Ecommerce vs retail: Understanding The Key Differences

Online shopping is having a serious moment (we mean, who doesn’t love window-shopping in pajamas, right?) It's raking in over 20% of global retail sales, making it the cool kid on the block. But don’t count out physical brick and mortar stores just yet.

The National Retail Federation (NRF) just dropped a bombshell. Physical stores are making a comeback faster than anyone expected. Brands like Target, DSW, and Macy's are killing it with new, smaller stores (think showrooms and pop-ups) because, apparently, people still love strolling through aisles in 2023.

So, whether you’re all about the digital shopping spree or still rocking those in-store finds, it’s clear both retail and ecommerce have their own charm (and challenges). Let’s get into how these two worlds differ.

Difference between retail sales and ecommerce sales

When looking at ecommerce and retail, the main difference is how products are sold. Both involve selling products from businesses to customers, but they work in different ways:

• Retail means selling products in physical stores via POS transaction, face-to-face, or through direct mail. So your customers purchase products from your store.

• Ecommerce means selling products only online. This could also include dropshipping.

So, what sets them apart? Let's look at how each sales model works:

How retail sales work

Retail sales in brick-and-mortar stores happen when businesses sell products directly to customers in person. Stores get their products from manufacturers, wholesalers, and distributors, then set prices and display them for shoppers. Customers visit the store, look around, and buy what they need at checkout. Most stores use a POS system (point-of-sale system) to scan items, take payments, and track sales. Once the purchase is done, the customer takes their items home.

A good POS system makes checkout faster, accepts different payment types, and helps stores manage their inventory. Sales staff also help by answering questions and suggesting products. Many stores offer discounts, promotions, and loyalty programs to keep customers coming back.

How online sales work 

Online sales work by selling products through websites or apps instead of physical stores. Businesses list their products online with prices, descriptions, and pictures. Customers browse, add items to their cart, and complete their purchase by entering payment and shipping details. Once an order is placed, the business processes it and ships the product to the customer. Many online retailers use a POS system to track sales, manage inventory, and process payments.

Some businesses don’t keep products in stock themselves. Instead, they use dropshipping, where orders are sent directly from a supplier to the customer. This means the retailer doesn’t handle storage or shipping, making it a low-cost way to run an online store. Online businesses also use ads, discounts, and email marketing to attract and keep customers.

With Epos Now, you can level up your ecommerce store. Their system lets you integrate apps for things like CRM, loyalty programs, and more. Streamline your supply chain, keep customers happy, and keep them coming back for more with those POS integrations.

TIP: Check out our guide on the five retail POS integrations your store needs to thrive for more on this!

The contrast between retail stores and online trading for business owners

When deciding between an ecommerce or retail business, there are a few key differences to consider:

1. The spending threshold

Starting a business always involves some investment. You should ask yourself things like:

• What are the startup costs?

• How long will it take to get the business going?

• How connected are you to supply chains?

• Are you interested in dropshipping?

These questions are important to answer before you make any decisions.

Retail:

Retail businesses require more upfront investment. You'll have costs like renting or leasing a store, maintenance, and marketing outside the store.

Ecommerce:

An ecommerce online business is generally cheaper to start. You'll need an ecommerce website, an ecommerce platform so customers can shop online, and marketing tools, often bundled together.

2. Operations management

Running a business involves managing inventory, expenses, and staff.

Retail:

Retail stores need more effort to run. You'll have to deal with employees, maintaining your physical storefront, and logistics.

Ecommerce:

Now, online sales are a different beast. With ecommerce, much of the work can be automated. Ecommerce tools can make operations easier and give you more time to focus on other parts of your business.

3. Total Cost of Ownership

Total cost of ownership (TCO) covers all costs involved in running a business, including hidden expenses.

Retail:

Retail stores have extra costs like rent, insurance, and the cost of equipment such as cash registers and POS systems.

Ecommerce:

For ecommerce, the TCO mostly involves keeping your website running. This includes domain name fees, ecommerce provider fees, and marketing costs like ads and social media.

4. Omnichannel selling

Selling on multiple channels is becoming more common, creating what's called an omnichannel approach.

Retail:

Many larger retailers now offer omnichannel selling, combining physical and online stores. This can make business operations more complicated.

Ecommerce:

Ecommerce businesses often already use omnichannel selling. You can reach customers through your website, social media, and apps, creating an all-in-one business model.

5. The potential risks

Every business model has risks.

Retail:

Retail businesses have known risks, like theft, and must keep up with online competitors. You'll need to ensure your store can compete with ecommerce businesses in terms of product availability, shipping, and customer service.

Ecommerce:

Ecommerce stores face the risk of security issues because of electronic data interchange. Data breaches are a concern when it comes to using electronic payment systems for digital payments, and it’s crucial to protect customer information to keep their trust.

In-store experience vs e-commerce experience for consumers 

While ecommerce and online shopping have become super popular, physical retail stores still offer plenty of perks that can’t be beat. There are unique benefits to shopping in-store that make it a great choice for many customers. Here’s how the two stack up:

1. Customer journey

The shopping experience is crucial for whether a business succeeds or fails. How easy is it to shop? How smooth is the buying process? And how likely are customers to come back?

Retail:

In physical stores, customers can touch, try on, and test out products in person. This hands-on experience is a big part of what makes shopping in-store special. Retailers can create an inviting atmosphere with displays, promotions, and live demos to draw in customers and make them want to buy.

