E-Business Vs. a Traditional Retailer

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Prior to the invention of the Internet and it’s easy access to millions of people worldwide, retail businesses had to reach potential customers mainly by building a “brick and mortar” store or by using mail order catalogs to entice buyers. While physical retail locations and mail order catalogs continue to be a part of a business’s sales, the Internet now offers an additional outlet for sales from which most businesses can benefit by having an Internet presence. Some businesses exist exclusively online.

Reaching Potential Customers

A business can’t survive without customers, and efforts to attract new business must be constant and ongoing. Brick and mortar retailers get exposure from “foot traffic.” People who walk or drive by their store will see their business or are reminded that the business is there. A good physical location, such as being in a popular shopping mall, can greatly contribute to foot traffic. Although a retail store can advertise to attract more customers than just those who will see the business in passing, they serve a limited geographical area. Online retailers, however, have the potential to reach customers worldwide. But, the Internet is a vast place, and simply setting up an e-commerce website does not ensure people will find you. Much due diligence must be done regarding search engine optimization and promoting the website through link exchanges, shopping directories, and utilizing social networking sites.

Operating Expenses

E-businesses have the advantage of lower overhead costs than brick and mortar retailers. While both businesses may require the hiring of employees, the cost to operate and maintain a store is typically more than an e-commerce retailer, who may only need a small office. Retailers who are located inside a popular shopping mall often have very high rent expenses, along with significant heat, light and insurance bills. Although e-businesses will have Internet, website and “shopping cart” service costs, these expenses pale in comparison.

Merchandise

Online businesses can use drop shipping services to mail orders from distributors directly to consumers, thus requiring little or no physical inventory. Retail stores needs lots of merchandise in-house for customers to purchase. This means large spaces are needed for display and storage, and a substantial amount of money is invested in inventory. Products that don’t sell quickly take up display space and tie up money that could be used for other purposes. The brick and mortar retailer, however, has the advantage of allowing potential customers to physically see, touch, feel, try on and inspect items. This is very important for marketing certain products, such as clothing. Also, shoppers can easily browse through a store and possibly see and purchase items that they were not looking for...impulse buying. Typically, online shoppers know what type of product they are looking for and search only for that specific item.

The "Storefront"

A business in a building must have a storefront that is interesting and enticing, inviting customers to come in. Seasonal decorations and sale items can enhance a shop’s windows. A small e-business can simply work out of a dining room, with no time and expense involved in displays and store maintenance. The e-business’s website, however, must look very professional and instill confidence in the customer. And, of course, an e-business has the advantage of being open 24 hours a day, seven days a week, where orders can be placed anytime.

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