Advantages & Disadvantages of Online Businesses

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You can reach your online customers most anywhere with your laptop.
You can reach your online customers most anywhere with your laptop. (Image: Jupiterimages/Comstock/Getty Images)

There are several businesses in the marketplace that trade solely online. In setting up an online business, the owner will need to go through the same procedures as a traditional business, in formulating a business plan, by crafting a mission statement and through handling other administrative matters. However, there are a number of advantages and disadvantages of operating an online business, points worth considering as you prepare to launch your enterprise.

Reduced Costs

The main advantage of having an online business is the cost difference when compared to setting up a traditional office-based company. While there are fees associated with securing a domain and setting up a website, these are minimal in comparison to leasing and maintaining physical premises.

Reduced Staff Requirements

Whereas in a physical retail outlet the owner would need to recruit a number of sales staff, with an online business a lot of the work is carried out automatically. For example, purchasing an item online does not require a cashier to take payment: a purchaser simply enters his or her card details and the item is paid for within minutes.

Wider Range

With an online business is that you can market your company on a global scale, reaching potential customers in other countries and continents. You will need to have systems in place in order to dispatch your goods or services to these far-away locations, however. Nevertheless, whereas a physical business can only advertise to customers in a local area, having an online business means you can expose your company to a large number of potential customers.

Saturated Marketplace

Having an online presence does, however, mean that you are surrounded by other businesses within your industry, all desperate to expose their company to a wide audience. As a result, your business may become lost in a sea of similar companies, in which case you will need to discover a product or element to your firm that gives you an edge over your competitors.

Lack of Interaction

With a physical presence staff members can interact with customers face to face. This can impress the purchaser and prompt them to share their positive experiences with others. Some purchasers may simply prefer face-to-face interaction, as opposed to purchasing their goods online. You may struggle to develop a meaningful relationship with a purchaser when you operate an online business.

Support Systems

If a customer purchases an item from a physical store, only to later discover it is faulty, they can return the product to the store for an exchange or refund by means of a relatively easy process. However, if an online purchaser finds that their goods are faulty, it could be several days until the issue is rectified, especially if you have no customer care system in operation. You will need to implement a structured policy and system for refunding faulty goods to avoid customer frustration.

Internet Connectivity

You could stand to lose a lot of time and money if, for some reason, your website goes down and cannot be fixed for hours, or even days. This could cause potential customers to be dissuaded from buying a product from you if they receive an error message when trying to visit your website, and they may communicate their poor experience with friends and family.

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