Pros and Cons of an E-commerce Business
The future of Commerce is E-COMMERCE
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Worldwide online sales are expected to grow to $4 trillion by 2020. US; $504.58 billion in sales revenue . Get your slice of that cake.
The Pro’s and Con’s of an E-commerce Business
Are you thinking about starting an ecommerce business? The good news is that worldwide online sales are expected to grow to $4 trillion by 2020. In 2018, in the US alone, ecommerce retailers made $504.58 billion in sales revenue. There are many more benefits of ecommerce. In this article, you’ll discover the advantages and disadvantages of online stores so that you can decide for yourself if this is the right business type for you. These advantages of online business will help you stay excited and motivated throughout your entrepreneurial journey.
What Are the Advantages of Ecommerce?
You came to learn what are the advantages of having an online business. Top of the list of advantages of ecommerce is low financial cost but other pros include selling internationally, retargeting customers, personalization of the buying experience, etc. These benefits of ecommerce will help you determine if starting an online store is right for you.
One of the ecommerce benefits is that it has a lower startup cost. Physical retail stores have to pay up to thousands of dollars to rent one of their store locations. They also have several upfront costs such as store signs, store design, 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, for a dropshipping store startup costs are estimated at $418 in 2019 and ecommerce stores only pay $3192 a year on Shopify at most for virtual ‘rent’. Shopify also includes an easy to use platform, hosting, free Shopify themes, great apps like Oberlo, and lots of 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. As your online store is online these employees can work remotely, making it easier to find staff that will suit your company.
If you choose to dropship online, you won’t need to buy bulk inventory saving you a lot of money. Your store logo is often more affordable than a store sign. Your business expenses are generally much lower in ecommerce. This is one of the most attractive benefits for new entrepreneurs looking to keep their costs low.
Another advantage of ecommerce is that online stores are always open for business. With your Facebook ads, you can attract someone at 11 p.m. or 4 a.m. in any part of the world. Most physical location 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.
Think about your audience who don’t work normal hours or who are too busy to pop into a shop to buy something. An ecommerce store allows you to 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. You’ll never need to hire a security guard! All you need to do is automate your ordering systems so that customers receive a confirmation email when they place their order to give them peace of mind.
Next on the list of ecommerce benefits is that a new brand can sell to customers around the world easily. You have the ability to discover your audience whether they’re in the U.K., South America, or neighboring countries. If you choose to dropship from AliExpress, many products offer affordable ePacket shipping or free shipping. This allows you to price and ship your products competitively to a worldwide audience.
Selling worldwide is a great feat as it helps you build your brand a lot faster, broadens your marketplace exponentially, and allows you to see profit long before your local competitors.
Ecommerce benefits like being able to easily display best-sellers makes it easier to show off products to customers. 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 are happy with their purchase. If you want to showcase new products to customers you can include them in your upsell, email marketing or retargeting ads. With an ecommerce store, you can include great product photography and product descriptions to sway the customer’s choice.
Website personalization, one of the online business advantages, can enhance the online shopping experience. Creating personalized landing pages for different audiences can entice them to buy from you without much extra work on your side. It is not like customers coming into a physical store who you need to nurture from the first minute. You can do all the hard work before you launch a campaign and then relax once you release the campaign to your customer base.
Try segmenting your email lists based on purchases made, location or even how much money a customer spent. You can also retarget a customer who visited your online store showing them an ad for a product they added to their cart and forgot about. If your online business has a login feature, you can have a welcome message appear such as ‘Welcome back (name).’
Product bundles can help the customer buy more for a better price increasing average order value. You can also personalize upsells based on what the customer has looked at or what you think they might like based on their purchase behavior.
One of the benefits of ecommerce is that hiring employees is affordable and, as mentioned before, you can hire from anywhere in the world. You can choose to outsource work to virtual assistants in countries where the cost of living is much lower. You’ll need fewer employees in an online business than a retail location. A huge advantage of online businesses is you don’t need to hire employees at launch. You can start and run an ecommerce business all by yourself. Only when you start to grow or when you have the capital should you start to hire employees.
Another ecommerce benefit is that you can capitalize on impulse buying as online shoppers are more inclined to partake in this. If you have attractive product photography, 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.
It’s easy to create retargeting ads to reach out to customers in your area when running an online business making it one of the most profitable ecommerce benefits. You can create a Facebook pixel. You can use the Shoelace Shopify app to retarget the browsers who visit your store but don’t buy.
With ecommerce stores, you can retarget people who add products 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.
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 sales 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.
One of the best ecommerce advantages is that you can easily gain access to data for analysis on your customer. 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 marketing 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. If your customers are based within Europe be careful of GDPR regulations when contact customers.
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. Also with dropshipping you don’t need to physically have the product in order to sell it to a customer, therefore you do not have to worry about stock control like physical stores have to.
In retail stores, long queues 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.
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, it can be hard to grow product lines or add more cashiers due to finite space. You’ll need to find a bigger space, renovate or wait for your lease to end in order to scale your business. If you create informational products, you run into a challenge again as it takes time to write 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.
With ecommerce, you can grow organic traffic and sales with ecommerce blogging. From making videos to writing blog content, you’ll be able to optimize your store to drive traffic and sales without having to spend more money. With ecommerce, you’ll be able to not only get traffic organically through content creation, but you’ll also be able to monetize those customers with retargeting ads.
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.
What Are the Disadvantages of Ecommerce?
As with every pro, there is a con. When starting an online store it is important to be realistic so below are a few ecommerce disadvantages that our merchants have run into, that do not apply to a physical store.
The worst of the ecommerce disadvantages is when 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 sites affected. Twitter, Spotify, Soundcloud, and more were affected by this 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.
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 ecommerce companies 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.
Finding the right niche is another one of the worst ecommerce disadvantages. 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 being targeted by competitors through Facebook ads, you might try ranking organically with SEO optimization. If all your competitors are using Pinterest, you might try Instagram marketing if your audience are very visual beings.
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. Working on CRO campaigns can help you be much more successful than your customers.
If a customer has a question in store a salesperson is on the floor ready to answer them. However, an ecommerce disadvantage is that most businesses experience a 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 angry 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. Or you can work with a chatbot to help customers find their answer any time of the day or night. But all of this still doesn’t equate to a person who is able to look after each person, in person.
Customers consider shipping times to be one of the worst ecommerce disadvantages. When a customer shops in person she can take the product home right away. 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.
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, online commerce had only made $1.3 trillion worldwide. Having an online business in the early stages allows you to become a leader in your niche. Yet, most money made is in physical retail stores making it an ecommerce disadvantage. Hence, why Amazon, despite being the biggest online store, is now creating in-person 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. And this number keeps growing.