As customer expectations and shopping habits shift, so does the retail industry, which is redefining the shopping experience. This could mean enhancing fulfillment centers to make shopping more convenient for customers, investing in cutting-edge technologies that emphasize personalization or altering the in-store experience to keep customers coming back.
The primary takeaway from the past two years has been the significance of incorporating an e-commerce platform in order to create a more meaningful shopping experience for customers, despite the fact that all of these business investments are significant. Over the past two years, Americans spent $1.7 trillion online, indicating that digital shopping is likely to continue growing. Recent data from Xero indicates that accountants and bookkeepers believe that e-commerce platforms generally outperform traditional brick-and-mortar alternatives, with 70% of respondents stating that online platforms have a higher net profit margin.
More than 1,500 small-business accountants and bookkeepers in the United States were surveyed for the report. For your small business retail strategy to be in the best possible position for financial success, the following data points demonstrate the significance of incorporating an e-commerce model.
Better Profit Margins and Cash Flow Online
According to the survey, e-commerce platforms generally perform better financially. They have stronger cash flow, higher margins, and lower costs.
- Online businesses make more money per sale when they have a higher net profit margin—25 percent of respondents said it was significantly higher—partially because fewer operating costs eat into revenue.
- Eight out of ten respondents stated that e-commerce has a lower operational expenditure (opex) than purely brick-and-mortar stores. From an operational standpoint, online retail stores are generally less expensive to operate. The financial viability of online platforms is aided by the absence of rent and lower staffing costs.
- Online businesses have better cash flow, according to 51% of respondents, while brick-and-mortar businesses only have a 27% advantage. Online businesses can make investments in upgraded technologies or additional supplies with improved cash flow. Customers are typically billed electronically by online businesses through instant payments, which can cut payment wait times by as much as half.
Starting Up an Online Business
When compared to traditional brick-and-mortar establishments, the establishment of an online business typically takes much less time and costs less, and owners typically reach profitability much earlier.
- Eight out of ten people who took the survey believe that starting a business online is less expensive than starting one in a physical location. This is probably because online businesses do not have to sign long leases that are expensive. Brands can also try a soft launch, in which they carry less stock and figure out how to adjust their strategy based on consumer demand, by having an online platform. Due to increased pressure to meet rising operating costs, physical stores typically lack this flexibility.
- Breaking even is a significant milestone for any business, and experts believe that eight out of ten online retailers achieve it faster than traditional brick-and-mortar retailers. Online businesses are able to use their revenue to quickly recover startup costs thanks to lower startup costs and weekly operating expenses.
Less Financial Risk = Less Stress
Owners can face a lot of stress when starting and running a business, which can affect their health and personal lives. Experts believe that online platforms experience less stress and a lower risk of failure as a result of their greater resilience.
- According to 69 percent of respondents, an online business has a lower risk of failure as an ecommerce platform. The pandemic demonstrated the resilience of online platforms to significant shifts in consumer shopping habits and preferences.
- Sixty-eight percent of respondents believe that the failure of an online business will result in fewer personal financial losses due to the fact that online businesses typically spend less during the initial phase and break even more quickly, resulting in fewer debts in the long run.
Potential Challenges for eCommerce Platforms
The report looked at metrics related to personal comfort and business performance; however, this does not address all of the problems that online retailers face. A new understanding of consumer habits and strategic thinking is required for an online presence. Respondents mentioned the following issues:
- When running an online store, 41% say it was hard to figure out the right digital marketing strategy. Digital marketing expenses can be reduced by having relevant industry experience.
- Thirty-seven percent say it was difficult to spend more time combing through social media and online reviews.
- Thirty-three percent said they needed to spend more time learning about new technologies.
According to the report, e-commerce platforms are creating a new, less risky route to business ownership. The financial advantages of having at least a partial online presence should not be overlooked by retailers as they consider their business strategies for the future. It has never been more crucial to adapt to changing consumer expectations in order to develop an all-encompassing strategy that can satisfy a variety of consumer requirements.
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