Sep 16, 2021
eCommerce: Advantages and Disadvantages of Running an Online Store
The eCommerce industry has grown rapidly in recent years and shows no sign of stopping. It’s estimated that online sales will grow up to $6.5 trillion in 2023.
Why is eCommerce so attractive to both retailers and customers? We’ll explain the advantages and disadvantages of eCommerce businesses and why you should start one.
Advantages of eCommerce Businesses
First, we’ll look at the advantages of the eCommerce business model and why it has recently become a more appealing option than a brick-and-mortar business.
1. Low Startup Cost
Starting an eCommerce business requires a lower startup investment compared to the alternatives. A traditional store generally needs multiple store locations and offices to operate as well as investments in store design, setup, and inventory.
An eCommerce solution cuts down on the cost by eliminating the need for most physical locations and a large number of employees.
It’s also possible to cut the cost further by choosing a specific type of business model. For example, a dropshipping business enables you to sell items without producing and storing them.
2. Extensive Market Reach
One of the benefits of having an online presence is the much wider reach your store will have. 87% of shoppers begin their product searches on an online platform, making eCommerce an ideal way to gain more customers.
Conducting your business online allows your products and services to become accessible worldwide. With the use of a website, you’re able to cover a much broader area compared to physical stores.
3. Open 24/7
Online stores are always open for business, which gives customers the option to make a purchase anytime they like.
People who have a hectic schedule or do not have a physical store in their area can browse and purchase from your store without having to leave their homes.
An eCommerce website with excellent uptime and automated order processing will give you the ability to generate constant revenue without having to worry about scheduling and working hours.
Automation is one of the best benefits of eCommerce. From handling payments and sending promotional emails to updating your inventory and providing customer support with the use of a chatbot, it cuts down on work and the number of employees you’ll have to hire.
With these advantages in place, you’re free to manage the marketing and management aspects of your business.
Automation minimizes the risk of human error as well. If your automated systems are functioning properly, there should be no risk of sending an email, product, or bill to the wrong person or address.
5. Customer Retargeting
While many customers view a variety of relevant products, a number of them will inspect the item and leave without completing the purchase.
You can recover the sales opportunity by engaging in customer retargeting. It’s an advertising campaign that displays online ads of viewed but unpurchased products to the respective visitors of your online business.
It’s an effective online marketing strategy that cannot be achieved when doing business in a physical location as there is usually no way of contacting a customer after they leave.
6. Easier to Scale
As your business grows, you will have to engage with an ever-increasing amount of customers.
With eCommerce, you’ll only need to upgrade your hosting plan and eCommerce functionality to handle more traffic. Any advertising campaign can also be adjusted painlessly by simply increasing the ad budget.
The same can’t be done with a physical store – in order to accommodate more shoppers, you’ll need to increase the space of your facilities. This will cost a lot more than having to scale a website.
7. Personalized Shopping Experience
The eCommerce business model enables you to enhance the online shopping experience of your customers by personalizing your website for every visitor.
You can personalize the experience based on user location, such as displaying pricing in local currency. If your website has an account-based system, you can recommend items that are based on their browsing experience, much like on Amazon.
This also works for returning customers. The store can remind them about the products that they frequently view or have had in their cart and abandoned them.
8. Less Invasive for Customers
Some shoppers enjoy less invasive shopping experiences – they don’t like the sometimes intense interactions with store employees.
This is where this type of customer benefits from eCommerce. A website enables a visitor to browse privately without any disturbances. If a customer needs help, they can contact the customer support team through live chat or email.
9. Analytics Tools
Another advantage of eCommerce is the ability to integrate analytics tools such as Google Analytics. These tools can help you identify vital information that comes from your customers, such as their geographic or demographic characteristics and purchasing behavior.
Some heatmap tools like Hotjar and Zyro AI Heatmap also provide information about how visitors interact with your website. By learning how your users navigate your website and which areas they pay the most attention to, you can optimize your website for a more enjoyable user experience.
10. Able to Process Multiple Orders at Once
Even if a business owner takes all the necessary precautions, it can still get crowded and busy in a brick-and-mortar store. If there’s a large queue by the register or the customer is buying a lot of products, the transaction can take a long time.
When doing business online, this issue is mostly eliminated. If you scale your eCommerce website accordingly with your business, the traffic you get should never meaningfully impact the amount of time it takes for a customer to complete his order.
In ideal cases, thousands of customers can complete an order in the time it would take at a register.
