Over the past decade, online total retail sales have skyrocketed from 4% to 15% of the total retail market in the United States – a growth of nearly $1.4 trillion. So if you’re considering starting an eCommerce business or expanding your current business to online sales, you’ll be in good company. There is a mix of eCommerce businesses that do business exclusively online and have a physical storefront for a part of their sales.
But if you’re still determining the benefits of eCommerce vs retail, or a mix of the two, then read on to learn about why eCommerce could be a good fit for most products.
Is eCommerce a Retail Industry?
eCommerce is a part of retail. Retail is the sale of goods and eCommerce is retail that is done online. eCommerce has some of the same challenges that traditional retail business does, but also has some unique challenges and benefits when compared to a brick-and-mortar store.
What Is the Difference Between Retail & eCommerce?
eCommerce refers to the purchasing and selling of goods and services through the Internet, whereas retail refers to the same activities taking place in traditional brick-and-mortar establishments. Your customers purchase from the comfort of their own homes with eCommerce, but some still enjoy the experience of heading to the store (or combining their shopping with eCommerce and retail).
And because online marketplaces typically have fewer operating expenses than physical stores, consumers can benefit from cheaper overall eCommerce prices.
What are the 4 Types of eCommerce?
There are different types of eCommerce, and each of these four types offers different experiences and benefits to both businesses and consumers:
- B2B (Business-to-Business)
First up, we have business-to-business (B2B) models, which tend to be simple. Business-to-business (B2B) eCommerce refers to the sale of products or services from one company to another. Moreover, it splits into two distinct subsets: A vertical strategy targets customers in a certain industry, while a horizontal strategy targets customers in a broader range of fields.
Depending on the target market, you can either take use of specialized knowledge (vertical) or broad exposure (horizontal). When compared to sales made directly to consumers, B2B sales have a lower conversion rate, but they make up for it in order value, repeat business, and potential partnerships if service quality is kept high.
It’s important to note that this business strategy isn’t without difficulties. One challenge is getting your product or service in front of the right people at the right companies. Business-to-business deals typically involve premium pricing and a drawn-out evaluation period.
- B2C (Business-to-Consumer)
Then we have business-to-consumer (B2C) eCommerce, which is the most common type of eCommerce. These
businesses that cater to consumers on an individual level and satisfy their wants and needs are known as “business-to-consumer” or “B2C” enterprises. Direct sales are similar to conventional retail trade, with the exception that customers do not have to physically visit a store to make a purchase.
Logistics issues and the costs associated with them are among the most frequently encountered limitations of business-to-consumer (B2C) transactions. Because of the smaller number of repeat buyers and a smaller quantity of each order, the business tends to function irregularly.
One advantage is that the sales cycle is shorter than in B2B. Businesses everywhere are either taking a hybrid approach, where they maintain some physical locations while also focusing on internet sales, or even moving solely online.
- C2C (Consumer-to-Consumer)
Next is the consumer-to-consumer (C2C) model, an unusual approach to making money online. Since customers are more assured of their purchasing power, C2C features have emerged, facilitating sales between individuals through online marketplaces (like eBay, Craigslist, and Etsy) for a modest fee.
Although C2C is moving in the direction of being a completely independent business, it should be noted that it is still required to obtain an electronic commerce business license from the appropriate state and federal authorities.
- C2B (Consumer-to-Business)
And finally, with consumer-to-business (C2B), as the name implies, business-to-business (C2B) transactions flip the customer-provider dynamic from B2C transactions. Employees advertise their skills to businesses, which then compete for the chance to use them.
A common C2B case that has grown in popularity over the past few years is freelance work. C2B gives customers more leeway in setting prices, allowing them to shop around for the best deal before settling on a provider.
Is eCommerce More Profitable Than Retail?
Well, that depends. eCommerce can be more profitable than retail, but it isn’t always a guarantee, just like everything with business. eCommerce is no longer an emerging industry, and during the first year of the COVID-19 pandemic, eCommerce sales saw a 43% increase in the U.S. alone (according to the Census Bureau).
Now, more than half of people prefer online shopping to heading to a store in person. But with online shopping, you might see a higher return rate. This might just be due to people over purchasing, like buying all available colors or multiple sizes to find the one they like best.
Benefits of eCommerce vs Retail
When you are considering how you want to sell your products, these are the benefits of eCommerce versus a retail store:
- Overhead costs: Online stores have lower overhead expenses than brick-and-mortar shops. They have no recurring out-of-pocket expenses, including rent, utilities, or employee wages for retail workers. As a result, they can provide their customers with lower prices.
- Audience: eCommerce websites can reach a much larger audience than traditional brick-and-mortar shops. Now that your products can be purchased from anywhere in the world, you have access to more consumers and more markets.
- Time and effort: Spending less time and energy is a significant benefit of starting an online store rather than a traditional brick-and-mortar establishment. There is less of an initial investment of time and energy required, allowing you to begin generating revenue.
- Transactional speeds: Online purchases typically complete more quickly than in-store purchases. A customer can purchase with just a few clicks and have it delivered right to their door.
- Automation: Retail stores are less automated than their online counterparts. This will save you time and effort, allowing you to concentrate on other aspects of managing your business.
