You’re running a business, and things are looking up for you. At the same time, you have this feeling that you could be doing more. Your online business is booming, and you’re thinking about opening an offline retail store. Or maybe it’s the other way around, and you’re thinking about supplementing your successful brick-and-mortar business with eCommerce.
Still, you don’t go further with expanding your business because of crippling doubts. You ask yourself, “Do I need an online store?” or “Do I need a brick-and-mortar location?” After all, your customers aren’t asking for more, and it feels like things are good the way they are. If you stick with only one of those two options, you’re missing out.
We’ve entered the era of omnichannel commerce. If you’re thinking about the next steps for your business, you shouldn’t think about whether to double down on eCommerce or retail. You need to think about how to make them work together.
Consumers expect a consistent shopping experience no matter if they decide to buy online or in store. Keep reading to learn about the key differences, pros and cons of eCommerce and retail, and how to integrate the two to make the most of your business.
What’s the difference between eCommerce and retail?
Whether you run a retail or eCommerce business, both types involve selling a product or service to another company or consumer. While I’d like to come up with an unexpected answer, the major difference is that, with retail, you sell products in stores, shopping malls, or through direct mail, and most of the time, you do that in person. When it comes to eCommerce, all transactions happen online.
Retail and eCommerce have more in common than things that separate them. Actually, eCommerce is a type of retail. In other words, you could say that retail is an umbrella term like “sports.” The latter primarily includes traditional sports that you do in real life, like soccer or basketball. It also consists of the esports versions of the same disciplines and esports that you can only play on computers and game consoles.
In the same fashion, retail businesses include shopping malls, grocery and convenience stores, as well as eCommerce. Keep in mind that there’s more to eCommerce than selling physical products online. It also incorporates other types of transactions that can happen online, like buying customer relationship management (CRM) software or hiring a content writer to write blog articles for you.
So eCommerce is just online retail, right?
Not exactly. While the difference between eCommerce and online retail is even less noticeable than between eCommerce and traditional retail, it exists. The confusion stems from the fact that online retail businesses belong to types of eCommerce businesses.
The thing is, eCommerce isn’t just about selling products online. There’s much more to it than that. eCommerce platforms, like Shopify, usually give business owners access to marketing tools, loyalty programs, rich customer data, and more.
While talking about eCommerce, retail, and the differences and similarities between the two, it’s impossible not to mention the COVID-19 pandemic. It’s influenced both types of businesses in ways we didn’t expect, and it’ll continue to do so in the foreseeable future.
How the pandemic has sped up the growth of electronic commerce
You need to know that eCommerce accounted for only 8% of total retail sales a decade ago, according to Digital Commerce 360. The percentage of retail purchases had been slowly and steadily growing ever since, and then the infamous virus broke out. As a result, the online share of all spending in the U.S. boomed by 3.6 percentage points from 15.5% in 2019 to 19.1% in 2020. To put that into perspective, we’d never seen a year-over-year increase by even two percentage points before the pandemic.
In 2021, the growth of online sales significantly decelerated, but U.S. eCommerce penetration stayed at the same level. That’s because total eCommerce sales grew from $762.68 billion in 2020 to $870.78 billion in 2021, and offline sales grew from $3.22 trillion in 2020 to $3.68 trillion in 2021. This brings us to a 14% year-over-year increase in total retail sales. That’s all-time high growth, double the 7.2% growth in 2020.
Why am I bringing up all of these numbers? eCommerce has been steadily growing over the last decade, and you could think it’ll soon eat up traditional retail. Still, the data shows us that it was mainly offline, in-store shopping that caused the 14% growth in total retail sales I mentioned above.
If you’ve been thinking about ditching your offline retail business or delaying the start of its eCommerce branch, these are both terrible ideas. Traditional retail is doing great, and it’s here to stay. At the same time, eCommerce is predicted to increase its share of total retail sales to 20.4%. All of this ties in with consumers' desire to make the most of both in-store and online shopping. They expect an omnichannel experience that makes offline and virtual shopping work seamlessly.
The omnichannel experience is already here
Nike serves as an excellent example of this approach. Last year, I used their mobile app to buy soccer cleats that turned out to be one size too small for me. I must admit that I hate the hassle of packing and returning the stuff I ordered online and then waiting a week or two to get my refund.
I thought it was good to check if I could return the items bought online and get a refund on the spot in a nearby store. I grinned because all it would take was to just go to that store and hand over a box to the sales assistant. Brands that understand that eCommerce and retail should not work in silos but should instead be intertwined will capitalize on this approach in the following years.
Examples of eCommerce and retail businesses
We can distinguish between a few different types of eCommerce with the transactions happening between consumers and businesses in different types of eCommerce models. These models include business-to-business (B2B), business-to-consumer (B2C), and consumer-to-consumer (C2C). Now, coming back to different forms of eCommerce:
- Online retail involves sales of a product from a business directly to the end user.
- Wholesale focuses on selling products in large quantities from a wholesaler to a retailer.
- Services involve freelance writing, accounting, and many others that people and businesses provide in exchange for money.
- Digital products include ebooks and online courses like product marketing courses you can buy, like on Udemy.
