Table of Content
What is a Retail Store?
Retail stores or retailers are business entities whose main income source is through selling. Retailing encompasses all activities associated with selling products or products directly to the final customer for personal, non-business purposes.
Despite the technological advances which led to the growth of E-commerce, the retail industry is still flourishing with the opening of physical stores in malls, shops, and airstrips around the globe.
Benefits of retailing include
- The buyer and consumer have a face-to conversation with the seller, which increases the likelihood of closing a deal.
- Consumers can see and feel a product before purchasing it. This eliminates the risk of return purchases.
- The goods are delivered immediately following the purchase.
- Shipping costs are non-existent.
- It is simple to return defective products
Different types of retail channels
Retail channels are methods that merchandise can be moved from producers to customers. Different fields and markets employ various channels; however, the goal is to provide customers with products.
Here are two of the most popular retail channels that are used these days:
Direct channel
Direct channels are the fastest method of delivering products to consumers. In this method, manufacturers or producers sell directly to consumers. For example, E-commerce stores typically make use of this channel to offer handmade items like artwork prints or hand-crafted items for sale to consumers through the web. But physical retail stores, like farmer’s markets or pop-up stores, could utilize the direct channel method for sales for their operations; however, it’s less frequent.
Retail channel
The retail channel is an additional link to the supply chain when contrasted with an indirect channel: the retailer. In most retailers, products to be sold are initially purchased by a producer or manufacturer before being sold to customers in the store’s physical location. In this way, retail stores may have various kinds of merchandise available for sale, which they acquire from various manufacturers, like stores that offer home items as well as grocery items within the same place. E-commerce stores may also utilize the retail channel when they purchase items from a manufacturer that they can resell or even permit the reselling of goods via their websites.
Comparison between a retail store and an eCommerce store
Initial Investment
Retail
If you decide to open retail stores, it is necessary to locate an address and acquire the required government and business resources, such as paying the licensing fee, obtaining the Employer Identification Number (EIN) to use for tax purposes, and opening an account at a bank.
You’ll also need to decide whether you’d prefer to lease or purchase commercial space. The next cost will be the staffing and facilities. Before you start your business, you’ll require staff. The hiring process includes not only the paycheck, but they must also report on them as well as pay taxes to the employer.
In the end, you’ll need your initial inventory. This is the minimum quantity of stock you’ll require before inviting customers into your shop.
Ecommerce
Costs for starting are generally inexpensive, with the principal e-commerce cost being the website hosting your company. In addition, eCommerce companies must be able to pay for the company’s creation, domain registration hosting, web development, hosting marketing, sales tools, and possibly an advertising budget.
If we look at inventory, the most important benefit of eCommerce is that it can start an online store without any inventory. Of course, this depends on the system you choose – the fulfillment of orders and drop shipping.
Inventory is required if an e-commerce company uses order fulfillment, which means you manufacture the item you sell. If that is the situation, you’ll need to ship batches of your product to fulfillment services like the Fulfillment Service via Amazon, Rakuten, ShipBob, FedEx, etc. They will handle the logistics of your products – starting with proper storage and packing as well as cost-effective shipping and keeping track of inventory levels, the tracking of returns, and delivery.
Total Cost of Ownership
To fully comprehend the expenses involved in running a business, it is important to take into account the initial investment and the various costs that follow.
Retail
There are a variety of things you should be considered when estimating the financial cost of the overall cost of ownership.
- The formation of business entities
- Annual insurance
- Attorneys
- Accounting
- Marketing expenses
- Cash Register / POS terminal
- Bank Account
- Costs for renting a storefront
- Insurance for business owners
- Workers’ salaries
Ecommerce
An online store is subject to certain expenses that are associated with it:
- The maintenance of the eCommerce website by the developer
- Domain name
- Hosting
- Tools for Sales and Marketing
- Paid add-ons, plugins, and extensions
- Advertising campaigns: Google, Facebook, Instagram, YouTube, etc.
- Payment Processor
- Taxes
- Accounting
These costs are applicable for those who do the majority of the work, and you have only a freelancer as an employee on a part-time basis. If your e-commerce business expands, you could require more staff, and, in this case, the TCO will rise for these line items:
- Management of advertising campaigns
- Customer support
- Many tasks related to sales and various marketing and sales tasks
Business Operations Complexity
Retail
The brick-and-mortar model is a bit more complex. It has constant seasonal shifts in demand and supply as well as planned and non-planned promotions. While it is easier to manage a portfolio of products online, offline shops require a system to manage their inventory, supply chain, and stores for every seasonal shift.
If you are in direct contact with your client, this provides many opportunities to increase your customers’ loyalty. Your employees should be friendly as well as knowledgeable and friendly to leave lasting impressions to keep your customers returning.
Additionally, there is the issue of internal communication between your staff and staff and between them and suppliers. Internal communications must collaborate to create balance.
Ecommerce
Complexity in eCommerce includes aspects like managing inventory. For example, if you do not have a warehouse in which to store your goods, then you’ll have to lease one or use drop shipping.
When purchasing from an online store, Your customers are likely to expect that their purchase will arrive promptly and in perfect condition, which requires a quick and efficient order fulfillment process and shipping systems.
Also, not having direct interaction with your customers is a sign that you’ll need to employ methods like analytics or tracking surveys to keep up with changing customer preferences and trends in their tastes.
Risks and Limitations
Retail
We all know the dangers of brick-and-mortar stores, the most frequent theft of physical goods.
When it comes to the products, there is also the issue of transporting the items to the retailer, which could result in the inventory being damaged.
Technology is constantly evolving, and the variety of options in the marketplace means that businesses need to invest in keeping up with their competition.
In the end, customer satisfaction is the main goal of every business. Therefore, owners of businesses must ensure that they cultivate customers’ loyalty and provide their customers with reasons to return.
Ecommerce
Security is the most significant threat to online stores. As technology is evolving at a rate that is alarming, this leaves websites vulnerable to cyber-attacks and security threats. Security issues occur when data breaches occur. Store owners who operate online must invest in online security to prevent theft and breaches of credit cards. It is also necessary to have a reliable system that includes efficient website hosting to ensure that the website doesn’t go down.
Additionally, not just the fraud of credit cards but also shipping problems must be dealt with, and that includes having a support system for customers to resolve customer complaints.
Conclusion
There are many retail stores that offer the use of e-commerce. Not every online store is retail. What is the primary difference between e-commerce and retail? Retail is a term used to describe B2C sales transactions which occur via offline or online contact points. However, E-commerce is able to support all kinds of business models, such as B2C, B2B C2A, and more. However, it is only accessible via online transactions.
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