The debate between e-commerce and retail has continued since e-commerce started gaining popularity. Most consumers prefer the online shopping experience for its convenience, availability, and assurance from other consumers through reviews and ratings. While, some consumers prefer the experience of going to retail stores, where they get to see and analyse the products before purchasing them.
Both e-commerce and retail have the same end goals: selling quality products while maintaining consumer satisfaction and profit margins. However, the manner in which retail sales are conducted differs significantly from e-commerce sales.
E-commerce refers to selling or buying goods through digital means like online platforms and social media pages. E-commerce is wholly digitised, making it a convenient shopping option for consumers. E-commerce faces global market competition due to its online nature.
Retail refers to selling goods either at brick-and-mortar facilities like department stores and malls or at individual stores in smaller quantities. The retail industry faces local or hyperlocal market competition due to its fixed location.
Differences between E-commerce and Retail
1. Business Model
E-commerce has various kinds of business models; some of them are Business to Consumer (B2C), Business to Business (B2B), Business to Business to Consumer (B2B2C), and Consumer to Consumer (C2C). Most major e-commerce platforms follow the B2C business model, where companies list their products online and sell them directly to consumers.
Retail follows the business-to-consumer (B2C) model. B2C means retailers buy finished products from manufacturers or wholesalers in bulk and sell them to consumers in smaller quantities at their stores.
2. Capital Requirement
An e-commerce business requires minimal capital investment initially, with the direct costs being the website and domain hosting. An e-commerce business can be self-managed in its early stages, and employing staff isn’t necessary. Inventory costs depend on whether you choose order fulfilment, where inventory is a must-have, or dropshipping, where inventory is not required.
Retail stores need a lot of capital investment to be set up. Finding the perfect location, leasing or renting a store, purchasing goods, applying for a business licence, and insurance are only some of the costs associated with starting a retail store.
3. Consumer Experience
The consumer experience is where retail and e-commerce vary significantly. With e-commerce, customers cannot interact with the product physically. However, features like ratings, reviews, high-quality product pictures and 360-degree views ensure the quality of the product. Comparing prices is also much easier on e-commerce platforms, as customers can see different price options for the same product from different vendors. The only downside to the e-commerce consumer experience is the prolonged delivery time.
With retail, customers see the products physically, check for quality, and then determine if they would like to make a purchase. Shopping at retail stores means obtaining products immediately, which is an advantage over an e-commerce store. However, retail stores are often dedicated to only one kind of product, which can be inefficient for customers in terms of saving time and money.
E-commerce platforms are available around the clock, enabling customers to shop at their convenience. They also have 24/7 customer support, so consumers can ask any product-related queries at any time.
Consumers can shop at retail stores only during shopping hours. While there are 24/7 shops available, it can be highly inconvenient to go to retail stores at late hours of the day. In terms of customer support, consumers can ask their queries and questions when they visit the store.
E-commerce stores have a high-profit margin due to their global customer base. An e-commerce store has more potential for growth because of its reach and ability to offer products at a price that attracts the consumer’s attention. It is also easier to increase sales exponentially in an e-commerce store through simple marketing techniques like providing free shipping for orders over a certain amount or giving away free sample products and paying only the shipping price. Many platforms offer affiliate marketing opportunities that benefit both the consumer and the e-commerce company.
Retailers make profits by buying products at wholesale prices and selling them at a higher cost. But, retail stores are less profitable compared to e-commerce stores because of their local reach and limited customer base owing to their fixed location.
6. Payment Modes
E-commerce platforms offer flexible payment methods like credit/debit cards, e-wallets, Internet banking, and cash. Many e-commerce platforms also allow take payments from consumers through their preferred payment method after their package has been delivered. Moreover, e-commerce platforms also offer the option of no-cost EMI and subscription models, which makes for an effortless shopping experience.
Most retail stores accept cards, e-wallets and cash payments but do not have an option for net banking. But many old retailers are still adapting to digital means of payment and accept only cash.
E-commerce operations include supply chain optimisation, warehouse and inventory management, order fulfilment, multichannel retail strategy, transportation, reverse logistics and customer support. Modern technology has made it possible to automate a lot of these e-commerce operations, which makes e-commerce a cost-effective option for online businesses.
Retail operations include supply chain, cash management, store layout, customer support, order fulfilment, inventory management, marketing and promotions. These operations primarily require manual labour and can get expensive very quickly.
8. Distribution Channels
E-commerce stores offer multichannel distribution, meaning they sell products through various online and social media platforms. Customers can access e-commerce platforms through both websites and mobile applications without losing their shopping progress.
Retail stores offer omnichannel distribution, meaning they can sell products both in-store and through online websites or mobile apps. Having online websites for retail stores allows customers to check for product and stock availability, save products to purchase in-store, check for sales and avail coupons. The advantage of omnichannel distribution is that consumers get the unified experience of shopping online and in a retail store.
Both e-commerce and retail have their pros and cons. However, with more and more people preferring online shopping, an e-commerce store is bound to do better than a retail store, as it requires less investment and is also more lucrative in the long run. E-commerce will have a significant effect on the retail business, and many stores will move their sales online.