What Are the Advantages and Disadvantages of E‑commerce?

What is e-commerce?

So, what is e-commerce exactly? E-commerce refers to business transactions — such as the sale of a product — that occur online. E-commerce websites typically include a virtual storefront that has a title, picture, and description for each product. When a customer finds a product they want to purchase, they can add it to their shopping cart and check out using their debit or credit card. Some payment processors even allow you to accept payments via cryptocurrency and other alternative payment methods.

What are the advantages of e-commerce?

There are several advantages of e-commerce for business owners who don’t want to set up a physical storefront. Thanks to e-commerce, you can build an affordable website and sell your products online. You can also drive traffic to your e-commerce store to reach a larger audience. Here’s a full breakdown of some of the biggest e-commerce benefits.

1. Reduced overhead costs

Running an e-commerce store is a lot more cost-effective than running a physical store. You don’t have to rent commercial real estate — instead, you can pay an affordable fee for web hosting. You don’t have to invest in security for your commercial property, plus you don’t have to worry about paying rent for a warehouse or hiring employees. With an e-commerce store, typical costs include your domain name, your web hosting, and the cost of building your website, as well as your inventory. That being said, most e-commerce websites spend some money on marketing as well.

2. No need for a physical storefront

There are so many difficult aspects to running a physical storefront and using e-commerce means you don’t have to face most of those obstacles. Renting a commercial property can be expensive, especially if you’re in a big city. You also have to pay for electricity, water, and internet to ensure your space is up to code and can handle your business. There’s also security to consider; if you want your physical storefront to be secure, you’ll need to invest in cameras and other surveillance equipment. With an e-commerce store, you can simply build your website and start selling your products online without worrying about setting up a physical storefront and spending as much money.

3. Ability to reach a broader audience

Perhaps the biggest advantage of e-commerce is the fact that it allows you to reach a massive audience. Your physical storefront can only get so many visitors in a day, especially if you live in a smaller town or a rural area. With an e-commerce store, you can reach potential customers all throughout the world and show them your products. Even if you’re not selling your products overseas, you can still reach shoppers all the way across the United States to boost your sales. This expanded reach has even allowed a handful of smaller e-commerce stores to become massive brands over time.

4. Scalability

Of the advantages and disadvantages of a business using e-commerce, scalability is one of the most practical advantages for long-term growth. If you have a physical storefront, your business can only grow so much before you have to move to a larger storefront. You also have to move inventory and equipment from one location to another, which makes it even harder to scale your store with the growth of your business. With e-commerce, your website and store can grow as your business does, and you don’t have to spend a fortune moving to a new physical space.

5. Track logistics

Keeping track of logistics is an essential part of e-commerce and retail marketing, and it’s significantly easier with e-commerce than it is with a physical storefront. You can outsource fulfillment logistics so your customers can enjoy benefits like 2-day shipping and easy returns processing. You also have an electronic record of everything, which makes it easy to track sales and look for trends that help you grow your business over time.

What are the disadvantages of e-commerce?

There are advantages and disadvantages of a business using e-commerce, so it’s important to know about the potential drawbacks as well. Running an e-commerce website can be particularly challenging for people who aren’t familiar with computers and technology. Here’s what you need to know about the potential downsides of e-commerce.

1. Potential security threats

When you’re doing business online, there’s always the potential for security threats. Poor website security can allow unauthorized users to gain access to your website and look at sensitive data. In rare cases, issues with payment processors may lead to data breaches that put customers’ credit and debit card information at risk. A big part of learning how to build e-commerce websites is learning how to make sure that website is secure, which is why some business owners prefer to hire a professional.

2. Competition

There’s a lot of competition in the world of e-commerce because it’s so easy for anybody to create an online store. This is one of the biggest e-commerce disadvantages because it means you have to work extra hard to make sure you’re promoting your store and driving traffic to your website. Certain niches are also very crowded, so you may have a tough time selling your product depending on your industry and products. Ultimately, the success of your store is determined by how hard you work to build your online presence.

3. IT issues

There are no tech issues that can keep you from accepting cash at a physical store, but IT issues can be a big problem for e-commerce websites. If your website suddenly crashes or you’re having a problem with your payment processor, that downtime could potentially cost you money and customers. What’s even worse is that fixing these IT issues could cost you even more. Keeping it simple can help you avoid some of the potential IT issues that come with e-commerce, but tech problems are something to be aware of.

4. Shipping logistics

Running a physical storefront is simple because all you have to do is sell products to customers when they come in to shop. If you want to sell products over the phone or through a catalog, you can use a simple shipping service to send out a few packages each week. With an e-commerce store, you have to figure out all of the shipping logistics because every purchase will have to be shipped. It can be difficult to figure out a seamless shipping solution for your business, and you don’t want to end up in the red due to high shipping costs.

5. Limited connection with customers

You don’t get a chance to connect with customers on a personal level when you’re running an e-commerce store. Some people may prefer that, but you can’t offer the same personal touch when you make a sale online.

What are the benefits of e-commerce for customers?

E-commerce also offers several benefits for customers. Here are some of the biggest advantages of e-commerce from a customer’s point of view:

• Easy to compare products: Instead of going from store to store, customers can browse multiple websites to quickly compare products. This makes it easier to make informed purchases.
• Shop from anywhere: Customers can shop at home, at work, or on vacation. Easy shopping from anywhere makes the whole process more convenient for customers.
• Browse a wide range of products: There’s no limit to how many products you can sell in an online store, so customers get access to a wider range of products online.
• Access to product information: You can use product descriptions and details to provide in-depth information about products that customers can’t get in a physical store.
• Save time: Quicker shopping and no driving allow customers to save time when they shop online, and time is valuable to everyone.

Create an e-commerce store with Mailchimp

If you want to make it easy to sell your products, building an e-commerce store is a good start. E-commerce can be a little complicated, but you can really boost your business when you understand the advantages and disadvantages of a business using e-commerce.

With Mailchimp, creating and managing your e-commerce store is easy. Our website builder allows you to create your own website with no experience, plus you get access to simple marketing tools to boost your brand. Try Mailchimp today and launch your first e-commerce store.