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According to the Adobe Digital Economy Index, Americans will spend $1 trillion on e-commerce platforms next year. Online spending has been steadily increasing over the past decade, with the demand for digital shopping hitting an all-time high during the pandemic. But is it better than traditional retail?
Here are 7 advantages of e-commerce over traditional retail:
- E-commerce is always open for business.
- Online retail isn’t limited by geography.
- E-commerce has a low overhead.
- Digital marketing allows for targeted localization of ads.
- Being digital allows for better engagement with customers.
- Scaling up is easier without a storefront.
- Financing opens your business up to more people.
This article will cover each of these advantages in more detail to help you decide if e-commerce is right for you and your business.
Table of Contents
How Is E-Commerce Different From Traditional Retailing?
One of the most significant differences between online retailing and regular retailing is that customers can buy products 24 hours a day. This is not the case in traditional stores where customers are only able to shop during certain times such as weekdays from 9am to 5pm. Another significant difference is that online retailers do not have any geographical limitations, meaning they can offer their products worldwide.
To sell local goods, traditional shops need to open branches in each region, which requires more investment and time. A third difference is that an online retailer’s overhead costs are much lower than those of a physical store because it does not need to purchase many things such as buildings, furniture, and utilities.
This means it can spend less on marketing and advertising.
The Advantages of E-Commerce Over Traditional Retail
The retail industry is in a state of flux. With e-commerce being the new norm and offline sales dwindling year after year, retail giants have been scrambling to find ways to stay afloat. What used to be your one-stop for everything you needed now requires that you go from store to store looking for what’s still available – knowing full well that it won’t be cheap when you do finally find it.
E-Commerce has grown exponentially in recent years. With more than two billion people now engaged in online shopping, it is no longer a niche market for early adopters and tech aficionados.
What are the advantages of this? Let’s find out as we explore some of the ways that e-commerce has changed our lives for the better.
1. E-Commerce Is Always Open for Business
One of the biggest advantages of e-commerce over traditional retail is that online retailers aren’t limited to business hours for making sales. Visitors can shop and make purchases 24 hours a day, 7 days a week.
According to KPMG’s report on online consumers, the number one reason customers choose e-commerce is because they are able to shop anytime, day or night.
Not to mention having an e-commerce store “open” 24/7 doesn’t create additional overhead like a traditional retailer, which would require staffing for extended hours.
The ability to shop anytime is especially important during high-volume periods such as holidays when brick-and-mortar stores are normally opening earlier and closing later (and paying top dollar to staff them).
We live in an “on-demand” world now, and all retail businesses are already competing with giants like Amazon who offer one or two-day shipping on millions of items.
The ability to offer the consumer what they want at the moment they want it is a huge advantage for e-commerce.
2. Online Retail Isn’t Limited by Geography
Like time constraints, physical store locations also limit who can access a business and their products or services. Traditional retailers are limited only to those potential customers who live or work in their local area.
E-commerce retailers have access to virtually anyone in the world, creating an endless pool of potential customers and earnings waiting to be tapped.
In fact, in 2020 over two billion people made purchases online globally, with the number of digital buyers steadily increasing every year.
Of course, geography means more than just a globalized customer base.
E-commerce makes it more convenient for customers to access goods and services without having to travel at all. That means businesses are less impacted by seasonal fluctuations, weather events, or even bad traffic or poor parking that could create a burden for customer flow.
3. E-Commerce Has a Low Overhead
E-Commerce retailers don’t experience the same overhead costs as traditional retailers.
Cost savings include not needing to have a storefront, meaning that in addition to facility cost savings, businesses also save on reduced labor costs.
Lower operating costs can be passed on as savings to the customer and help to maximize profits. This is essential in today’s competitive retail environment, a fact backed up by KPMG’s 2017 Global Online Consumer Report which showed that 65% of consumers compare prices on their mobile device while shopping in a physical store location.
Even I do this and take it a step further by reading the reviews of an item, just to make sure I’m not buying a piece of garbage.
The ability for a business to lower their cost of sales and potentially lower their prices can mean the difference between making the sale or losing to a competitor.
E-commerce operations also have lower marketing and advertising expenses, and virtually no upkeep or maintenance costs that storefront locations need to include in their budgets.
Savings can be reinvested to grow the business or make improvements to the platform.
