Pros And Cons Of Starting An Ecommerce Business
Ecommerce has revolutionized consumerism on a global scale, and starting a business in this space can be rewarding but not without risk. It is important to weigh up the pros and cons of ecommerce businesses before taking the plunge.
In this article, we’ll take a look at the various advantages and disadvantages of launching an ecommerce business, to help aspiring entrepreneurs make the best decision for their situation.
Pros of Starting An Ecommerce Business
- Low Overhead Costs
In comparison to more traditional brick-and-mortar businesses, ecommerce businesses require much lower setup costs. Instead of spending money on physical shopfronts, utilities, staff salaries and other overhead costs, you can get an ecommerce website up and running for very little capital.
- Automated Processes
Ecommerce businesses can be automated to a certain degree, making them a more efficient endeavor than many types of traditional businesses. Depending on the technology you set up within your platform, a lot of the backend processes (such as inventory management, accounting, and sales reporting) can be automated.
- Wider Market Reach
Ecommerce businesses enable you to reach a much wider demographic than traditional businesses. While physical stores are limited to the local or regional vicinity, you can tap into global markets as an ecommerce business.
- Easy & Cost Effective Advertising
Ecommerce businesses can easily and cost-effectively advertise their products or services, allowing them to reach out to potential customers all over the world. With the right combination of content marketing, SEO, and paid advertising, you can attract the right type of customers for your business.
- Increased Customer Insight
Having an ecommerce business grants you access to a wealth of customer data that you can use to improve their experience and boost sales. By using analytics tools, you can track customer activity on your website as well as gather demographic information, which can be used to optimize target marketing campaigns and improve the website’s user experience.
Cons of Starting An Ecommerce Business
- High Competition
Starting an ecommerce business isn’t easy due to the sheer number of competitors. Potential customers will be able to find many alternatives to your product or service with a few clicks, thanks to all the choice in the online world. You need to find ways to differentiate yourself from the competition to make your business viable.
- Increased Upfront Cost
Although the overhead costs of running an ecommerce business are lower than that of a traditional store, investing the money and time to develop a great website from the ground up, can be quite costly. Additionally, running an ecommerce business involves paying for hosting, marketing and other associated fees.
- Lack Of Physical Contact
Ecommerce businesses don’t allow potental customers to actually try the product before they buy, limiting opportunities to build relationships with customers. Furthermore, customers may become apprehensive when shopping online, due to the potential of receiving counterfeit products.
- Technical Savvy Required
On top of all the general small business prerequisites, such as great customer service and a knack for sales, it is important to have an understanding and affinity for technology if you want to start an ecommerce business. You need to understand all the elements and coding required to develop, customize and SEO optimize a great website.
- Delivery & Returns Challenges
Ecommerce businesses have to get it right every time when it comes to delivering and returning products – mistakes can be expensive and often lead to customer dissatisfaction. Delivering products on time and in good condition is essential for building customer trust and satisfaction. This can become even more complicated with international customers, who will expect best practice when it comes to delivery, tracking and return requests.
Starting an ecommerce business can be very rewarding, but it is important to consider all the various pros and cons of the endeavor before taking the plunge. Weighing up the advantages and disadvantages will ensure you are prepared for the journey ahead.
Some of the advantages of ecommerce include low overhead costs, automated processes, wider market reach, easy and cost effective advertising, and increased customer insight. At the same time, one also needs to be aware of the cons including high competition, increased upfront costs, lack of physical contact, technical savvy required, and delivery and returns challenges.
Ultimately, it is important to decide which course of action is best for your situation and weigh up the risks and rewards of launching an ecommerce store. It is great to imagine what the future of your business can look like, but it is equally important to be mindful of any potential pitfalls.
