Since the internet boom and the launch of online retail, US E-commerce sales have been growing exponentially and have reached a trillion dollar mark in 2022. However, that doesn’t mean any decrease in sales or the presence of physical stores.
According to NRF, nearly eighty percent of retail sales in the US still occur in physical stores, highlighting this with the fact that physical stores were opened at an unexpected pace after the 2020 pandemic.
We do agree, that the convenience offered by E-commerce is undeniable allowing people to engage and access the product from anywhere and everywhere. However, the experience provided by brick-and-mortar stores is unmatched by online retail.
So, where does the future lie — retail or e-commerce?
The Difference Between Retail and E-commerce
Retail stores refer to traditional physical or brick-and-mortar stores with in-store purchases and physical interaction with the product. Popular examples include retail chains like Walmart, Best Buy, and The Home Depot.
On the other hand, e-commerce involves the selection of products from online stores, with digital transactions and home delivery. Amazon, eBay, and Target are some of the popular companies deriving the majority of e-commerce sales in the US.
The key differences between these two are the shopping experience — handling the product directly in physical stores versus viewing it online in e-commerce — and pricing, as online products are often priced lower than those in physical stores.
E-commerce vs. Retail for Businesses
For businesses, looking to expand their foothold, choosing between e-commerce and retail should be considered on various factors including the market gap, buying behavior, and whether the audience they are selling to is willing to purchase the product or not.
A product that belongs to a particular niche and is difficult to access with physical stores can select e-commerce as the best option through which it can cater to a global audience. However, the product which relies on physical demonstrations, and a localized network — can select retail as its preferred solution.
The broader reach in e-commerce can help you scale your business, however, the shipping costs, delivery delays, etc can make a dent in your profit. Physical stores are based on impulsive buying, face-to-face customer engagement, and physical interaction with the product which fosters customer trust and loyalty. But it also comes up with challenges like higher operation costs which makes it hard for smaller businesses to grow and survive in the market.
Let’s understand each of these factors in detail for a clear understanding.
Cost and Infrastructure
The first thing that crosses your mind when starting a new business is the initial cost of setting it up — How will I gather funds for the initial months? How long it will take to get the first customer? How long it will take to generate the first profit?
These questions are legit for an entrepreneur and the answers to these questions are necessary to be informed regarding future decisions.
Retailers
The investment cost for retail depends on various factors including real estate, rent, labor salaries, etc which makes it quite expensive to set it up compared to an e-commerce store.
Moreover, a brick-and-mortar store is associated with recurring and long-term costs beyond the initial setup including property maintenance, insurance, and inventory management.
E-commerce
The initial investment required to set up an e-commerce business is relatively low. It requires setting up an e-commerce platform, domain, hosting, and other marketing and automated tools necessary for increasing the visibility of your platform.
Operations
Operations are a crucial part of running a business and they may vary for different types of professions and can not be put into one category. Similarly, there may be some differences and similarities between retail and e-commerce with regard to operational complexity. Let’s discuss them also:
Retailers
Retailers face increasing operational complexity, managing everything from suppliers to customers. This involves extensive processes, including inventory management, logistics, marketing, and customer service.
E-commerce
Handling operations in e-commerce is relatively easier than in retail. Many tasks can be automated, including:
- Inventory management, which involves tracking various channels in real-time, such as website stock, warehouse stock, and third-party suppliers.
- Logistical supply to customers, which can be automated through delivery services.
- Customer service can be managed online without any face-to-face interaction.
However, this doesn’t mean you should completely rely on automation. Real-time monitoring is essential, and managing all the above operations still requires time and resources.
Marketing and Customer Acquisition
A marketing channel is important for businesses of any type and size. It nurtures the growth and development of the business allowing it to acquire leads and convert them into potential customers.
Retailers
Retail marketing is more of a local and physical thing relying mainly on in-store and off-store marketing tactics.
In-store marketing refers to strategies employed by retailers within the vicinity of their physical stores to influence the purchasing decisions of the consumers. This involves eye-catching product displays, point-of-purchase displays, promotions, and discounts aimed at encouraging immediate purchases.
