When a person or business is thinking about opening a shopping outlet, often their main consideration will be whether to open a traditional brick-and-mortar store or sell solely online and open an ecommerce store. There are significant benefits to trading online, and there has been a rise of online shopping outlets of late.
Why trade online?
Surveys have revealed that consumers are spending at least half of the money they spend online with companies that only have an online store with no corresponding physical store in a shopping mall or high street. This represents a rise of nearly 25% from 2010. Why is this? It seems that the answer lies in consumers overcoming the issues they previously had with buying from online stores. The primary issue was the inability to see and handle the item they were thinking of buying. Now, it is common practice for a consumer to visit a brick-and-mortar store to view an item, evaluate whether they want to buy it or not, and if so, return home or use their smartphone while physically in the store to buy the same item from an online retailer, often at a cheaper price.
Another benefit for an online retailer is the sheer amount of choice that they are able to offer consumers. Brick-and-mortar stores are often compelled to stock items that are guaranteed to sell, which may mean that they are generic products that will appeal to a mass audience.‘Online retailers are able to sell niche products, products that are either too specialized or too diversified – such as products that are as seen on TV in infomercials and adverts – to generate enough regular revenue to make it worthwhile for a physical store.’
The fact is that the smartphone in particular has made online shopping highly attractive, both for the consumer and the retailer. Mobile technology has made it easier than ever to shop, at any location, and at any time of day, which can lead to consumers making impulse purchases that they later regret. It is therefore imperative for stores to have a good customer service and returns system, and this is perhaps where online stores have the edge. As they do not have a physical store where goods can be returned, online retailers have to rely on other companies to make the returns process simple. For example, they may include in parcels a returns label that is ready for use by a courier company, which when booked online, picks up from the customer. This is preferable for the customer, who would otherwise have to make a journey to the local store to make the return. Then there are other options offered by online retailers, such as dropping off the item to be returned at a local shop or post office, or even depositing it in a locker system used by the retailer, ready for collection.
There are also fewer overheads for online retailers. Obviously, they do not have to take out a lease for premises, which can be a huge percentage of the company’s overheads. Online retailers may have a warehouse where their goods are stored and from where they are dispatched direct to buyers, or they may simply have a deal where the manufacturer ships the goods direct from their own warehouse.Branding, marketing, and sales processes can also be managed faster and more cheaply than physical stores. For example, if an online retailer wants to put a sale on, the company can simply reduce the prices of the items on the website, create sales announcement graphics, and post the sale on social media platforms, with time being the only real cost. A physical store would have to design, print, and put up physical signage, involving significant cost, time, and labor.
All this being said, shopping experts do not believe that the rise in online shopping outlets will kill off physical stores. They believe that there is still a place for shopping malls and high streets, not least because the online experience cannot wholly compete with the physical experience, where a consumer can pick up, feel, see, taste, and touch an item and interact with the store’s representatives. The experience that a consumer has in-store can be valuable in cultivating loyalty, as many consumers like to “see” who they are buying from. Without proper engagement, an online retailer can be perceived as faceless by the consumer.
It is undeniable that setting up as an online retailer and forgoing a physical store does deliver significant benefits to the retailer and the consumer. Foremost among these areconvenience and cost – two benefits that greatly appeal to the consumer and are not to be taken lightly.