Online Store or Physical Store: Comparative Advantages and Disadvantages

Many entrepreneurs consider opening a store but doubt its format. With the rise of electronic commerce, and as it implies a much lower investment a priori, there are not a few who favor the online format. But, what are the advantages and disadvantages of an online store versus a physical store, and vice versa? We are going to give some answers so that you can make your own opinion.

The relative advantages of the online store

It is a cheaper option

You certainly cannot compare the costs of starting and maintaining a physical store, with what it costs to open and run an online store.

A physical store involves paying a deposit for an amount equal to two months’ rent, carrying out some work, and buying shelves, furniture, and some decoration, in addition to computer equipment, and of course, the initial stocks. Then you have to pay rent, electricity, and other expenses every month. We are not going to consider the cost of personnel, because both formats need, but usually, more people are needed in a physical store.

The online store only needs some computer equipment, and you can even start from home. You don’t even need to have initial stocks in case you opt for a solution like dropshipping. However, the advertising budget is probably significantly higher for an online store than for a physical store.

The trend is very positive

Another plus point for an online store is that e-commerce is growing year after year. The health crisis favored e-commerce a lot over physical commerce, but even without that help, e-commerce was improving sales every year. Entrepreneurship is a growing sector that is very attractive.

Until now, online stores have been much less affected by the ups and downs of consumption. However, as the channel consolidates its market share, it becomes more sensitive to short-term variations in the economy.

It is more flexible and scalable

It is perfectly possible to open an online store from home, and then change the base of operation depending on the needs without the customer noticing. In this sense, it is a much more flexible option than having premises, which forces it to function within certain parameters. With little activity, fixed expenses eat up margins, and money is lost. If there is a lot of activity, the premises can become small, and therefore sales opportunities are lost.

Every decision to change the location of a physical store has very significant implications in terms of costs and possible loss of customers.

The advantages of the physical store

Still, the preferred way to shop

Despite the rise of e-commerce, the majority of the public still prefers to buy in physical stores. The advantage of being able to touch the genre and observe it better before buying certainly weighs a lot. And let’s not forget the experience of going to the shops itself, which for many people is a leisure activity that goes beyond simple shopping.

It is easier to have good visibility and maintain it

The location is key for any physical store. Renting premises in a busy area can indeed be a significant expense. But, at the same time, a good location guarantees a volume of passage in front of the showcases.

An online store, on the other hand, starts from zero visibility. You have to work and spend money to get traffic, in two ways:

• Through organic search engine optimization.
• Paying ads both on social networks and on specialized sites and search engines.

If the store succeeds, you will be able to get a third source of traffic, the most interesting, which is when your customers enter directly to find what they want in the store. Today, for example, many people enter Amazon without going through search engines or advertisements.

The reality is that, for a small online store, getting visibility in search engines is very difficult. There is a lot of competition. What forces it to have a significant expense in advertising?

Even when you get organic traffic, Google’s algorithm changes regularly, and that can have a huge impact on business, with visits that disappear from one day to the next.

Can you imagine that the pedestrian traffic of a commercial street changes drastically every few months according to the will of an entity that is beyond your control? This is what happens with web positioning.

Personalized service and trust

Finally, another of the great advantages of the physical store is the personalized service. If you are a kind person, with good contact, and commercial skills, you can advise your clients, recommend other products, and close sales in a very personal way. Online shopping is a much colder exercise, no matter how much the design or the texts on the web try to create a feeling of proximity.

In a physical store, it is easier to create a sense of trust so that the customer remembers the deal and their shopping experience. And that facilitates loyalty. Many people who buy online find the store through Google, buy, and then forget where they did it. The next time they use a search engine again, which can take them to another online store. There is less emotional attachment.

Online store and physical store?

You might think that the best strategy is to have both options. However, in my opinion, physical stores that also offer online services have it more as a service complement than as a real e-commerce strategy.

In other words, people who will buy in the online store or physical store will do so because they already know the physical trade, and simply want to avoid a trip.

Succeeding online means spending a lot of time on SEO and marketing, and typically a small or medium physical store won’t have the time and resources to excel in e-commerce.

In addition, logistics are very different, the management of shipments and returns is a strategic aspect in which you have to give a quick response to the customer.

Certainly, there are some examples of stores that succeed in combining both models, but, with the competition that exists online, usually, those that manage to stand out are either native online companies or are the online channels of distribution giants.

That said, it is a very good idea, even essential, to offer an online sales service when you have a physical store. It allows for giving a more complete service to the client.