In today’s technology-focused world, it’s becoming easier for people to start their own businesses. Traditional brick and mortar stores are still around but becoming less prevalent in the grand scheme of things as e-commerce businesses offer significant advantages over a physical store. Even some major retailers are scaling back their physical operations in favor of putting a bigger emphasis on the advantages of e-commerce.
Here are five advantages of e-commerce businesses over brick and mortar businesses. Keep these things in mind when deciding which business format (or a combination of both) is right for you.
Enjoy Lower Overhead Costs
The overhead associated with starting an e-commerce business is very small in comparison to brick and mortar stores. Inventory does not have to be stored locally. And it doesn’t even have to be purchased up front if a merchant chooses to drop ship their products.
Instead of paying rent on a large lease every month, a merchant will pay for website hosting for their storefront, and possibly the online software for taking orders, called a “shopping cart”, both of which are significantly cheaper. There are free shopping carts, but they require technical knowledge of websites to set up.
Marketing costs can also be reduced as there is no need for physical signs or advertisements. Marketing can occur through a variety of online channels, some of which only require time and knowledge of your target customers, such as the use of social media, and optimizing your website for search engine traffic (called “search engine optimization” or “SEO”).
There is also no need to hire regular help to process orders right away as most shopping carts offer basic order management capabilities that either automate or allow one person to process orders manually and quickly.
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Your Business is Always Open
With a physical store, the business is limited by what hours it is open. Personnel would need to be hired to accommodate longer business hours, and this and will increase costs. With an e-commerce business, the online store of a merchant is always open (barring technical difficulties). This means customers can place orders 24/7.
Reach a Broader Audience
One of the biggest advantages of e-commerce is the number of people a merchant is able to reach. The internet is a vast place and has enabled small businesses to reach customers all over the world instead of being restricted to the comparatively smaller number of people who reside in their local area.
Target Niche Markets
Reaching a broader overall audience opens you up to other advantages of e-commerce, such as being able to sell more easily to niche markets. This means that if a merchant has an idea of a product he or she wants to sell, but the local market for that product is virtually non-existent, the merchant can still find and market to people who are interested in their product.
In other words, merchants can reach narrow markets with highly targeted interests even if those people are spread out across the country, or even the world.
Easily Gather Data on Customer Behavior
For every merchant, it is important that they are able to analyze statistics about their customers to determine what products to market and sell and when to do so. This requires the merchant to be able to gather the data necessary to do that analysis.
Brick and Mortar stores would need to keep manual track of their customers and purchases, but an e-commerce store can make use of tools that would automatically capture this information when a customer is shopping in their online store. Examples of possible automatic reporting include:
- how frequently customers order;
- what times of the day seem to generate the heaviest traffic;
- what is bought most often at what days and times;
- how much revenue each product generated.
The advantages of e-commerce businesses over a brick and mortar store are numerous. In addition to the ones I’ve mentioned above, what others can you think of? If you have run a brick and mortar store and then set up an online store, what advantages have you seen? Tell us in the comments.
This article was originally published on November 26, 2012.