Over the past decade, e-commerce has taken off like a shot, with sales topping $1 trillion in 2022, according to Comscore’s 2023 State of Digital Commerce Report. So, it’s easy to assume that brick-and-mortar stores are on their way out.
But that couldn’t be further from the truth.
While e-commerce has certainly made significant gains, brick-and-mortar is still a $4.44 trillion industry. So, if you’re thinking of throwing in the towel and going all-in on e-commerce, hold off on making a decision. There’s so much to consider.
In this e commerce vs brick and mortar comparison, let’s discuss out the pros and cons of e-commerce and brick-and-mortar — and find out which business model will work for your business.
Choosing the Right Business Model
Choosing the right business model is one of the most important decisions you’ll make as a business owner. It can impact everything from your revenue and profitability to your customer experience and brand reputation.
And when it comes to finding a business model that works for your business, you need to consider four important factors:
- Target Market – Do your customers primarily shop online or prefer to do it in person? This will help you determine how to use your business model to generate demand.
- Product or Service – If you’re selling physical products, a brick-and-mortar store might be necessary to help customers see and touch the products before they buy. But an online store might be a more cost-effective option if you’re selling digital products or services.
- Equipment – E-commerce requires different equipment than brick-and-mortar. For instance, you’ll need a portable EFTPOS machine from a provider like Smartpay to process payments on the go when you’re selling cakes in person. An online credit card processor will do the job if you’re selling online.
- Resources – A brick-and-mortar store can be expensive, so you need to make sure you have the resources to cover rent, utilities, staffing, and other expenses. In contrast, an online store can be cost-effective, but you’ll still need to invest in a website, marketing, etc.
Now that you know what to consider when starting a business, let’s take a look at the pros and cons of brick-and-mortar and e-commerce to find out which business model is right for you.
Pros and Cons of Brick and Mortar
When it comes to running a business, there are definitely some advantages to brick-and-mortar. But there are also some drawbacks to consider. Let’s take a dive:
Pro#1: Higher Personal interaction
When you have a physical store, you can interact with your customers face-to-face. This can help you build stronger relationships and better understand customer needs and preferences, leading to repeat business and positive word-of-mouth referrals.
Con#1: Increased Overhead and Equipment Costs
Brick-and-mortar businesses can expect to spend between $500 to $10,000 monthly on marketing and advertising, especially when starting as a blank slate. Plus, commercial rental space is more expensive.
So, rent, utilities, and staffing expenses can eat into your profits if you’re not careful.
Pro#2: Tangible Experience
Think about it: when customers can see, touch, and try on products in person, it can create a more engaging and memorable shopping experience. This can be especially important for items like food, clothing, and shoes.
And with 83.9% of sales being offline, creating a tangible experience can make the difference between making a profit and breaking even.
Con#2: Limited Reach
When you have a physical store, you’re limited to the customers who live or work nearby. This can be a disadvantage if you’re trying to expand your customer base or reach customers outside your immediate area.
Plus, with social commerce predicted to grow by $1.2 trillion by 2025, you may be limiting your potential revenue and customer base by not having an online presence.
Pros and Cons of E-commerce
E-commerce has revolutionized the way we shop, offering a range of benefits that were previously unimaginable. However, it’s not without its drawbacks. Here are some pros and cons of e-commerce to consider:
Pro #1: Massive Reach
An e-commerce store can help you reach customers worldwide, increasing your leads and revenue potential. And with 2.41 billion customers wandering the seas of online commerce, you can make thousands of conversions at the same time.
Plus, e-commerce is expected to make up around 20.8% of all worldwide sales in 2023, so there’s never been a better time to start a successful online store.
Con #1: Lack of Personal Touch
Customers don’t have the opportunity to speak to a sales associate for advice or recommendations. This can lead to uncertainty about the product quality and a lack of trust in the online shopping experience.
However, many e-commerce businesses have found ways to address this issue, such as providing detailed product descriptions, high-quality images, and customer reviews.
Pro #2: Cost-Effective
Without the overhead costs of a physical store, you can often offer lower prices to your customers. This can be a major selling point for budget-conscious shoppers.
Plus, you can spend more on marketing and product development, increasing leads, improving customer satisfaction, and skyrocketing your ROI.
Con #2: Lack of Sensory Experience
Customers can’t see or touch products before purchasing them, which can lead to increased product returns. This shows that a lack of sensory experience in e-commerce can cause customer disappointment and dissatisfaction.
Plus, some products, such as fragrances or food items, rely on sensory experiences that can’t be replicated online.
There’s no one-size-fits-all answer when it comes to choosing the right business model for your retail business.
However, by considering the pros and cons of each option and understanding your customers’ needs, you can make an informed decision that will help your business thrive in the years to come.
So, start by identifying your goals, researching your market, and analyzing your resources. And remember: no matter which model you choose, always prioritize your customers. They’ll keep your business afloat.