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Online Or Store Based Retail

The debate over whether an online business would be more successful than a store based business has been a long one, and it changes year by year, with many contributing factors. Some businesses are simply better meant for one or the other, such as marketing being better online, and health services always premises based. This comparison will mostly be focussing on retail businesses, as other businesses are often much more clear-cut.

In past years, it has generally been better for small businesses to be store based, but this trend fluctuates with technology and group dynamics. Obviously, before the internet became popular, almost all retail took place in a store based setting, with only a few major outlets operating on a delivery service. Companies such as Avon and other postal order outlets were once quite popular, just for their ease of use and range of services. As the internet took hold, most of these people moved to online ordering of goods; it's cheaper.

Let's be honest here, it's much cheaper to run a business online than it is to have a physical public premises. No rent, tax, utilities, insurance, and lower staffing costs all add up to savings to the end user. Online retailers only really needs website setup and maintenance, and a delivery network for their products (which store based retail needs anyway). Because of this, many people started doing their shopping mostly online, with a few exceptions such as for fresh food.

In the early 2000's, massive resellers became extremely popular online, such as Amazon and Ebay. The main draw of these sites are that they are cheaper and more convenient than going to a local store, and the sites always have a massive range of products to choose from; something small retail stores struggle with. This was noticeable all around the UK and rest of the world, with many high street shops such as Woolworths and HMV shutting many of their branches due to costs. Many experts believe this was a contributing factor in the recession, but there are many contributing factors to that.

As a consequence of the rising popularity of online stores, most physical stores created an online presence aswell. Most major retailers have websites which you can use to purchase goods, it's just the generation we're in right now. Unfortunately for most, their success is extremely limited for one major reason; the online stores sell at the same price their shops do. See, almost everyone expects that they can buy a cheaper version of the same product online, because it's cheaper to run an online store than a physical one. But setting up an online store is a double edged sword; you can't make items cheaper than in store because then the store would fail.

This is where we see companies like Amazon and Etsy excelling, because they buy their products either directly from the manufacturer in bulk (Prime) or people are simply selling products through Amazon which they bought for cheaper elsewhere. Their business model is buy lots and sell them cheap, something store based retail struggles to do due to storage constraints. Amazon has been singlehandedly responsible for many businesses shutting their doors forever, as their business models simply cannot cope with the competition.

Fortunately we are starting to come out the other side of this retail dip, as seen by Amazon setting up physical bookstores across America, and many more people choosing to support their local stores, albeit at a higher price. It will always be cheaper to run a retail business online, but at this point the market is pretty much saturated, with only a few major names dominating. It's incredibly hard for a new business to break into the online retail sector, with only speciality sites truly thriving, but a physical store? Most people would give it a try if they were walking past, and if the business is involved in the local community, even better. The major rough-patch of the recession is over, and people are returning to wanting to support their local businesses.


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