Let’s say you are to start a small business anytime soon, would you go for a traditional business — with an actual physical location — or pick an online business concept?
If you ask me, I’m bias, of course. I would always pick an online business over the one which is traditional, bricks-and-mortar. It’s the smart choice and later I will elaborate why by comparing the two types of businesses.
First, let me lay down the basis of comparison just to make sure we are comparing an apple to an apple. There are many forms of businesses, but let’s make this simple. Consider a small and familiar retail outlet. It could be a mom-and-pop bookstore, franchised store operation, or anything you are already familiar with.
They say the three most important factors to consider when buying a piece of real estate are: location, location, location. Many traditional businesses like retail stores and restaurants are overly dependent on the location. Being in the wrong location could mean committing financial suicide for your business.
An e-commerce store on the other hand lives in cyberspace. It’s a virtual real estate identified by such things as domain name, IP Address, sub-domain, etc. In a virtual world, location is not the problem. Your problem is being found out by your target customers. (I have more to say on this topic in another article.)
2. Business Or Store Setup
Space rental, renovation, period maintenance — you have to consider these things in a traditional store setup. Furthermore, you’ll need a signage, furniture or fixtures, display areas, POS machines and other things needed to keep your business in operation.
In an online business setup, your website is your store. Yes, you still have to maintain it, keep it looking good, update your product listings and prices, or run a few articles. But in general, comparatively cheaper to do or buy and you won’t be sweating it out when doing these activities.
In general, a traditional store requires a much bigger manpower to operate than an online store.
More often than not, the size of the store’s floor area is directly proportional to the number of employees needed to operate the store.
I once discussed with a medical representative about the possibility of setting up pharmacy. The one thing I can’t forget was his advice on inventories: As much as possible, you have to keep a wide range of different kinds of medicines in your store because once your customer goes there and you don’t carry what he is looking for, he would go to your competitor and might never come back to you again.
Keeping a large amount of inventory is one of the burdens you have to bear for running a traditional store.
With an online business, this one is less of a problem. You can start with minimal or even zero inventories and keep it that way. There are so many ways of doing this.
5. Business Hours
Bricks-and-mortars operate in the usual and standard business hours. Your staff have to go home, too.
An e-commerce store, on the other hand, can accept orders round the clock, 24/7 – even while you sleep. That means, passive income coming your way.
Since it is confined to a particular location, a tradition business can only serve a very specific, regional market. The only way to serve more clients and customers is to setup branches in different locations.
This restriction is removed if your business is online. You can choose to serve nationwide or even to do business internationally. As our tagline says, “Earn Global. Live Local.” That’s easily possible with an online business.