- Subscription products and services also include B2B SaaS tools some of you probably use daily at work.
- Marketplaces include Vinted or OLX where people put pre-owned items up for sale.
These different types of eCommerce businesses give people numerous ways to shop for products and services they need. People can buy nearly anything they want on the internet. However, Raydiant’s State of Consumer Behavior 2021 report , which surveyed 1,000 American consumers, revealed that 46% of respondents prefer to shop in person rather than online when given a choice. For 33%, the reason for that is the ability to interact directly with products because those people value the fact that they can see and feel the products they buy.
When it comes to retail businesses, they all involve a sale between a company selling a product or service to the end user. Transactions can happen through offline channels, including brick-and-mortar stores or direct mail, and the online channels mentioned above. Shopify distinguishes four major types of retail businesses:
- Hardlines include items that you buy every couple of years, like cars or furniture.
- Soft goods or consumables are products like shoes, cosmetics, and garments.
- Food. No explanation needed here.
- Art, as in not just “art” in its traditional meaning, like paintings, etc., but also books and musical instruments.
We can break these four categories of businesses further into specific types of retail stores, including department stores, big box stores, discount stores, and more.
eCommerce versus retail: differences in the shopping experience
You can find at least seven major differences between the way people shop online and offline. If you’re considering venturing into the world of eCommerce or retail, take a look at how differently your customers can experience doing business with you.
1. Product interaction
In the retail world, consumers can physically interact with your product. They can touch it, feel it, and smell it, making it easier to make a buying decision the moment they’re in a store browsing your inventory.
When they shop online, consumers have to rely mostly on product images, videos, and size guides. To meet customers’ expectations, some businesses have started to employ virtual try-ons.
2. Obtaining products
With retail, it’s simple. You buy a product, and you can begin using it almost immediately. When you buy a physical product online, you have to wait at least a day to get it.
3. Opening hours
Here’s the big advantage of eCommerce. You can shop anytime you want, whether it’s six in the morning or midnight. With retail stores, you can only shop at specific times unless you shop at a store open 24 hours a day.
4. Customer service
When you shop in a store, you can find customer service reps to talk to in person in every other aisle, making communication quicker and more efficient. With eCommerce, you have a few options to choose from. You can use live chat, phone, or email, and depending on company policy, you’ll get help as soon as customer service reps are online. Keep in mind that some companies offer 24/7 customer service, while others use chatbots that can be helpful while human agents are taking some well-deserved rest.
5. Travel
Whenever you want to get something from a retail store, you need to drive, take a walk, or use public transport to get to a brick-and-mortar store. All of these options take different amounts of time, and you have to find ways to squeeze them into your busy schedule. With eCommerce, you can buy whatever you want from wherever you want. All you need is internet access.
6. Finding products
Remember when you badly wanted to find that one product, but it was nowhere in sight, and neither was the shopping assistant that could tell you if that product was available? This problem doesn’t exist in the eCommerce world.
7. Shopping duration
With retail, you have to walk around a store, find products that you want to buy, and ultimately, you spend your time looking at products you don’t even need, but hey, since you’re already in that store, why not? With eCommerce, even if it’s grocery shopping, you just add items to your cart, proceed to checkout, and pay without mindlessly walking down the aisles.
Omnichannel retail bridges the gap
You’ve probably heard self-proclaimed marketing “gurus” saying that email marketing is dead. There are so many more modern, shiny, and effective tactics out there, right? You’ve probably heard from these types of people that traditional retail is dead, too. The thing is, it’s doing great, and so is email marketing. Businesses that use these channels need to adapt to the changing reality to use those channels more effectively.
One of the results of the changes to consumer behavior and the way people shop is the emergence of omnichannel retail. What does that even mean? The keyword that’ll help you better understand the idea of omnichannel is “integration.” I’m talking about integrating traditional retail and eCommerce that enables companies employing omnichannel retailers to provide the same customer experience regardless of the channel their customers use.
When I mentioned my soccer cleats above, I labeled the whole situation as an omnichannel experience, but I might as well have called it omnichannel retail. This level of integration between offline and online shopping is facilitated by centralized data management. Because of that, people can begin their customer journey by visiting your website. Later, they go to your brick-and-mortar store to see the product they liked in real life and buy it a few days later by clicking through one of your social media ads. If they dislike the product after it’s been delivered, they can easily visit your brick-and-mortar store to return the item.
Omnichannel retail comes with its own set of benefits and challenges. It’ll help you reach potential new customers and give you more avenues to ensure a seamless experience in every channel. At the same time, you’ll have to make sure that you properly integrate your offline and online channels and that your staff handles them both with ease.
eCommerce or retail? Why not both?
eCommerce sales are expected to surpass $1 trillion by the end of 2023 in the U.S. alone. While it’s evident that the growth of online sales has slowed down, it’ll gradually increase its share of total retail sales. Traditional retail isn’t going anywhere though, as shown by last year’s data. The most successful businesses of tomorrow won’t settle for just one of these options. Instead, they’ll give their customers ways to interact with them wherever and whenever they want, and omnichannel retail is the key to making that happen.
Published May 11, 2022
