Online Store VS Physical Store - What is Best for Business?
As we are writing this post, most malls are empty. More and more people choose to engage in online purchases, as the second wave of lockdowns is once again upon us. In many ways, e-commerce has become synonymous with online retailing as the industry embraces the advantages of selling online.
The recent economic developments have made historical changes in how organizations conduct online store vs physical store business, as the majority of consumers choose the convenience of shopping online. But is this just a temporary measure to stay afloat? Or is this a permanent solution that leads to better results?
Online Store VS Physical Store - What is Best in 2021?
While online shopping has become a lot more popular, physical stores are not going anywhere. While the latest may decrease their market share compared to their virtual alternatives, there's still room for both in our economy. Thing, however, are changing at a rapid pace. This naturally leads to the consideration of future shopping trends and technology changes that one would need to “work into” their business strategy.
Many see this shift continuing well within 2021, as physical store organizations adapt to the more demanding needs of their consumers. Truth of the matter, it is a natural progression of growth impacting the world's shopping trends, and COVID19 simply expedited it. As such, if they aren't already online, businesses should definitely consider doing so. Having an online presence in this day and age can lead to:
- Market expansion.
- Revenue growth.
- Customer satisfaction.
- Brand recognition.
Online Store VS Physical Store in the post-COVID era
Some industry experts taunt the current online trend as temporary. Yet the national statistics confirm with all of the challenges brought on by the COVID19 pandemic, enterprises are quickly adapting to consumer supply and demands. Like it or not, online is here to stay, and physical stores have accepted the facts that these changes are the new marketplace.
To keep up with the online competition, which is much higher than on a local level, retail stores are called to:
- Transition to support both online and in-store personalized experiences to improve retention rates.
- Both physical and e-commerce stores adapt to changing consumer demands and put more emphasis on customer support.
As long as in-store shoppers continue to enjoy their experiences, physical stores will continue to conduct business. As good as technology is, it cannot duplicate the sensory triggers consumers are after when spending a day at the mall. In time, however, just like Netflix replaced blockbuster stores, convenience will lead to a new wave of innovation. While we are still rather far from this, the content of this article should help you get prepared accordingly.
The world is moving towards online-first
Initially, online shopping developed as an extension to brick and mortar shopping. In time, however, the online movement opened the door to new market segments that found comfort in the ability to choose their favorite items simply by browsing online.
The process is straightforward. By integrating with digital solutions, stores can engage with new customers while retaining their loyal in-store audience. For the consumer, online store benefits include:
- Remote shopping convenience and time saving.
- Previews of the hottest trends and fashions through newsletters and virtual banners.
- Additional rewards normally not present in physical stores.
- Virtual up-to-the-minute, day-to-day interactions through live chatting.
Advantages and disadvantages of retailing online vs in-store
Perhaps the most significant disadvantage of online stores is the face-to-face encounter shoppers have come to expect when visiting a physical store. Once again, technology has leveraged that experience between online vs physical stores using chatbots, voice interactions, and videos, but these seem to bother most people when browsing through their favourite items.
Online retail is about lifestyle improvements but also data collection. While the process makes shopping easier for the consumer and leads to more sales, the ability to collect valuable information and improve personalized offers makes online businesses even more luring.
Additionally, having multiple sales channels helps to maintain the consistency of the consumer's experience and brand quality. Online retailers have secured lead sales positions by embracing the concept that different consumers will purchase the same product through various marketing strategies. Each channel serves to capture a potential sale:
- In-store views and promotions.
- Browsing new product platforms.
- Social media and direct email promotion.
- Word-of-mouth enticements.
On any given day, online retailers will find consumers surfing the internet, looking for offers, discounts, and product placements that can swing their buying decision.
Online store benefits
The recent COVID19 pandemic has broadened the online store function and purpose. Consumers and businesses had to adapt to changing retail environments by adding online ordering processes for at-home delivery and curbside pickup. When time is critical, comparing online store vs physical store is pointless, and offering consumers both options has several benefits:
- Access to shopping 24 hours, seven days a week (usually with free shipping).
- Global business opportunities no matter what time of the day or night.
- Increased online sales lead to a larger amount of collected customer data, which in turn leads to improved retention rates.
- Easier comparison and filtering options for products, prices, and features.
- Online reviews or testimonials of previous buyers. These further increase trust towards the brand in question.
