Globally, online retailers account for nearly 20% of retail sales, growing in popularity and profitability. In spite of this, physical stores are still doing well.
A total of $6.6 trillion was sold in brick-and-mortar retail in 2021, according to the US Census Bureau.
The concept of retailing and e-commerce refers to the process by which a business sells products and services to an individual customer. A retail store’s sales process differs significantly from an e-commerce store’s sales process, as well as its advantages and limitations.
How do retail sales work?
A retail sale is one made in a physical store. Brick-and-mortar retailers range from large chains-like grocery stores and shopping malls-to small, local shops (think pop-up shops and farmer’s markets).
Before the products or services reach their customers, retail stores are the last link in a supply chain. Throughout the distribution process, goods go from manufacturers to wholesalers to distributors to brick-and-mortar stores to consumers.
How do e-commerce sales work?
Ecommerce sales are those made digitally. Purchases online can be made via eCommerce stores or social media.
Compared to their retail counterparts, ecommerce business models typically have less steps in their supply chain. That’s because online retailers have more options when it comes to stocking and shipping their goods.
Two of the most popular methods are drop shipping and direct to consumer (DTC). With drop shipping, an ecommerce business sells products that are stocked and shipped to consumers from a third party. By comparison, direct to consumer is when goods are sold directly to consumers without the involvement of wholesalers or third-party retailers.
Retail vs. e-commerce for consumers
When shopping in a store, one visits a brick-and-mortar location, browses products, completes a purchase with a salesperson, and then takes the items home.
Online shopping, however, has many potential entry points. Consumers can use digital marketing campaigns or social media recommendations to find a new store online. A customer browses online for items, compares prices, makes a purchase, and waits for the products to arrive. Customer preference, the level of customer service desired, and the convenience of a customer’s lifestyle determine which shopping experience is best for them.
- Some similarities are retail and e-commerce make use of tactics such as merchandising and curation to enhance the shopping experience. To establish familiarity and consistency, brand identity is also crucial across both mediums.
- Differentiating factors include product descriptions, imagery, and reviews when making decisions online. It is also possible to do a bit more research and compare prices across different online retailers before making a purchase decision.
Unlike online shopping, shoppers can physically interact with products in a physical store. You can try on shoes to ensure they are the right size, or sit on a mattress to make sure it’s comfortable. A survey indicates that consumers feel more confident in their purchases when they use this tactic: An estimated 20% of items purchased online are returned, compared to just 9% of items purchased in a physical store.
- Similarly, both retail sales and ecommerce sales provide customer service to resolve customer issues, answer questions, and assist with returns.
- The difference: Physical stores offer proactive customer service via sales associates, who greet and assist customers as they browse goods, and assist them with checkout once they’re finished.
- Both online retailers and brick-and-mortar stores offer shipping. Depending on the type of store, larger items such as furniture are typically shipped, and some retail locations offer to ship out-of-stock items as well.
- A computer or smartphone allows you to shop whenever, wherever, easily. That’s how shopping online differs. It can also take more time to get to a physical store. Investing time in finding parking and traveling can take minutes or hours.
Getting to a shop requires a monetary investment, too-whether it’s sending the subway or driving the car. Still, physical stores do offer instant gratification, since you usually don’t have to wait for your items to arrive–you usually get them right away.
Business versus retail vs. e-commerce
Businesses need to consider what they’re selling and who they’re selling to when choosing between retail and ecommerce sales. Individuals selling a few products on their own cannot compare with larger, more established businesses selling hundreds of products. You must understand specific factors for your business before deciding between retail and e-commerce: the initial investment, scope of operations, and possibility of selling products in multiple channels.
Aspects of operations
- In both physical and online stores, inventory and costs are tracked through business operations.
- The difference: Brick-and-mortar stores require a lot of manual labor. In addition to hiring employees, maintaining inventory and space, and responding to changing supply and demand, costs add up.
Ecommerce retail operations, on the other hand, can largely be automated with ecommerce tools. Everything from inventory management to seasonal digital marketing campaigns can be streamlined with these tools.
Using multiple channels to sell products
- Using multiple channels to sell products improves retail sales and ecommerce sales alike. In order to make it easier for consumers to find and purchase products, multiple touchpoints must be available-whether through social media, customer reviews, or email marketing.
- There is just one major distinction between brick-and-mortar stores and online stores: almost all offer omnichannel retailing (an online version of the store) in addition to in-store shopping. Multichannel retailing is the practice of selling products across multiple channels, including a dedicated ecommerce site and a mobile app.
Retail vs. e-commerce: what to consider
There are three main considerations for business owners when deciding between retail and ecommerce:
- Some business models are more appropriate for retail, while others are more appropriate for ecommerce. In order to make that determination, it’s critical to ask yourself: Will you be using a wholesaler and distributor? Selling directly to consumers? Products you’ve made on your own?
- Costs of starting a business: Starting a business can be very expensive. Determine the overhead costs and other expenses of renting and operating a physical store versus using an ecommerce platform like Shopify after figuring out the budget. Whenever you need to scale up, just keep in mind that you can.
- When it comes to scaling, keep in mind the size of the business and how many goods and services it offers. If you answer that question, then either retail or e-commerce may be a good choice. Consider offering your handmade candles at a one-time neighborhood pop-up along with your small ecommerce shop.
A final thought
Ecommerce and retail sales may share a lot in common, but their experiences are very different – both for customers and for business owners. Choosing the right business model, budgeting for start-up costs, and the size and scope of the company will determine the best fit for the products or services being offered.
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