Retail Vs E-commerce Stores (Definitions And Differences)

Many businesses sell their products and services in retail stores, while others prefer to use online modes to reach customers. Both retail and e-commerce stores have advantages and disadvantages and appeal to different customer segments. Knowing the differences between retail and e-commerce can help you understand which one is suitable for the company you work for and its customers. In this article, we explore the characteristics of retail vs e-commerce and review the parameters a business can use to differentiate between the two selling channels.

Retail Vs E-commerce

Knowing the characteristics of retail vs e-commerce can help you determine the best way to reach out to customers and sell a company's products. It can also help you decide whether the business is more profitable selling through both physical stores and online stores or if it might benefit more from choosing one method. It can help your marketing team ideate advertisement campaigns and strategise sales funnels. The following is an overview of the two types of selling:

What is retail?

Retail is when a company sells its products through physical stores. Retail stores are any building or part of a building that customers physically visit for shopping. Examples include shopping malls, departmental stores, roadside stalls, standalone shops, open markets and pushcarts. Retail sales typically involve a shopkeeper displaying products and a customer giving them cash in exchange for the product they wish to buy.

Retail stores can represent one particular brand where a building or a chain of buildings sells products only from one manufacturer. These are brand outlets. In most cases, retail stores stock products from multiple brands and sell them in categories, such as clothes, toys, food or medicines. Retail stores typically depend on a traditional supply chain, where products travel from the manufacturer to the wholesaler and then to the distributor before they finally reach the shelves of a store.

Related: What Are Brick And Mortar Stores? (With Examples And FAQs)

What is e-commerce?

E-commerce is when businesses sell their products through the internet. They typically store products in a warehouse and display them as pictures on a website. Customers browse through these pictures on the internet and purchase items using various online financial transaction methods, such as credit cards, net banking and debit cards. Some websites may even provide the option to pay by cash on delivery.

Customers may receive packages through shipment methods such as courier, postal services or dedicated brand delivery services. e-commerce allows sellers to directly purchase products from the manufacturer without them going through wholesalers and distributors. Some e-commerce websites are common platforms where multiple sellers can display their products while others are exclusive to a particular brand. Smaller brands or new businesses without a website often also use social media networks to sell their items.

Related: How To Become An E-commerce Specialist (With Skills)

Difference Between Retail And E-commerce

The following are parameters that can help you understand the difference between retail and e-commerce to help you choose the right method of sale:

Channels

There are usually two types of channels you can use to sell goods to end users, namely, direct channels and retail channels. A direct channel is where manufacturers sell their products directly to customers. This type of channel is more common in e-commerce. Many brands sell their products directly on their websites. Some retail stores also use a direct channel. An example of this is a manufacturer with its own outlet or a farmer who sells vegetables they grew in their field.

A retail channel typically involves a large supply chain. Most physical stores use this type of channel. Through retail channels, shop owners purchase products from multiple brands and sell them in one store. E-commerce stores can also use the retail channel. An example is an e-commerce website that hosts products from multiple brands and categories, inviting manufacturers to sell their products on the common platform.

Related: What Are Channels In Marketing? (Definition And 14 Examples)

Customer interaction

In a retail store, customer interactions are typically face-to-face. This means that shop owners can converse directly with customers. This allows them to build relationships with customers, who might then refer the store to others. It also benefits the customer, especially if they are unsure of what to buy and require assistance with choosing the right product for them. Social relations can also emerge between store owners and customers when they meet at a physical retail shop.

For e-commerce, sellers typically use digital marketing plans to communicate with customers. These interactions take into consideration the browsing data that the website collects for sellers. A company may automate many of these interactions. For example, they might send an automated welcome message or promotional email. Human interactions typically occur when the customer contacts the support helpdesk for questions about a product.

Operational costs

Retail stores typically incur huge operational costs due to the maintenance of physical stores. Costs often include rent, maintenance and utilities. Retail shops might also spend heavily on decorating the store to make it attractive to customers. In particular, customers who window-shop like to visit stores that display items beautifully. Retail stores are also at the end of the supply chain, which means they buy products from distributors at a higher price than their manufacturing cost.

Contrarily, e-commerce stores save money on operational costs, as they do not own a physical store. They typically store products in a closed warehouse that they only pay to keep clean. They also save money due to purchasing products directly from manufacturers. The only additional cost they usually incur is the cost of logistics for shipping the products to the customer. Customers typically pay for shipping, but brands that want to increase customer loyalty may bear these costs themselves.

Convenience

Depending on the product, an e-commerce store may be more convenient to a customer than a retail store. Customers may be willing to wait a few days for the delivery of non-urgent items, such as jewellery, because of the convenience of shopping from home. They may find it easier to browse items online because of the wide range of options available to them. Many websites also provide easy return services, so customers can send an item back from their homes if they want to replace it with something else.

A retail store is more convenient if the customer wants to buy an essential commodity. For example, a customer might be cooking when they suddenly realise they are out of salt. If they shop for salt on an e-commerce website, it can take days to arrive. Instead, they can walk into a nearby grocery store, buy the salt and finish cooking on the same day. Convenience depends on where the customer lives. In a remote area, retail stores may be far away, making e-commerce stores more convenient.

Customer experience

In retail stores, customers can physically test the product before buying it. For example, if a customer wants to buy a pair of jeans, they can try them on at a retail store to make sure they fit before purchasing them. Some customers may enjoy these in-store experiences. Allowing customers to test products is beneficial because trying out a product before purchasing it makes a customer less likely to return it.

E-commerce stores can provide a different kind of customer experience. Some shoppers may enjoy scrolling through their mobile phones to find items on e-commerce websites. These customers typically like to browse through various items and short-list their favourites. If they are buying clothes, for example, they may prefer to buy and try on a pair of jeans at home instead of at a shopping mall.

Shopping time

It typically takes more time to shop at retail stores than on e-commerce platforms. A customer may take time to visit the store, physically walk around to find the right item and then wait in line to pay for the product. Customers can reduce the amount of time they spend shopping if they know exactly what to buy, which store has the item in stock and what time the stores are not busy.

E-commerce websites can drastically reduce shopping times. They can save the time it takes to visit the store and wait for billing. A customer that shops at an e-commerce website may take only as much time as they require to select a product. Once the product is in their online shopping cart, checking out and paying for the product takes only a few minutes, depending on the loading time of the website and their internet speed.