Off-store marketing refers to the marketing strategies that take place outside the vicinity of the physical store to increase footfall and brand awareness. Word of Mouth, banners on the street and transport system, and sponsoring events are some of the strategies brought into play by retailers to expand their business reach.
E-commerce
E-commerce businesses heavily rely on digital marketing. SEO, social media marketing including ads and influencer marketing, and email campaigns are some of the factors that help businesses in their customer acquisition.
E-commerce vs. Retail for Customers
E-commerce offers numerous advantages and time-saving benefits for consumers. Shoppers can browse products online, compare prices across different options, and secure the best deal from the comfort of their homes while simply waiting for delivery. However, this doesn’t mean e-commerce has completely surpassed the retail market. In fact, retail still holds many advantages over e-commerce businesses.
Customer Experience
Customer experience plays a crucial role in shaping a brand’s success. Every interaction with a customer has the potential to strengthen or weaken the relationship they have with the company.
Retail
Face-to-face interaction is necessary for a brand to create a true connection with its customers. This personal interaction helps in the comprehension of customer’s emotions and feelings, which in turn fosters trust and strengthens the relationship with the brand.
The proactive support provided by the physical stores including immediate assistance, hands-on demonstrations, and checkout assistance adds to the experience of customers and is much better than dealing with potential issues on the chat.
E-commerce
Physical support shouldn’t be underestimated. However, the support provided by e-commerce businesses tends to be more reactive. Customers can reach out 24/7 via email, phone, or chat, without being limited by store hours.
Shopping Experience
According to a report by PWC, 32% of all customers will stop doing business with the brand they are loyal to after a bad customer experience(source).
Therefore, delivering a pleasant and positive shopping experience is crucial for both retail and e-commerce stores. There’s no reason a customer would choose to buy from a place that complicates the purchasing process.
Retail
The retail shopping experience is more grounded in physical interaction. Customers can touch, feel, and try out products before buying, making the purchasing process more interactive and immediate.
This leverage over e-commerce allows retailers not only to facilitate shopping at their stores but also to connect with customers on a personal level.
E-commerce
Though e-commerce doesn’t allow for direct interaction with customers, it enhances their shopping experience by offering key advantages, convenience — 24/7 shopping and customer support, efficiency — easy product comparisons and data-driven personalization, and flexibility — the ability to browse and purchase from anywhere at any time.
Convenience
Convenience in retail and e-commerce refers to how much easier and faster customers can complete the shopping process — From finding products to making a purchase.
Retail
Retailers may not be able to provide the level of convenience compared to e-commerce. But, there are some options to consider that amplify the experience, including immediate product access, personalized service, and physical interaction, which help level up the convenience offered by retail.
E-commerce
The concept of E-commerce is based on convenience. It allows consumers to look for products from anywhere at any time, compare prices from different online retailers, read reviews from previous customers, and apply offers to multiple payment options, which makes it easier to get the best product from the market.
What to choose — Retail Or E-commerce?
These factors are important to consider before choosing between retail and e-commerce for your business:
Business Model
Knowing the business model is important in determining which option would be best in the future. Retail is an ideal option if your business relies on customer experience, local demand, and physical interaction with the products.
However, selecting e-commerce would be the best decision if your company is dealing in B2B and C2C. It also works best for businesses that are looking to scale at a global level or sell niche products on high margins.
Target Audience
Identifying the target audience before starting a business is the most important step. Is your audience tech-savvy enough to prefer e-commerce? Does your audience prefer an in-person shopping experience over the convenience of online shopping?
Operational Costs
Retail, in general, requires a huge upfront investment and monthly recurring expenses, including salaries, maintenance, insurance, and rent. An e-commerce business has a comparatively lower cost than retail, with an upfront investment in domain, website hosting, logistics, and marketing.
Conclusion
Both retail and e-commerce have their own plus points, and assuming that retail will not be dominated or will die out after some time is a very naive decision. The best answer for the retail vs. e-commerce debate would be to ask yourself the motive of the business or what it is trying to achieve.
I hope you like this blog. Feel free to message me anything you need clarification on. Follow me on Twitter. Thanks for reading!