Ecommerce:

With ecommerce, customers can’t physically interact with the products. But online stores use digital tools like high-quality images, detailed product descriptions, customer reviews, and videos to make the shopping experience as close to real as possible.

2. Customer service

Good customer service makes a huge difference for businesses. Whether it’s helping with issues or offering easy returns, great service builds trust.

Retail:

Brick and mortar retail shines with personal customer service. A real-life sales associate can answer questions on the spot, making the experience more personal and direct than chatting online or on the phone.

Ecommerce:

Ecommerce stores may lack face-to-face interaction, but they can still offer top-notch customer support, often 24/7. Online stores provide help via email, social media, and live chat, so you’re not limited by business hours.

3. The time-flexibility

Convenience is what many shoppers care about the most — making shopping easier, faster, and stress-free.

Retail:

In-store shopping can be less convenient since you need to visit the store during its hours. But with helpful sales staff and a more personal experience, it can still be a pleasant way to shop.

Ecommerce:

Ecommerce is all about convenience. You can shop anytime, anywhere, and easily buy what you want with just a few clicks. With a user-friendly website or app, ecommerce makes shopping simple and fast.

3 factors to consider when choosing between retail and ecommerce

When deciding whether to go for retail or ecommerce, there are three key factors you need to consider:

Business model

Consider your business model and what fits best. Are you B2B (business-to-business), C2C (consumer-to-consumer), or B2C (business-to-consumer)? An Ecommerce business could be a great fit for B2C businesses looking to reach a larger audience. But if your business thrives on in-person interactions and customer service, it might be harder to transition to ecommerce without losing that personal touch.

Start-up costs

Both retail and ecommerce come with their own set of costs, so it's important to figure out what works within your budget. Retail often involves real estate, staff, and overhead costs, while ecommerce requires investing in a website, platform fees, and online marketing. Both require retail inventory management technology and the inventory itself.

Size and scope 

Take a good look at your business size. If you’re a smaller company with products that aren’t ideal for online selling and require competitive pricing, sticking to retail might be your best bet. However, if you’re growing and already have a solid online presence (or plan to), ecommerce could help you reach more customers and boost your growth.

How to sync your retail store with your online site to create an omnichannel approach 

If you have both a physical store and an ecommerce retail store,it’s important to make sure they work well together. To do this, you need to:

Centralize stock control

To keep things running smoothly, it’s important to manage your stock in one place. By centralizing stock control, you can track inventory from both your physical store and online store in real-time. This helps prevent issues like overselling, ensures you know exactly what’s available, and makes it easier to manage stock across all your channels. Get yourself a retail POS system that updates in real-time, so you know exactly what’s in stock, what’s running low, and what’s mysteriously disappeared. This way, you won’t accidentally sell the same pair of shoes twice—awkward!

Gather all customer data in one place

Next, focus on customer data. Think of it like keeping a list of your guests with details about what they like. By centralizing this information, you can track what customers buy, how they shop, and what they click on, whether they’re in your physical retail store or shopping online. Having everything in one place helps you personalize their experience and understand their preferences better. It’s like having a guestbook that shows you exactly how to make them feel special!

Integrate payments

When it comes to payments, you don’t want to juggle different apps. Integrate your payment systems so that whether someone’s buying a coffee from your brick and mortar store or shoes online, the payment process is easy and smooth. This means having one system that handles everything from credit card payments to digital wallets, making it simpler for both you and your customers to keep things moving without any problems.

Cross-promote your products effectively

This is your chance to showcase all your products, whether in-store or online. Put up signs in your physical store that guide customers to your online shop for special deals, and do the same online, encouraging shoppers to check out your in-store offerings. Use email and social media to remind your online customers about the great products they can find at your physical store. The goal is to make sure your customers see your products wherever they’re shopping, so they’re always tempted to buy something new!

Simple steps to switch from a retail store business to an ecommerce store

Ready to take your retail store online? Here’s how to make the leap without tripping over your own shoelaces:

1. Choose an ecommerce platform 

First up, pick your ecommerce platform (this is like choosing the right outfit for your online store). Whether it’s Epos Now Online, WooCommerce, or something else, find one that suits your style and budget. This platform will be your online store’s new best friend, handling everything from listings to payments. Think of it as a digital POS system (but way cooler).

2. Set up an online store 

Time to get your online store up and running! Customize your site with your branding, upload your products, and make sure everything looks as snazzy online as it does in your physical store. Don’t forget to integrate your POS software so you can manage sales across both worlds.

3. Centralize stock and payments

Now, let’s get organized. Centralize stock and payments so your retail POS system and online store are on the same page (literally, because no one wants to double-sell that last item.) Sync your inventory so you know what’s in stock and make sure your payment processing is seamless. No more juggling different systems or confusing your customers with checkout hiccups.

4. Start digital marketing for your business 

Spread the word now! Kick-off some digital marketing to get those online sales rolling. Use social media, search engine optimization (SEO), email campaigns, and maybe even some good old-fashioned online ads to let everyone know about your new online digs. This is where you really make some noise!

5. Offer shipping and returns 

Set up shipping and returns so your internet users can get their goodies delivered to their doorstep (and send them back if they need to—no hard feelings!) Make sure you have clear policies and options to keep your customers happy and coming back for more.

6. Test and launch

Before you go live, give everything a good test run. Check all the links, test the checkout process, and make sure your store software is running smoothly. Once you’re happy with the results, hit that launch button and let the online sales begin!