11. Easier to Encourage Impulse Buying
With eCommerce, you can deploy several strategies to attract impulse buying. You can place attractive product pictures and sales promotions on a header banner complete with a call-to-action (CTA) button to encourage your visitors to make their purchases.
Another employable strategy is exploiting the fear-of-missing-out (FOMO) to encourage customers to buy the product. An example of this strategy is offering a special promotion for a limited time with the display of a live countdown to create a sense of urgency.
12. Quick Shopping Process
The eCommerce business model enables shoppers to find exactly what they’re looking for in a far lesser amount of time than it would take in a brick-and-mortar store.
Visitors can utilize the search bar to find the product that they need and continue to customize parts of their order, such as the color, size, or version. Thanks to the advantages of the automatic inventory tracking system, a customer can quickly be informed whether the item is in stock or not.
This is in contrast to brick and mortar – the shoppers can only view what’s available on display and have to ask an employee whether different colors and sizes are available.
13. Reduce the Cost of Hiring and Training
Your eCommerce shop doesn’t need as many employees as a brick-and-mortar store. You don’t need to hire cashiers, security guards, cleaning services, and other personnel important for a physical location.
However, you will still need to employ a customer support team, as well as other people to help you manage the various aspects of your organization.
Disadvantages of eCommerce Businesses
Despite all the advantages of eCommerce, there are downsides to it as well. Since we’ve promised to talk about both pros and cons, let’s take a look at some of the disadvantages.
1. Downtime Means Losing Customers
One of the disadvantages of eCommerce is the halt of any transactions when your site requires maintenance or goes down due to a server failure. As a result, you will lose your potential revenue.
Downtime can also create a negative impression for visitors – they may think that your website is not reliable. Mistrust can result in a reluctance to engage in a credit card payment.
Therefore, it’s essential to host your online store on a reliable platform. It ensures that your website will be up and able to handle any traffic surging your way.
2. Customers Can’t Try the Items
In a physical retail store, shoppers can try out any appliances or clothing items before committing to the purchase. This can’t be done when shopping online.
In order to overcome this issue, online shopping stores regularly employ a return policy if the item does not meet the customer’s requirements. However, this results in the additional hassle that customers don’t appreciate.
However, technology is being developed to solve this problem. Some online retailers integrate Augmented Reality (AR) into their shopping experience. This allows customers to see how the product fits them with the help of a virtual display.
3. Customers Demand Quick Response
Whether it’s a question about payment, order processing, or delivery time, customers expect an instant response. If your business cannot respond in time, the chances are your customers will find another place to shop.
This is why it’s recommended to have a customer service team ready to help your customers 24/7. You can integrate a chatbot to alleviate the problem, however, it will not replace the personalized chat experience that your customer base expects.
Having a chatbot as the first line of support is a great idea, however.
4. Compulsory Sign-In Puts Customers Away
Not everyone is willing to input their information and sign up for an account when shopping online. Those who don’t intend to make a repeat purchase may think that signing up is a waste of time, especially if they need to purchase in a hurry.
Increased chances of a cyber-attack is another reason for such reluctance. To prevent such an attack, you need to ensure the security of your website with such methods as an SSL certificate or two-factor authentication.
5. Highly Competitive
With the relative ease of starting an online store, the eCommerce industry is highly competitive. Customers can also easily and quickly compare prices between stores, urging vendors to always keep up with the state of the market.
One way to differentiate yourself is to offer a unique selling proposition (UPS). Doing so will prevent you from having to lower the price of your products.
Having to deal with shipping is one of the major disadvantages of eCommerce.
Expensive shipping costs coupled with the waiting time required for the products to arrive can deter shoppers from completing their purchases.
Shipping time can vary depending on the shipping service and the location of the recipient. Therefore, it’s crucial to let the customers know the expected delivery time when they place their order as well as provide shipment tracking when available.
Specific tariffs and regulations may apply if you intend to ship internationally. These taxes will have to be paid by your customers, so keep them informed about this.
7. Lack of Personal Assistance
Customers may still prefer to shop at brick and mortar stores for specific niches like jewelry or high-end fashion goods. Face-to-face interaction with an expert on the subject is preferable when purchasing such expensive products.
Without a devoted team to accommodate this need, this experience is not replicable in eCommerce.
Now that you know the advantages and disadvantages of eCommerce businesses, you should be ready to start one yourself. Despite the drawbacks, eCommerce has become so favorable, that most brick and mortar retailers have developed eCommerce platforms to complement their business.
Remember – to engage in online business successfully, you will need a reliable platform to host your eCommerce website to guarantee your website’s uptime and security. Make sure you pick carefully.