Is eCommerce Cheaper Than Retail?
When compared to traditional storefronts, the costs associated with launching an eCommerce business are significantly lower. Except for web hosting and technical support, an online storefront has no fixed overhead expenses like a physical storefront would.
There is no need to invest in store fixtures, signage for both the inside and outside, or interior design. Because you can handle it by yourself, extra help is unnecessary. There are fees associated with maintaining an online store’s website, transporting products, and processing payments.
Domain name registration and having a professional build your website and eCommerce platform will cost money, but they will be much less than the overhead of a physical storefront.
Deciding Between eCommerce & Retail
How and to whom a company decides to sell will determine whether it will focus on traditional or online retail. There’s a big gap between a solo entrepreneur selling a handful of items and a well-established company with a large product catalog and a loyal customer base.
When deciding between a brick-and-mortar storefront and an online marketplace, it’s important to consider several factors, including the size of your initial investment, the breadth of your business operations, and your desire to sell products through a variety of different sales channels.
The startup costs for an online shop are typically lower than those for a brick-and-mortar location. In the former case, you’ll need to put money into things like an online store, domain hosting, and digital marketing software. However, traditional brick-and-mortar stores require significantly more resources and staff. These new business owners have a lot to think about, including the price of rent or a lease, the cost of insurance each year, the price of advertising, and more.
Operations management is essential for the success of both brick-and-mortar stores and eCommerce websites. A lot of physical labor may be necessary for traditional stores. It’s not cheap to run a business, what with having to pay people to work, pay rent or mortgage, keep stock on hand, and deal with fluctuations in supply and demand.
However, many aspects of running an online store can be automated with the help of specialized software. Everyday operations like inventory management and seasonal digital marketing campaigns can be simplified with the use of these instruments.
When products are made available through multiple channels, retailers and online merchants alike benefit. As a result, it’s essential to provide customers with several different ways to interact with your brand online before making a purchase decision. Omnichannel retailing is available at nearly all major brick-and-mortar stores (a fancy way of saying consumers can find products both in-store and on a dedicated version of that store online).
Most online retailers now support multichannel retailing, in which goods can be purchased from a company’s website, various social media platforms, and a mobile app.
Combating Loss & Theft in eCommerce
Of course, both brick-and-mortar stores and online stores face challenges and restrictions similar to those experienced by any other type of business.
Theft is a well-documented risk in retail, and its limitations are also well-known. Modern retailing still faces significant challenges, many of which revolve around the very concept of progress. But physical retail isn’t the only time that theft is a concern. This is a problem even in eCommerce.
In retail, losses are expected and planned for every day. But when revenue is down and losses are mounting, stores can’t stay open. In recent years, retail businesses have experienced unprecedented losses. It’s no secret that ORC (organized retail crime) is on the rise. According to the National Retail Security Survey (NRSS), in 2021, retailers reported almost $100 billion in total shrink.
This skyrocketing trend in retail theft has been accompanied by a similar spike in online fraud. Carding, in which criminals make small purchases on grocery store websites to verify the accuracy of a victim’s credit card information, is just one of many methods of attack that has seen growth.
As online shopping has become increasingly popular, the manual review departments of retailers have been under intense strain. Manual review teams need to strike a balance between approving orders quickly, keeping the customer experience frictionless, and screening out fraud as ‘instant’ has become king and fraudsters have perfected their craft using sophisticated tactics. Merchants have become excessively cautious as a result.
If your store suspects an order is fraudulent, for instance, you can cancel it. But if you cancel legit orders, it will frustrate your customers, and they will take their business elsewhere, as there are plenty of other options just a click or two away.
Aside from shoplifting concerns, with eCommerce, another primary concern is data and information security. The sophistication of hackers and bad actors has increased over the past few years, making data breaches a persistent problem for online services. When starting an online store, protecting the reliability and authenticity of customer information is essential. If you don’t, your current clientele won’t stick around for very long.
So, how should shop owners like you proceed? Well, just know you don’t have to approach solutions to shoplifting, fraud, and data security alone. With the right business partners, you will have access to expertise, tools, and processes to handle online concerns with ease.
Expand eCommerce Operations With AMS Fulfillment
At AMS Fulfillment, our order fulfillment services include a processing phase, where we validate the order and ensure everything looks okay. With your eCommerce platform and secure payment processing – combined with our validation process – the chances of catching and stopping fraudulent orders are higher, and your customers’ private information can stay safe.
We can also help with returns management so that your store doesn’t have to risk the loss or theft that can come with customers initiating a false return. We know what to look out for so that you can rest assured that your company won’t fall victim to the hackers and fraudsters out there waiting to prey on eCommerce business owners and their customers.
AMS is a reliable partner for all your eCommerce order needs, including preventing falling victim to shoplifting and other threats. We have a tried and true method of quality control and can accommodate orders of any size, even during peak seasons.
Every day, our warehouses across the country process over 25,000 orders. If you’re ready to find a partner who can quickly and accurately fill your orders while keeping your company and your customers at the heart of every filled order, then AMS Fulfillment is the place for you. Our teams can process and ship your orders to customers in the U.S. or internationally in a flash. Contact Us today to learn how we can get started.
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