Why Ecommerce?

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Why there is a need to change the business style from traditional stores to the ecommerce? Let’s elaborate in details. 

Many people and companies are entering the ecommerce business. Small businesses are moving or extending their business to online stores. Let’s figure out why these businesses are more kin to online stores than the traditional physical store.

Both business models have their advantages and disadvantages. Let’s look out what these are-

1. Entry Cost

Ecommerce is a cost-efficient way to enter the market. There is no entry barrier. That’s why many people & companies are entering the ecommerce world. There is no need to buy or rent a physical property or space to run a store online. Whereas to run a physical store you need high capital upfront.

            The first and major cost is selecting and acquiring the space for the store. There are two options to acquire the space for stores – either you can buy or rent a space for the store. If you buy a space for a store then it requires huge investment upfront, even when you have not entered the market. If you rent a space then you have to make or keep some amount of money as a deposit to the land owner and you are committed to make a fixed monthly payment to the land owner. No matter if you are profitable or not.

Whereas for running an ecommerce you do not need to spend such a huge amount upfront. You just need to purchase the domain and need hosting to run an online store. Which makes ecommerce less costlier than the physical stores. The entry cost is very low as compared to the physical stores.

2. Maintenance cost and Cost required to run store

            After the store is built, now it’s time to run the store. What are the costs involved in running the stores, which will add further burden. Maintenance of physical stores is no doubt more expensive than the online stores. For running physical stores you need to hire a salesperson, a person to clean the store on a daily basis. You have to also maintain the furniture and displays, there is always small wear and tear to these. They also create some expenses on regular intervals.

Ecommerce stores are away from such maintenance. Once you build the store then there is hardly any cost in maintenance of ecommerce. So maintenance of the ecommerce is much cheaper than physical stores.

3. Advertising and Marketing Cost

The advertising and marketing cost is another aspect for running a business. In physical stores you can also go without advertisements and marketing. But in this competitive world you have to advertise and market your store to stay ahead from the competition. These costs vary from store to store. Some may require a high budget for marketing and some may require very low to no money for marketing.

Advertising and marketing cost is the major expense of ecommerce. Ecommerce businesses need regular advertising and marketing to attract customers. The advertising cost is high due to the low entry barrier in ecommerce. Many ecommerce stores are bidding for the same product advertisement, making ad costs high. But this can be managed smartly by properly optimizing the SEO and Ad sets.

4. Product Range Expansion

            The physical store provides you the limited space to display your products. You can display limited numbers of products. This means at some point if you want to expand your product range then it will be difficult to expand in the physical store because of limited space. For displaying more products you need more space.

            For that, you have to again buy or rent more space. In most cases, it is very difficult to expand the same store because the neighboring stores will not be easily available. If you rent or buy space in a different location for expanding the product range, then again you can’t display all the products in a single store unless you go for the bigger space than the previous store.

            Suppose your existing store has the capacity of displaying 100 products at a time. So you can sell those 100 products only. You cannot go beyond the 100 products. For displaying another 25 products you need extra space for display. You can get extra space by acquiring a neighboring store or some other store nearby. If you acquire a neighboring store then it is good but the chances are very less. If you get a store nearby with a display capacity of 50 then you can display the extra 25 products in that store. But you cannot display all 125 products in one store. The customers are very lazy. They are not in a mood to check one product in store 1 and the other in store 2.

The relocation of stores is also a problem. You have to redirect all your existing customers to the new store. And we all know how difficult it is to direct existing customers to new stores. In general, it is impossible to direct all customers. Even bigger and established brands failed to do that. You have to again build trust.

Product range expansion in ecommerce is very simple and very low cost. You just need to get better hosting for expansion, which is very low.

5. Customer Reach

The reach of physical stores is limited to only local. You can reach the customers of only that particular area unless and until your store is selling very unique products that no one else does.

You can target the customers of the whole world. The only thing is that you are able to deliver the service or product to those parts of the world. The reach is unlimited in ecommerce. Social media has very wide reach all over the world.

6. Loss on exist

Staying in the business needs lots of commitments.  You need to look at many things at one time. Making a store does not guarantee that it will be profitable. Many times store owners have to exit the market by shutting down the store. The reason for the shut down the stores can be many. This applies to both online as well as physical stores.

As we understood that physical stores need high capital to enter and ecommerce needs less. So if we exit the market the loss is more in the case of physical stores than the online stores due to the high capital involved in setting up the physical stores.

7. Competition

Competition is a part of every business. There is no business that they do not have competitions. If there is no competition that means businesses have no buyers. No buyers mean no profit. No business can survive without profits.

The ecommerce is highly competitive. The low barrier of entry makes ecommerce highly competitive. The competition is there because they have buyers for their services and products. It is very difficult to excel your competitors because the market is open for all. 

The physical stores have less competition due to their high-cost entry in the market. The competition is mostly limited to local stores. You can excel your competitors by managing your business better.

Want to learn more about how can you use Social Media marketing to enhance your business visit Digital Mitali’s blog.

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