4. Digital Marketing Allows for Targeted Localization of Ads
With online retail comes access to extremely valuable information about customers. Analytics allows businesses to better understand what customers are looking for, what they like, and what helps promote conversions.
The availability of information in the online retail space versus a physical store allows the online retailer to localize promotions and marketing efforts, and provide customization on an individual level.
Targeted marketing can be tailored to certain demographics and shared, localized, and targeted ads can be purchased on most social media platforms.
Localization also supports efforts to scale and grow the business, particularly on a global or international level.
According to CSA Research, 60% of consumers rarely (or never) make purchases on a website that only provides content in English.
E-commerce websites allow for content to be created, translated, and optimized for specific audiences, allowing for a user experience that is focused on local consumer shopping habits, local culture, and even technology considerations.
5. Being Digital Allows for Better Engagement With Customers
Using a variety of communication tools, e-commerce retailers can engage with customers in a way that traditional retailers cannot.
In addition to targeted communications and special deals, online shops can encourage return visits or send emails about abandoned carts that aren’t purchased.
Once a customer walks out of a physical store, it’s unlikely that the business will be able to engage with that individual. In contrast, e-commerce stores have the advantage of being able to use data to continue to engage with their customers – even after they’ve left the site – through multi-channel retargeting.
According to PrestaShop, sending a cart abandonment email within 20 minutes results in an average conversion rate of 5.2%.
Engagement can also occur across multiple channels, including social media and apps. Many of these platforms are optimized to support e-commerce, meaning more opportunities to turn clicks into sales.
Engagement with customers can improve a business’s ability to rank on search engines, as traditional and local SEO look at things like reviews and social media pages to determine if a business is trustworthy and well-liked.
Brick-and-mortar retail locations have to spend significant amounts of time and effort managing social media pages and websites, responding to reviews, and trying to build connections that come much more naturally when the business is already operating online.
6. Scaling Up Is Easier Without a Storefront
An online retail location has the potential to be scaled much easier and faster than traditional retailers.
Brick-and-mortar retailers are limited by lack of resources (it’s expensive to purchase or lease storefronts), physical geography, distribution, and other logistical constraints that don’t apply to e-commerce.
E-commerce allows businesses to expand to global markets and potentially find niche product demands that increase sales and allow for the growth of the brand.
To put all of that potential into perspective, retail e-commerce sales worldwide amounted to $4.28 trillion in 2020. E-commerce retailers can easily tap into those sales by simply making their website and products accessible to an expanding market.
Traditional retailers do not have the luxury of being able to do this. Though stores can take their business online through their websites, they may not have the logistics in place to support shipping and distribution without some improvements and investments.
7. Financing Opens Your Business Up to More People
Maximizing ways to pay is another advantage for e-commerce retailers.
According to Statista, there were over 392 million active PayPal accounts at the start of 2021. PayPal has features that allow some consumers to make payments in installments, or link their account to a number of payment methods.
Credit cards are still the most popular payment method for online shoppers, with electronic payment like PayPal at a close second.
Online customers expect payment options that allow them to make their purchases now and pay later, something that is not necessarily associated with brick-and-mortar store locations.
This advantage can be leveraged through partnerships with electronic payment platforms or by targeting consumers with special deals.
The Downside of E-Commerce: Competition
Of course, having an online store with search engine visibility doesn’t necessarily mean you’re going to be successful. There are advantages to brick-and-mortar stores that online retailers need to account for, including the ability to see and touch products before they buy.
One of the major downsides is that there’s a lot more competition than ever before when shopping online. This is why online retailers need to take more seriously their branding and media when it comes to photography and video.
Any photographer can take a picture of your product, but specialists known as product photographers will make your products look exciting so that you can enjoy higher conversion rates and more sales. We also create marketing videos for your social media and interactive 360-degree product photos that mimic the in-store experience of physically touching your product.
I know, shameless plug for ourselves, but that doesn’t mean it isn’t true.
Final Thoughts
Consumers have spoken, and e-commerce is steadily growing as the preferred way for many people to shop. From 24/7 availability to targeted digital marketing, there are so many advantages to taking your business online.
The convenience of being able to buy the things we need anytime from anywhere in the world is undeniable, and it can only get bigger and better.
If you’re interested in the world of e-commerce and want to know more, check out our post on e-commerce revenue models that actually work!