Disadvantages of online stores
With all of its convenience, online store vs physical store has a technological disadvantage linked to data security affecting its brand and customer. As online stores continue to improve security standards to reduce the incidents, even the best fall victim to security breaches. Although today’s consumer is aware of the online security risk potentials, they have high expectations of the store’s responsibility in safeguarding the data.
- Unsafe access (hacking) of personal and financial information online is on the rise.
- Loss of certain market segments due to security (cyber-theft) concerns.
- Costly damage recovery to the company brand, industry, and consumers.
One common disadvantage of online shopping is problem-solving for a purchase that did not live up to customer expectations. The communication mode to resolve the issue quickly is limited:
- Emails or online chat representatives, who have little if any authority.
- Difficulty in reaching a higher management level.
- Delayed or inadequate responses can cost a customer.
Historically on-time delivery has been a challenge, primarily when business extends its reach beyond local regions. This is especially true for busy seasons, like holidays or the recent pandemic-related lockdowns. The way in which most online retailers’ attempt to resolve this issue does not necessarily lead to happy customer solutions:
- Longer delivery schedules taking up to one to three weeks, depending on location.
- Higher costs for expediting delivery on rush orders.
- Fewer shipping discounts for lower purchase amounts.
Physical store advantages
The most notable advantage of a physical store is building an exclusive relationship (branding) with consumers. The attention is focused on building a long-term relationship, which in turn increases the customer's chances of returning for another purchase. It turns out that repeat business (customer retention) generates more than 50 percent of a company's revenue, making the branding effort worth it.
The need to seek expert advice and guidance before making a purchase is another reason a consumer prefers to shop at a physical store:
- Physical stores host experienced sales reps who can also collect customer data through CRM software solutions.
- Provide personal and customized service that matches and exceeds customer expectations.
- Usually, deliver a better customer experience than physical stores.
Sensory marketing continues to be a powerful force influencing purchasing decisions and enhancing physical store branding. Unique in-store sensory selling features trigger a consumer's sense of pleasure, helping to make the decision:
- Sight, touching, and trying it out. This is especially important for fashion brands.
- Shoppers make the purchase and immediately walk out the door with it.
Another aspect of sensory shopping is that of impulsive spending. It happens as in-store shoppers spend more time walking the aisles to check out new merchandise. This single attribute is responsible for more lavish in-store spending compared to an online shopper. It is an opportunity to:
- Convert a window shopper into a customer at no additional marketing expense.
- Reaffirm a long-term repeat customer that they can continue trusting the brand.
Many shoppers find physical store service qualities to go beyond delivering just a product. How so? For some, it is an earned perception established after focusing on good business practices and customer satisfaction. For others, it comes with the help of retail software tools that help them collect customer data, using it to improve the experience.
Disadvantages of in-store shopping
Physical stores rely on foot-traffic, window displays, marketing campaigns, and advertisements to attract shoppers – the effort comes at a much higher cost than digital marketing. In-store survival involves satisfying the need of its consumer base during good and problematic business phases. Here are some issues that physical stores have to deal with:
- Short supply.
- Increased cost to sustaining inventory.
- No guarantee of availability.
- High lease (rent) prices.
As the current impact of COVID is being felt by companies worldwide, operational square footage and foot-traffic are being significantly reduced.
- Decreased consumer base.
- Loss of revenue.
- Limited staffing and servicing.
In-store product selection is rather limited compared to online stores. Overall, it is safe to say that physical store management should integrate in-store and online services throughout its supply chain to ensure its future survival. This can be clearly seen when looking at stores that have been struggling with the COVID epidemic.
So what is best - An online store or a physical store?
The answer to online store vs physical store somewhat wrong to ask since both options offer pros and cons to businesses and consumers. Even though an online business can operate without a physical storefront, adding one can improve both its credibility and revenue numbers.
Ideally, the optimal business strategy needs to build upon its current consumer base by expanding into new channels. Physical stores can build an online presence. E-commerce brands could experiment with pop-up store locations. Increasing the number of available channels does not only improve accessibility but also open the business to new segments. After all, the customer experience, as a concept, is changing continuously.
One thing is for certain: The channels of distribution should match the wants and needs of the target audience, as well as the changes in society. Therefore, it is important to step into your customers’ shoes regularly and remain up to date with industry-related developments.
If you’ve made it this far, you should now understand the importance of maintaining both a physical and digital presence. To keep their competitive edge and survive, businesses need to adapt to changing environments, meaning that they should open up more channels for their customers to use.