichannel retail as it allows you to buy products either online or physically through the real stores to keep your customers satisfied in all the possible ways.
What is the difference between eCommerce and retail?
Retail is something that can be conducted in a brick-and-mortar store, online, between persons, or through direct mail. However, eCommerce refers to electronic commerce which means commercial transactions that are conducted only through the internet.
How owning an online store is better than physical stores?
Owners of the online stores can sell and ship their products and services to a large number of people with fewer investments as buying a website is easier and more economical than buying a physical store.
What is the biggest challenge faced by eCommerce?
One of the most significant challenges faced by eCommerce is the security issue. Ecommerce involves a great deal of personal information and even a small technical issue can create huge damage to a business's operations and image.
What is a retail store?
The most common example of a retail store is the conventional brick-and-mortar stores like Walmart, Best Buy, etc. However, retailing as a whole includes goods or services sold through stores, kiosks, or even on the internet.