Whether you’re planning your next big business move or simply deciding on weekend plans, examining the potential risks and rewards before you move forward can help you make an informed decision.
If you’re considering venturing into the world of ecommerce, we’ve done some of the work for you. Read on to learn about the advantages and disadvantages of ecommerce and whether it’s right for you and your business.
What is ecommerce?
Ecommerce refers to buying and selling goods or services online. All sales made on the internet are considered ecommerce. These can be business-to-consumer (B2C), in the case of online stores; business-to-business (B2B), for cases when companies sell services to other brands; or customer-to-customer (C2C), where individuals use online markets like Poshmark or Facebook marketplace to sell goods to each other.
Though ecommerce stores are online, they may sometimes delve into physical retail by setting up permanent locations, opening pop-ups, or by having a partnership with a brick-and-mortar business. And increasingly, brick-and-mortar stores need an online presence, too. Ontario-based mattress company Polysleep is a prime example of this hybrid model.
Advantages of ecommerce
Ecommerce is popular with both customers and brands. These are some of the advantages to consider as you choose the best approach for your business:
Fewer upfront costs
Setting up an online business is significantly cheaper and easier than opening a physical store. Brick-and-mortar businesses face several upfront costs, including renting and stocking a retail space, purchasing sales equipment, and potentially hiring employees. Setting up an ecommerce website requires a smaller initial investment. Potential business expenses include buying a domain name, paying web hosting fees, and purchasing services from an ecommerce solutions platform.
With a physical store, your goods are available to anyone who walks in the door. An online store, on the other hand, can serve national and international audiences, gaining access to a larger pool of potential customers.
In an episode of Shopify Masters, Polysleep CEO Jerimiah Culvers highlights the importance of having a platform that can handle international purchases and reach customers who speak different languages: “If you're on Shopify Plus, it's just so much easier to manage multilingual now, whereas before if you wanted to have a subfolder structure, it was a lot more complicated.”
Ecommerce businesses can use numerous techniques to boost web traffic. Digital marketing, search engine optimization (SEO), and social media utilization are all ways to bring in ecommerce customers who are searching for products and services online. By starting your business online, you can reach beyond the pool of potential customers in your physical location.
Advanced customer data
Ecommerce companies have access to large amounts of customer data, including purchase history, engagement, conversion rates, and how they landed on your store. Tools like Google Analytics can help you understand this data and identify patterns. An online store can easily spot trends and popular products and use this information to make future online marketing decisions.
For physical retailers to grow, they often need to find new retail space and hire employees. Online businesses are more flexible. As long as the product is in stock, an ecommerce store can handle increased sales—although additional workforce may be required to upkeep the website and handle customer support.
Forget standard operating hours—ecommerce shops are always open for business. This can be a huge advantage because it allows customers to shop online when the mood strikes them. This may encourage behaviors like impulse buying.
Disadvantages of ecommerce
It’s important to consider all the advantages and disadvantages before entering the ecommerce market. Establishing an online store can be a great choice for many businesses, but there are also challenges to this approach:
Setting up an online store might be difficult for individuals who lack technical experience. It may require some technical expertise to ensure your website is optimized for mobile devices or to fix any problems that arise. Complications can arise on the consumer end as well—customers need a stable internet connection to make a purchase.
Online retailers process and sometimes store sensitive customer data, including home addresses and credit card information. Handling this information safely requires a secure website. If a data breach occurs, you’ll need to inform customers, which could damage your brand's reputation.
Limited customer experience
The online shopping experience can’t replicate all the elements of shopping in a brick-and-mortar store. Some buyers may prefer the experience of comparing products in real life, particularly for goods that need to be tried and tested.
In the same Shopify Masters episode, Polysleep CEO Jerimiah Culvers emphasizes that if your business is limited to online sales, you may miss out on potential customers. “We know for a fact that, when someone sets foot in a retail store specialized in selling mattresses, if we're not there, the odds are we pretty much lost that person.”
Online shoppers typically pay shipping fees to have their orders delivered. These costs vary depending on the customer’s location and the service that they select—same-day shipping is more expensive than standard delivery, for example. Shipping charges add to the cost of your product. If the fee is high, it could discourage customers from making a purchase.h
Is ecommerce right for you?
Determining the best sales strategy requires a strong understanding of your product and your customer base. Consider these aspects of your business to determine if ecommerce is right for you:
Conduct audience research to understand your target customer and their shopping preferences. Different demographics may have different purchasing behaviors. For example, younger customers may prefer shopping online, while an older audience might prefer to browse in person.
Not all products are well-suited to online sales. Perishable items might not fare well during shipping, and some products, like those containing lithium-ion batteries, may be subject to shipping restrictions. Research local shipping rules and regulations related to your particular products before you decide to sell your product online.
Take the time to understand the market for your product. If all of your competitors offer online sales, establishing a digital presence may help your business stay competitive.
Take a look at your long-term goals. Ecommerce advantages include the ability to scale quickly and to reach more customers. If you see your business as a scrappy start-up with big growth ambitions, the online world may offer the opportunities that you crave. If your goal is to become a local mainstay and serve a specific community, a physical retail store might be a better solution.
Advantages and disadvantages of ecommerce FAQ
What is the most secure ecommerce platform?
The best platform for security may vary depending on the type of information that your ecommerce business processes. Shopify uses SSL encryption, PCI compliance, and fraud analysis tools to offer a secure platform for ecommerce businesses.
How do you choose the right ecommerce platform?
Look for a platform that suits your budget and your specific business needs. Consider elements such as included security features, SEO tools, customer support, and ease of use.
What are the benefits of ecommerce for customers?
Online shopping is convenient and customer-friendly. With an ecommerce store, customers can shop whenever they please and can access additional information by reading product descriptions.