Ok, just a quick lowdown on the pros and cons of going online vs offline (for retail startups) from personal experience. Since the heady days of the IT boom, a lot of retail experimentation have been carried out for the online arena and several success stories were written in the process. However, it is my my opinion that having an online retail site is still kinda over-rated these days and that there are some pitfalls which anyone who wants to startup a retail venture online should take note of :
- Low Overheads Online?
Yes, this is the ubiquitous reason why half the world wants to set up a business online. However, while it is easy to set up something online, this becomes a double-edged blade as it means that a million other people with the same idea is going to jump on the boat also. And the last time I checked, a leaky boat (a.k.a Internet) with a million people on it (a.k.a IT startups) sank (a.k.a Dotcom Bust). Marketing (additional costs) and Differentiation are the ways to go. - 24/7 Online Presence
Websites work for you so you don't have to be there 24/7 right? Wrong... Websites serve the purpose of getting the message across but there's still tons of follow up work to be done before you fulfill sales. And guess what? Having a 24/7 website presence with international customers mean that unless you have a streamlined and efficient business process, you're be replying mails and parcelling off trinkets 24/7 too once your business expands. - Serving the Customer
The wonders of being online negates the need to have face-to-face communication with your customers. Good for all the shy startups huh? Nope. Research shows that since up to 60-80% of communication is non-verbal, online retail startups effectively miss out this majority of non-verbal feedback as their main communications will be based on webmails and to some extend IMs. It becomes harder to know a customer better and develop long lasting customer relationships, a key source of revenue for many a brick and mortar shop. In comparison, I would think that a traditional retail outfit with about 10 regular customers would fare much better than an online one with 100 come and go online ones. - Collecting the Payment
After making the sale comes collecting the payment. Should be easy online right? What with all the online payment portals and credit card services, right? Unfortunately, not all online customers think so and many still view making online payments as a risky transaction and would feel much safer to purchase something using cold hard cash at their local mall. - The Magic of Touch
Similar to the last point, the edge that traditional retail has over online retail would be what I dub the "Magic of Touch". This is the sense of safety and confidence that a customer can get from being able to see and touch the good he/she is about to purchase. Being a major part of the selection and purchase process, online stores selling unique items (collectibles, antiques ... etc) will have to find some means around this problem. On the flip side, this is less of an issue for the more "standardised" electronic or household items.
Having said all that, this is not about discouraging retail-based startups from taking the online route. The key point to note is to be well aware of the inherent short-comings of taking a business of selling online and find innovative means to mitigate these negative effects.
Be creative and different, then the drawbacks of selling online would never become too big a problem to you.
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