Online Stores are Different

An online store is not the same as a retail outlet located on the high street or in a busy shopping center.

We have been building traditional stores for thousands of years, there were fast-food shops in Pompeii, but online shopping started less than 20 years ago. While we have extensive experience building and operating physical stores, the guidelines for online retail are still evolving. An online store differs from its offline counterpart in a number of ways:

• Focused on providing information
• Subject to intense, worldwide competition
• Oriented towards customer demands rather than seller desires
• Built using fast-changing technology

These differences are evident in a variety of ways:

Location

photograph showing a row of stores on a typical shopping street with no shoppers in sight.

Location is important, whether your store is physical or online.

A customer must make a specific choice to physically visit your offline store, based on a variety of factors. Choosing the right location is a critical part of this decision process. A convenient place, easy customer access, adjacent complimentary businesses, nearby competitors, and more all affect the final choice.

An online store also has an address, a URL, but it has little physical meaning since the store can be reached from anywhere in the world, 24 hours per day. Conversely, competitors are equally convenient, only one click away from you. Customers do not have to make a physical commitment when choosing an online store, so leaving one for another is much easier.

Construction

Building a retail store can take months, and even small changes can be costly. Once the store is built, fittings and fixtures must be added and staff must be recruited and trained. All these require substantial commitments in time, money and people.

Online stores can be built much faster, often in weeks. Changes to a website can be made rapidly and at a low cost. Staff can be provided by outsourcing to specialized service providers or to business partners. Both the initial and ongoing costs for an online store can be substantially less.

Size

photograph showing stores crowded with shoppers.

Both offline and online stores must be large
enough for their customers.

Offline stores must be large enough to hold their products, jewelry stores are smaller than automobile dealerships, as well as the staff and expected customers. Adequate space for parking, storage, and deliveries is also needed.

Online stores must also be correctly sized but using different metrics:

  • processing capacity to handle multiple orders at once
  • bandwidth to send and receive information
  • data storage capacity for transaction records and digital products

While a warehouse may be needed to store and ship physical products, the customer-facing facilities are no longer required. While adding more space to a physical store can be a major project, adding more online capacity today is fast and relatively inexpensive.

Presentation

photograph showing a storeowner and goods attractively displayed along the wall.

Goods must be attractively presented
to appeal to shoppers.

The physical appearance and layout of your store impacts your company image as well as the customer profile you wish to attract. Well-trained, attentive staff who can guide a customer to make a purchase are one of the biggest advantages of a physical store.

For an online store, all customer interaction must take place through a screen, whether computer, mobile or tablet. Layout and presentation are limited, and there is no direct, physical interaction with customers. Online stores try to replicate the shopping experience, such as having online text and video chat features, but these do not equal the power of personal attention by helpful sales staff.

Security

Retail stores have long had to worry about security by protecting their physical goods using tags, alarms, guards etc. Thefts can be devastating, but the loss is limited by the ability of the criminal to carry the physical items.

An online store may have security issues with a warehouse, but there are other concerns more important. Online stores are built using complex technologies which are exposed to criminals worldwide. In many cases the information these systems contain, such as credit card numbers, is more valuable than the physical products. Because information can be easily transported in large quantities, the potential exposure to a large loss is even greater online.

Fulfillment

Order processing, pick and pack, shipping and returns are all part of fulfillment. Both offline and online stores must be able to perform these transactions quickly and correctly. However order volatility can be quite different. A physical store can hold only so many customers, which tends to limit the number of transactions which must be processed at one time.

An online store can be bombarded with transactions from all over the world, because there is no limit to the number of customers trying to access the store. If systems are not sufficient to handle these surges, orders will be lost or filled incorrectly, requiring even more effort to correct them later.

One cannot simply take a retail store and movie it online. There are substantial differences between them in planning, construction and operation. If these differences are not accounted for, the online store will not perform to its full potential.

A version of this article appeared in 2011 on the PowerRetail website as Getting Started Online: Online Stores are Different.

 

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