Once upon a time, it was common to see shopping enthusiasts making a trip to the local stores and poring over different shops.
Nowadays, the path to getting the desired product/service is much easier.
Online stores are growing in popularity and numbers, even if retail transactions are still on the rise. According to a study by Forbes, around 24% of all retail purchases will take place through online platforms by the year 2026.
With that in mind, a tricky question arises for new business owners – should they focus on retail, e-commerce, or both?
To answer that, we have drawn up the ultimate comparison between retail and e-commerce, taking into factor current market trends and future projects.
So, buckle up, we’re in for an insightful ride together!
What is Retail?
Traditional retailing refers to the act of making sales through physical stores, carts, stands, and so on. The point-of-sale (POS) system could be based on a single brick-and-mortar shop or large retail chains, like shopping malls.
In the retail setting, small shop owners rarely face competition from other local vendors. However, large retailers are often affected by changes in the economy or national/international competitors.
Retail operations mostly center on a fixed supply chain, where goods and services travel from the manufacturer to the wholesaler to the distributor and finally to the shop.
What is E-Commerce?
E-commerce, or electronic commerce, is the online retail stores that sell goods virtually and ship the products directly to the consumers’ addresses.
In most cases, the transactions take place directly on a specific e-commerce website or platform. Otherwise, channels like social media can be used to facilitate electronic sales.
E-commerce businesses have a relatively streamlined supply chain, as they don’t have to face issues related to stocking and shipping. They directly source the products from manufacturers and use a delivery system to get the products to the customers when the order is placed.
Because of the simplicity of the operations, driving sales through E-Commerce platforms is suitable for small businesses as well as large firms. Both can scale their operations accordingly to reap maximum profits.
Retail vs. E-Commerce – A Head-to-Head Comparison
Both E-Commerce and retail mediums offer their own benefits and share some shortcomings. To determine the best fit for you, it’s best to compare them side-by-side for a better perspective.
|Basis of Comparison
|Starting a retail store is generally more expensive than launching an e-commerce website.
|Launching an e-commerce website is comparatively more affordable than setting up a physical retail store.
|Retail stores require more manual labor for maintenance, such as keeping track of inventory, manning the shop, processing the transactions, and so on.
|E-commerce websites require less labor from the store owner as the majority of the work is shared between manufacturers, delivery executives, marketing, and so on.
|Retail stores cater to the customers of a geographically limited area.
|E-commerce platforms have a larger scope in terms of customer base as they are not limited by geographical boundaries.
|Retail stores are only operational for a fixed time between the day and night.
|E-commerce websites are accessible at all times and accept orders 24×7.
|Purchased products can be procured from retail stores immediately after the transaction.
|The delivery time may vary from one e-commerce platform to another, but immediate delivery is never possible.
|Customers can easily conduct an audit to check the quality of the product while browsing in retail stores.
|Customers have to wait for the order to be delivered before they can check the product for any quality defects or other shortcomings.
|Returns and Exchanges
|Returns and exchanges depend on the retail store’s policy. Products need to be returned directly to the store by visiting it physically.
|Returns and exchanges depend on the E-commerce seller’s policy. Products can be returned to the delivery executive by placing a return/replacement request on the website.
As you can see, both retail stores and e-commerce platforms are very different from each other in terms of aspects like convenience, logistics, and operations.
What is better for your business will depend on your preferences as well as organizational goals.
Choosing Between Retail and E-Commerce: Things to Consider
You have already learned the differences between retail and e-commerce stores. Based on that, have you been able to decide which one is more suitable for your business?
The actual decision should be based on some pragmatic considerations.
Here’s what you need to think about:
1. Your Business Model
Some businesses require intensive operations that are better suited to retail sales. Others favor the e-commerce approach to selling.
Ask yourself some important questions – for example, where will you be supplying your products from? Will you be selling directly to the consumers or through a distributor? Will you be selling your own products or outsourcing them?
These questions will give you a comprehensive picture of which trade channel is the best one for you.
2. Start-Up Budget
To start any business, you need significant capital. However, opening brick-and-mortar stores can be more expensive.
Based on your budget, you can decide to either build a physical store that requires more capital or start an e-commerce platform, which will help you save a lot.
3. Size and Scope
The final consideration will be your organizational goals and aspirations. How far do you want your business to scale and grow?
Depending on the answer, you may choose retail or e-commerce.
Generally, retail-based businesses don’t grow beyond a certain point unless you want to start a chain, which can be quite capital-intensive.
E-commerce platforms have a wider scope as they are not limited by geographical means, and it’s easy to scale them up without requiring heavy investment.
The Omnichannel Approach to Business – Benefits and Shortcomings
In 2023, the strict line between retail and e-commerce channels has blurred significantly. Companies are now reaping the benefits of both.
It’s common to see ambitious business owners investing in brick-and-mortar stores while also establishing an e-commerce presence on the Internet.
The benefit is quite clear – you are expanding the market to capture both in-store shoppers and online shoppers.
However, this can also prove to be more expensive and difficult to handle. While using such an approach, it’s essential that you keep the data, operations, and logistics of both channels separate.
Coming up with a unified strategy will be a big hurdle. But once you are past that point, the omnichannel approach will be the most profitable of all.
What’s Better for Customers – E-Commerce or Retail?
The answer to this question varies from customer to customer, depending on their individual preferences.
If they are looking for convenience, e-commerce is unparalleled. They can place an order anytime they want, from anywhere they are at that moment.
There are tons of other benefits as well. E-commerce platforms allow them to compare prices of similar products, arming them with the necessary information to make informed purchasing decisions. Moreover, these platforms are highly accessible and reduce the costs and hassle of traveling from one store to another.
As with any channel, there are some downsides to this approach as well. For one, customers won’t be able to see the products physically. This might lead to inefficient purchases due to potential quality defects, sizing issues, and so on.
Overall, e-commerce platforms offer more benefits than they have shortcomings from a consumer’s point of view.
What’s Better for Businesses – E-Commerce or Retail?
Most store owners are launching their own e-commerce platforms or establishing their presence on an existing one like Shopify.
That’s because this business model is more beneficial for them.
The cost of inventory, upkeep, and management will go down significantly when they shift to the virtual mode.
With retail stores, the expenses are much higher – you need to build a physical store, pay to keep it running, manage inventory, store goods efficiently, and so on. The overhead charges are much more significant.
E-commerce platforms, however, face fierce competition and require powerful USPs and strategies to stand out.
Our Opinion – What’s Better?
In our opinion, mixing the benefits of e-commerce and retail channels will be the most beneficial approach.
By providing multiple touchpoints, you can target customers who prefer shopping from physical stores while also allowing internet users to browse through your listings on social media, websites, and so on.
Doing so will drastically increase your business’s visibility and hit all the checkpoints necessary to become a formidable business.