Ecommerce Advantages and Disadvantages You Should Know

Business strategy
9mid read June 23, 2022
Business strategy
Ecommerce Advantages and Disadvantages You Should Know

If you strive to keep your business alive and healthy, you should stay open-minded to change and ever-lasting alteration of rules in the business world. For example, Covid-19 affected online retail sales as they increased by 32.4% in 2020. In this text, we are talking about the change from physical to virtual.

What are the advantages and disadvantages of ecommerce business and which benefits or drawbacks of ecommerce will you encounter on your way to the online world – read more below.

Advantages of Ecommerce or Why Brick-and-Mortar Goes Click-and-Order

One thing is for sure — ecommerce is growing rapidly as we speak. In fact, in 2020 global e-retail sales surpassed an incredible 4.2 trillion dollars worldwide. But what is so luring about ecommerce that keeps retailers build online stores? Let’s dive deeper into the advantages of ecommerce.

Advantage #1: Cost Effectiveness

Maintaining a brick-and-mortar business can sometimes be money-draining because of numerous overhead expenses. Going virtual is profitable since you will not have to own a physical store to sell your products. This means that you can forget about paying costly rent, hiring on-site staff, paying utilities and insurance — with online technologies and the right ecommerce platform, you can launch your startup easier and cheaper.

Advantage #2: Absence of Physical and Temporal Restrictions

The laws of physics work differently in the online world. There are no limits when we speak about time and space. The number of items you wish to display to potential customers is unlimited, and so are your working hours. You can stop worrying about the in-store “shelf space” for your products and stay open for your customers 24/7. As 72% of consumers like to shop late at night, you can welcome a higher number of customers as well as delocalize your services and expand your business globally.

Advantage #3: Access to the Global Market

When you go online, you go global! Why might this be important for an ecommerce business? The reason is simple — more opportunities to sell! Meet your customers where they are — on social media, Google shopping, or even their favorites marketplace like Amazon or Ebay. The choice is yours!

­Besides, having studied all the merits and demerits of ecommerce, you can start selling internationally and break cultural barriers; after all, some commodities might work better in other parts of the world. Just like Nintendo, a Japanese-based brand that receives its largest revenue from North America. In other words, there is a world of opportunities out there, and grabbing the right one is just a matter of coordinates.

Advantage #4: Data Use to Attract, Convert & Retain Customers

Another great advantage of ecommerce is that you don’t need to tug at your customers’ sleeves to get their feedback. In ecommerce, there are simple analytics tools to track that instead. The data is perfectly measurable and convertible into successful digital marketing strategies. With tools like Google Analytics, MailChimp, Kissmetrics, etc., you can easily monitor your customer journey and manipulate that data to meet online shoppers’ expectations.

You can easily gain insight into the following valuable data:

·  Trends and customers’ preferences

·  Customers’ feedback

·  Effectiveness of marketing strategies

·  Inventory management

Advantage #5: Fast and New Ways to Market Products

Among the benefits and limitations of ecommerce, it is worth mentioning fast and new ways to market products. Online selling is extremely beneficial if you are looking for speed and variability in marketing:

  1. It takes only a few clicks to introduce loyalty programs, set targeted ads on social media, and notify your audience of the new product you’re launching.
  2. You can take advantage of personalization by integrating a recommended products engine into your website and, thus, and successfully cross-sell and upsell your products.
  3. You can embed digital channels into your physical retail and embrace the omnichannel strategy (especially since the omnichannel purchase rate is almost 10% higher than the single-channel purchase rate).
Average purchase rate at single channel vs omnichannel commerce.
Average purchase rate at single channel vs omnichannel commerce. Source: Omnisend

Overall, the world is your oyster when it comes to ecommerce marketing. Use it wisely.

Advantage #6: Unlimited Scalability Opportunities

Another great advantage of ecommerce sales is an ever-growing number of sales and unlimited scalability. The COVID-19 pandemic pushed 150,000,000 customers to shop online for the first time ever, which increased the online market demands significantly.

Influence of COVID-19 pandemic on ecommerce in the US.
Influence of COVID-19 pandemic on ecommerce in the US. Source: Wonderflow

When the market asks for it, be ready to upscale and grow your business. Here are some upscale ideas:

·  Improving your infrastructure

·  Expanding communication channels with customers

·  Upgrading your services or product offer (adding more products to your catalog)

·  Adding more payment options

When the time comes, you won’t have to worry about your sudden need for extra “shelf space” because ecommerce platforms (like Magento development, for example) will sustain any kind of traffic peaks with no performance issues.

