Which is better, an online of offline business?
With the increase of business being conducted online, the distinction between online and offline businesses has never been more highlighted! It’s important to understand the benefits and drawbacks of creating an online business, if you are looking to start a company to see what works best for you!
E-commerce (Online Businesses)
Simply put, e-commerce is the purchasing and selling of goods and services via the internet, which includes the movement of money and data through transactions online. E-commerce has become a more popular way of conducting business in the modern day, which allows businesses to provide services for customers all over the world. Customers can now stay in the comfort of their own homes to access the services that they need! Major examples of ecommerce companies include Amazon and eBay.
Brick and Mortar Stores (Offline Businesses)
An offline business, also referred to as a ‘brick and mortar store’, is a place of business in a physical location. The most common types of these businesses would be outlet and retail shops, which can have single or multiple stores. This is the more traditional way that businesses are run and how a lot of customers prefer buying products or services because of the physical and interactive aspects. Big examples of these include supermarket chains like Tesco and Sainsbury’s.
Advertising and Marketing
Online Businesses
E-commerce businesses use a variety of advertising strategies to engage customers with their company. The majority of the methods used are online, as a way of conducting business, to reach a range of customers. These include social media marketing, which uses targeted ads on apps like Instagram and Facebook aiming for specific target audiences, as well as advertisement in articles and videos. A lot of times these adverts will have links to the company websites, hoping to increase customer engagement.
Another way form of advertising that online businesses is ‘Search Engine Optimization’ (SEO) market research. This helps the website/ platform that the company uses to rank higher in searches to gain a bigger popularity.
Offline Businesses
In order to attract customers, brick and mortar stores use a range of marketing methods. From traditional marketing strategies including print and newspaper advertising and billboards, attracting the attention of local communities and passers by to TV and radio promoting the brand or business reaching more of a range.
Offline businesses have also begun to integrate newer ways of advertising in the same way that online ones do, including digital and social media marketing. While the stores would still primarily operate in a physical location, online methods can be used to gain attention to people using the internet. This is more commonly practiced by bigger chain stores in multiple locations.
Online vs offline – Which is better for micro and small businesses?
It’s important to consider which business type would work best if you’re deciding to set up a company. For smaller companies, there are both advantages and disadvantages to online and offline businesses, and one type can often work better for a company depending on its business activities and goals.
Advantages of an Online Business as a small company
• Lower operating costs – Micro and small companies often have limited budgets to operate with. Unlike traditional brick and mortar operations, online businesses will comparatively incur fewer expenses, business premises costs are typically avoided like rent and utilities, and they usually require fewer staff to manage in-person operations. Therefore, a small company is better suited and has more opportunity to progress financially without the additional costs of an offline store. Conversely, the cost of setting up a website and online store can be expensive and time consuming, especially if you do not have access to a lot of capital when you start your company
• Wider reach – Businesses created online have more of a global reach. The use of the internet allows people from anywhere across the globe to access the company’s website or store and has more opportunities for a range of customers to interact with their products or services. This has the potential to grow smaller businesses by gaining recognition through the use of online advertisements etc.
• Availability – Essentially all online businesses can be accessed 24 hours a day by people all over the world, whereas, in person stores will typically have limited access with their closing times. This opens up more opportunity for customers to interact with the business’ services, at a time that’s convenient for them. As a small company it’s important to maximise this opportunity, to help it to grow.
The advantages for an online company would be the same as the disadvantages for an offline one!
Disadvantages of an Online Business as a small company
• Competitive Market– With so many companies choosing to conduct business online, the online marketplace has become very competitive. Small businesses can often get lost online with an abundance of rivalling companies, and where SEO research and digital marketing can help boost a company’s presence, this can be costly and time consuming for a business that is just starting out. Without a clear niche this can sometimes be tricky!
• Trust- One of the benefits of having a smaller business, is that as a brick and mortar company, it can give more attention to fewer yet loyal customers. However, with limited in-person interactions, it can be hard for businesses to build stronger relationships with it's customers online. People often find it hard to trust purchasing services without human interaction or reassurance, and without notoriety of a big company, small businesses can often struggle keeping customers.
•Returns and Exchanges - Typically the refund process for online companies can be complex and time-consuming, more than that of an offline business. If customers find it hard to manage the refund process, it may disinterest the from interacting in the future with the business. For smaller brands trying to gain recognition and grow, it might be good to consider an offline business for smoother customer interactions.
Similarly, the disadvantages of an online business, are reasons to consider an offline one.
Which types of company are better suited?
Online Businesses:
Companies that don’t require a physical office and location, often thrive in an online environment, allowing them to expand their business. The following types of businesses work well with the online business structure:
• Subscription services – Companies where their primary income is subscription based, like video streaming platforms, ‘software as a service’ (SaaS) sites and any other digital subscription services naturally work best online and for accumulating revenue.
• Ecommerce retail services – Retail services can work well on an online format, like online clothes shops, as well as ones that sell a range of products such as amazon and eBay. These companies are able to sell products that can be shipped out to customers all over the world.
Offline Businesses:
The best types of companies that work best as a brick and mortar, in store business, are those where the in-person element is key to the trade. These include the following types of business:
• Foods and beverage services – these include restaurants, fast food chains, cafes which all rely on a physical location to provide the food and drinks products.
• Traditional trade services – for example professions like electricians, carpenters, builders all provide in person services, so it makes sense for a company with any of these trades to have an offline business.
• Health and wellbeing practices – it’s important for support workers, therapists and physiotherapists, to name a few, to have on site businesses to provide the best support service as these jobs require human interaction.
Hybrid businesses:
Some business types also work well, combining both the online and offline business model. Being able to provide in-store services for people who prefer to shop in person, as well as offering the convenience of ordering online. For example, retail stores that sell clothing work well with this model.
It’s a good idea to thoroughly research which type of business would work best for the nature of your company before setting it up. Choosing the right type of business will meet the company’s needs and make for an easy transition into business.
The Omnichannel Approach
Businesses have now started to integrate both online and offline market channels to develop the growth and reach of the company. The basis for this marketing strategy is so that there is more opportunity for interested customers to encounter the business; it’s a way of meeting the customer where they are, whether that be in-stores through billboards or on social media and applications through ads.
Which business works best?
Ultimately, the decision to either start an online or offline business really comes down the nature of intended business and available resources.
Setting up an offline business, can be potentially intimidating obtaining the funds to acquire a premises to conduct the business activities, so an online business might be a good way to start the business in order for it to grow and profits to increase. Alternatively, if the company’s business activities are more suited to in person operations, for example food service businesses, then an offline business would be more beneficial to help your company grow.
More and more companies are adopting the hybrid model, combining elements of both online and offline business structures, helping to expand their business online, while also offering in-person services for good customer experiences. This model could be good for small businesses to adopt if it works with their type of business!
