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What Are The Disadvantages & Advantages Of Online Shop Compared To Physical Shop
People who are thinking about setting up an online shop often ask what are the advantages
and disadvantages of running a business online compared to running a physical store offline?There are many obvious advantages with running an electronic shop (e-shop) in the virtual world but not everyone can see the disadvantages. In this article we will go through the pros and cons of running an online business.
Advantages
Lets start with the advantages. Many people already know that an online shop is much cheaper to set up and run. The shop owner is not burdened with expensive rent, wages of shop attendants and utilities. The cost of running of a website can be as little as $30 - 50 per month to pay for the server hosting and domain registration. As long as the initial web design is done properly, little or no maintenance will be required to keep the website running. This compares very favorably to running a physical store offline, which could easily cost thousands of dollars every month.
And then there is the shops reach. An offline physical stores reach is limited to the town where it is located. People rarely travel more than a hundred miles to do their shopping. An online shop is an international business by default. It can be found by shoppers from anywhere in the world. This can make online businesses very lucrative.
A virtual shop can be any size and is easy to scale. It can sell hundreds or even thousands of items or just a couple of items and still look attractive. For a physical store, the physical size of the store often dictates how many items the business owner should or could sell. If the business owner has a lot of items to sell, they will need to rent out a bigger shop, which means higher operating costs. If they only have a couple of things to sell, it might not be feasible to rent out a shop at all.
A virtual shop is easy and fast to set up. There are a lot of turnkey ecommerce software out there that can allow anyone to set up a shop in a matter of days if not hours costing no more than a couple of thousand dollars. A physical store often requires lengthy negotiation over legal contracts and then there is the shop fitting and refurbishment, which could easily take weeks and cost many thousands.
Disadvantages
Now lets look at the disadvantages. After going through the above advantages, for some people it is difficult to see if there are any disadvantages at all, but there are.
Lets start with competition. The barrier to entry to online business is extremely low. Anyone can set up an online shop so the competition will be fierce. A physical store only needs to compete with other stores in the local area but an online shop has to compete against everyone around the world.
Price comparison is extremely easy online. The online price difference of just $0.01 could determine if there is a sale or not. On the high street, people are often far less price sensitive. They might even knowingly pay a higher price because the savings is not worth walking ten minutes.
And then there is exposure. A physical store is guaranteed some level of exposure based on the foot fall. An online store doesnt have any guaranteed foot fall. To get traffic, shop owner must invest in online marketing such as Search Engine Optimization (SEO), classifieds ads, business directories, ad campaigns etc.
What about getting to know customers? Any successful business must know their customers. In a physical store, a shop owner can simply observe people who walk into their store, see what they like and talk to them directly to get to know them better. In an online shop, this is virtually impossible since every visitor is anonymous by default. It is more difficult to engage the customer in direct communication and the shop owner can only make intelligent guesses about what they might like or dont like.
Finally there is optimizing a shop. In a physical store, a shop owner can constantly optimize their shop by observing customer behavior and how they interact with their products. They can put their most attractive products near the front of the shop to draw more people in and then place products that are most likely to be purchase on impulse near the counter. Reconfiguring the shop floor involves no more than a couple of hours of manual labor, which anyone can do. However, it is very difficult to see how customers have interacted with the products in an online environment since every visitor is anonymous and revamping the store requires advanced computer knowledge, which most shop owners do not have. It will also likely take more than just a couple of hours since the task is highly technical and complex.
In conclusion, succeeding in e-commerce might not be as easy as some people think. There are many challenges just like anything else worth doing in this world. Success will go to those most prepared to overcome those challenges and risks.
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