Advantage #7: More Sales Channels

One of the biggest business advantages of ecommerce is multiple sales channels. You get more different ways to inform customers. This means that you can provide information about the product using different modes of communications such as demo videos, audio instructions, user experience, and tips and tricks. This can actually attract users’ attention more efficiently and sell the product more successfully.

Disadvantages of Ecommerce or What Drives Retailers Away from Online Business

Starting an online business from scratch or converting it from brick-and-mortar can potentially become a rewarding change, but it does not come without certain challenges. Let’s take a look at some disadvantages of ecommerce.

Disadvantage #1: Privacy & Security Concerns

Unfortunately, the increase of online shoppers induced an increase in cybercrime as well. According to the Insurance Information Institute, identity theft and fraud reports in 2020 spiked up 45% in comparison to 2019. Therefore, privacy and security concerns are one of the cons of ecommerce for business.

Identity thefts and online frauds 2016-2020
Source:  Insurance Information Institute

This new “trend” is damaging to the ecommerce economy, but still not enough to stop it from growing. We might as well encounter new and more efficient fraud prevention systems in the future.

Knowledge is power. Arm yourself against possible fraudulent online activities and follow these best practices to increase your website security.
Ecommerce website development
10 Ecommerce Fraud Prevention Best Practices and Techniques for Online Merchants

Disadvantage #2: The Risk of Downtimes and Tech Issues

Joining the online world cancels brick-and-mortar physical restraints, but imposes new ones via technological issues. They often represent a more complex, interconnected and harder to discern systems of errors such as:

·  System failure

·  Human error

·  Network outages

The downtime due to these events might be only temporary, but it can be long-term damaging for the brand itself. For example, it can cause data loss, damage the productivity and reputation of the brand.

The good news is that you can address this issue even before it arises. Magento support services come in handy in case you come across some frustrating downtime episodes.

Disadvantage #3: Immense Online Competition

According to Statista, in 2020 ecommerce sales worldwide amounted to 4.28 trillion US dollars revenues, and are projected to grow to 5.4 trillion US dollars in 2022. And now everyone wants a piece of that pie! This means that the online market is a pretty crowded place to thrive, and you will need to work extra hard to stand out. Make sure you get well acquainted with the competitors if you plan to join the saturated market of ecommerce.

Disadvantage #4: Uncertainty About the Product Quality

Even though ecommerce is trending and providing some pretty handy and practical shopping possibilities, certain customers are just not buying it, literally! The lack of possibility to check out the product personally is just way too repulsive for some. According to the Smart Insight survey, the inability to see and touch the product is actually the first reason why customers opt for brick-and-mortar stores instead.

Top reasons consumers shop in stores instead of online
Source: Smart Insights

In this case, a favorable return policy is an absolute must. If you need more information about ecommerce return policies, you are just a click away.

 Disadvantage #5: Tricky Shipping Times

OTD (On Time Delivery) can be very challenging for online retail businesses. Mostly because it is related to third-party services and can’t be fully controlled by the seller. According to the Smart Insight survey, 34% of customers wouldn’t shop online because the delivery takes too long, 25% find delivery costs too high, and 14% find complicated return policies repellant. Naturally, the customer is always right! In this case, being honest and realistic about delivery time with your customers goes a long way. 

 Disadvantage #6: Taxation and Legal Difficulties

In this case, access to the global market and wider public represents a setback. If you sell globally, you are obliged to keep good track of local legal and taxation regulations. For instance, if you sell wine online, you should know that every country requires different kinds of permits and licenses for a liquor store. And unfortunately, not all are adapted to selling spirits online (as in the case of some provinces in Canada).

As overwhelming as it is, this hurdle however is not impossible, it just requires more time, work, and accounting expertise. Make sure you are ready for it!

Is It Worth Getting Into Ecommerce?

Numbers never lie. And after analyzing all the advantages and disadvantages of ecommerce to a business, we arrive at a conclusion that the exponential growth of ecommerce trends in recent years is undeniable.

Cost-effectiveness, easier access to the global market, and a pragmatic approach to data manipulation are extremely captivating. Also, new creative approaches to digital marketing can be pretty stimulating and inspiring both for users and sellers. However, keep in mind that knowledge is power, and make sure you gather all the right information about both merits & demerits of ecommerce before it overwhelms you. 

If you feel ready to leap into the world of ecommerce, we got you! Click here and follow our step-by-step guide to online success.
Business strategy
How To Start An Ecommerce Business: The Ultimate Step-by-Step Guide

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