E-Commerce and Online Retailing: Pros and Cons

There Are Advantages and Disadantages to Selling Online

Happy couple shopping online at laptop in kitchen
••• Sam Edwards/Caiaimage/Getty Images

E-commerce offers many ways retailers can reach consumers and conduct business without the need for a brick-and-mortar storefront. Today, it's almost economic suicide for any retailer not to sell online. However, before you enter the world of e-commerce, you need to be familiar with the advantages and disadvantages of selling online.

What Is Online Retail?

Online retail or online shopping refers to a form of electronic commerce where consumers directly buy goods or services from a seller via the Internet rather than physically entering a brick-and-mortar store. Customers usually visit the company's website, select a product, enter payment information and shipping details, and then order the product. All of these steps are completed entirely online.

Advantages of Online Distribution

Online retailers can increase their sales and profits faster than a brick and mortar establishment because selling online offers the advantage of being open twenty-four hours a day, seven days a week.

Selling online also allows retailers to sell their merchandise in any part of the world without additional expense. This means e-retailers can expand into global markets or target an extremely focused segment, such as selling burkas to Middle Eastern women.

While the small retail store on Main Street would never dream of competing with a national chain retailer, a mom-and-pop shop may find itself on a more level playing field with its big-box competitors.

People can find your brand and interact with it when you establish an online presence, including tapping into a whole new customer base. Much of online traffic is organic, meaning that if you build your e-store correctly, customers will find you without spending a dime. All you need is a robust Facebook, Twitter, or other social media platform to spread the news. Also, while traditional advertising is very costly, if you do get involved in digital advertising, the cost is nominal.

Disadvantages of Selling Online

One of the biggest disadvantages of selling online is the continued battle with security. Shoppers are becoming more relaxed with providing their personal and credit card information, but security concerns are still keeping many consumers from shopping online. Additionally, a single security breach opens the business up to crippling lawsuits and fines.

Retailers selling online exclusively may have to work harder to build trust and establish a relationship with their customers. Personal interaction is limited when online sellingĀ and there is plenty of competition in cyberspace. Store owners may find it very difficult to find repeat customers.

As online retailers expand their customer base to include shoppers in other countries, they also increase the difficulties in delivering their goods. TheĀ retailer is responsible for all deliverables, and if the customer does not receive their products immediately, it is ultimately the retailer's responsibility to resolve the issue.

The Importance of Omni-Channel Retail

Retailers who sell online are dealing with a very different animal than traditional brick and mortar stores. However, there is a growing emphasis placed on what is known as omnichannel retail, which refers to retailers who sell in multiple "channels." Today, a retailer might have an online store, a traditional brick and mortar store, and perhaps even a mail order or catalog business. No matter how many channels you use, the customer experience needs to be equal. Also, your brand must be consistent among all channels.

The bottom line is that while some would have you to believe that brick-and-mortar retail is dead, nothing could be further from the truth. Even with the growth and prominence of e-commerce, consumers continue to frequent brick and mortar storefronts, and this doesn't appear to be changing anytime soon. E-commerce and traditional storefront retail will continue to grow together until there's a major shift in the retail landscape.