Entrepreneurs who are planning to start a new business venture should consider the differences between an e-business and a traditional business model. Differences don't suggest one is better than the other. One model might be better suited for certain types of business products and services. Some businesses benefit from a combination of the two models.
Differences in Overhead Costs
E-business models generally have lower overhead and startup costs compared to traditional business models with brick-and-mortar stores. Eliminating the need for location rent, staff and utilities that are necessities with brick-and-mortar locations help businesses improve profitability.
Those who choose a brick-and-mortar model also need an e-commerce presence. Web costs for development and marketing aren't eliminated in traditional business models.
Many new e-commerce models utilize affiliate marketing with large companies such as Amazon or drop-ship companies like Shopify. This model further lowers overhead costs by eliminating the need for inventory completely.
Importance of Consumer Convenience
The growth of online retailers such as Amazon has made it difficult for traditional stores to compete with consumers who seek a convenient shopping experience. However, there is still a group of consumers who prefer the process of a live shopping experience and the opportunity to physically examine products or try on clothing. There are others who enjoy the personal interaction provided by brick-and-mortar businesses.
Not all businesses are adaptable for strict e-business models. Attorneys, doctors and dentists can't provide services exclusively online.
Varied Marketing Strategies
Businesses that are exclusively online usually have a much larger digital marketing budget than a traditional business. Traditional businesses typically diversify marketing to attract customers from both local areas and from online demographics.
E-commerce businesses spend more time on blog, social media and search engine ads. Facebook pages have become popular avenues for e-business marketing and viral brand awareness. Some e-commerce businesses rely exclusively on low- or no-budget marketing campaigns, while others sponsor ads with big budget campaigns.
Traditional companies often utilize the same avenues online, although sometimes to a lesser extent. Brick-and-mortar stores may need print ads, mailers and other niche advertisements such as ads on bus benches or grocery store wagons. Radio and television commercials in a local market are others ways traditional businesses target new customers.
Reputation to Consumers
Brick-and-mortar stores tend to give consumers greater confidence that the business is legitimate. Being able to walk in, see the inventory and walk out with immediate service is a big factor in keeping consumers going to traditional businesses.
New e-business models take time to develop a solid reputation online. It takes consistent and targeted marketing to keep the target market engaged.
Time and Accessibility
E-commerce businesses are always open, and consumers can usually complete a transaction in minutes. Driving to and from a traditional business, viewing the merchandise and talking with salespeople — even the possibility of standing in line waiting to check out — all take up valuable time. E-commerce businesses can sell products and services 24 hours a day every day of the week.
Few traditional businesses are open 24 hours a day, although some are. Most brick-and-mortar businesses close on holidays, and many are open only five or six days in a week.