Better Business: dot-com or bricks and mortar?
If you’re thinking about starting a business, the very first question you have to consider is what type of business you’re going to open. Are you better off going with an online-only company, or should you have a physical storefront? Each has its own pros and cons, and some business models will be better suited to one of the other. For other businesses, the decision will be made according to your skillset, capacity and investors. To help you decide, have a look through our quick pros and cons list.
Thanks to their low overheads and easy set-up, online-only businesses are often favoured by start-up companies. The number of online-only companies has shot up in recent years. Everyone from retailers to personal assistants seems to be doing it – but is it the best option for your business?
Pro: Wider audience
With an online business, customers from all across the world can reach you from the comfort of their own living rooms. Thanks to the aptly named world-wide-web, your dot-com business is available all across the globe and can attract a much wider audience than a physical storefront, which requires consumers to be within reasonable reach.
This is particularly useful if your business is a more general one or one in a heavily saturated industry. While consumers might be willing to travel long distances to reach a speciality karate equipment store, they’re unlikely to cover the same distances to buy household goods.
Con: Wider competition
Of course, while more customers will have access to your business, they also have access to the abundance of other businesses that are available online. When you set up an online-only business, you’re pitting yourself against thousands of similar companies. Your consumers have a lot of choices and are less likely to impulse-buy in the way that the man on the street might while walking past your storefront.
Because of this, you need to ensure your online business offers genuine value for money. Consumers will likely be checking prices across a wide range of companies possibly all around the world, so you need to be aware of the industry standards and find something that makes your own product stand out.
Physical businesses are most commonly associated with retail stores, although the trend for pop-ups has spread across a range of unexpected industries. Pop-up marketing consultants are quickly becoming as common a sight as clothing stores – so what’s the advantage of setting up a home base?
Pro: Higher Prices
The California Institute of Technology has some good news for business owners who’ve opted for a physical store. A study of consumer behaviour undertaken by Caltech seems to suggest that consumers are willing to pay more for items they can see and touch. This means that the same items could theoretically fetch more when displayed in a storefront than when advertised online.
While there’s no definitive answer in regards to the reasoning behind this, researchers theorised that the physical presence of an item triggers a classic Pavlovian motor response, which is absent when you’re browsing online.
Of course, it could also be linked to trust. When choosing an item in a store, consumers can be certain of what they’re getting, and many may be willing to pay slightly higher prices in exchange for that reassurance.
Con: Higher overheads
Of course, not all that extra income is going to be pure profit – the overheads associated with a physical store are much higher than those of an online business. Rent and utilities alone put a significant dent in any company’s takings, and that’s before accounting for all the extras needed to help your business succeed, such as decoration, signage and display units.
For luxury goods or designer stores, it may be important that your customers are able to see their purchases in person – and they may also appreciate the experiential aspects of visiting a store. And businesses with big investors may find that it’s worth the initial costs in order to profit down the land. But for smaller, quirkier retailers or grassroots businesses, the overheads may not be affordable or cost-efficient.
So what do you think – is it better to start an online company or go with classic bricks and mortar? What are your experiences with each? Let me know your thoughts in the comments below.
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