9 Differences of E-Commerce vs. Retail: Can You Do Both?
You’re sure that, with an online store, you can expand your retail business and reach more customers than ever before. It’s a tempting idea, but before you dive in, what are the differences between e-commerce and retail, and can you manage both seamlessly and effectively?
At POS Nation, we understand the challenges of managing a retail business, and we’ve seen firsthand how expanding to e-commerce can take your business to new heights.
That’s why we’ve put together this comprehensive guide on the 10 differences between e-commerce and retail, so you can make an informed decision about your business’ future.
This article will help you understand the pros and cons of each channel, what to consider before expanding, and how a point of sale (POS) system can make all the difference.
So, whether you’re a seasoned retailer or just starting out, get ready to learn about the opportunities and challenges of doing both brick-and-mortar retail and e-commerce.
E-Commerce vs. Retail: What’s the Difference?
Expanding into the online retail space isn’t a decision you should make lightly. A lot can go wrong; if it does, your brand reputation is on the line. Crucially, you need to ensure a consistent experience across both channels.
The differences are obvious at first glance. E-commerce refers to buying and selling products over the internet, while retail refers to selling products directly to customers in a physical store.
What about similarities? Both require effective marketing and advertising. Though you’ll use different methods to market your online and physical stores, you should make an effort to tie those strategies together.
For example, you might offer an online discount to customers who fill out an in-store form or survey.
Excellent customer service is essential to maintain customer loyalty. Creating a positive customer experience is part of omnichannel success and requires a consistent approach.
Let’s examine the differences between these approaches in more detail, giving you the tools you need to manage both with ease.
- Sales Channels
- Customer Experience
- Inventory Management
- Sales Tax
- Shipping and Delivery
- Customer Data
- Payment Processing
- Product Returns
1. Sales Channels
Retail: In person
In your physical retail store, customers can stop in, browse your products, and make a purchase in person. The advantages here are two-fold:
- Customers can physically interact with the products, try them on, or inspect them before purchasing. This provides an immersive experience and a chance to interact with your shop employees.
- Your sales team can assist customers with their purchases, answer questions, upsell, and provide a personalized shopping experience. The human touch goes a long way.
In an e-commerce setting, your sales channels are online. Customers simply browse your store and make purchases from the comfort of their own homes or anywhere with an internet connection. The clear advantages are:
- Convenience. Customers don’t need to visit your store physically and can opt for home delivery.
- You have a wider reach and can choose to ship your products to any location. Meaning you could even have customers from all over the world.
2. Customer Experience
Retail: Personal interaction with sales associates and physical product displays
The customer experience differs somewhat, but who’s to say every customer wants the same experience? You can help buyers with different needs with a physical and online store.
Retail customers benefit from personal interaction with sales associates and physical product displays. Sales associates can answer questions, provide product recommendations, and help customers find what they want. Physical product displays allow customers to see and touch the products.
E-commerce: Virtual product display and customer service through online channels
In an e-commerce store, customers still get a product display, including product images and descriptions, but it’s virtual. Customer service is also virtual, but there’s the added benefit of multiple channels to access customer service, such as email, live chat, and phone.
Online product displays and customer service may not offer the same level of personal interaction as retail. Still, e-commerce stores can reach a wider audience and offer customers the convenience of shopping anytime, anywhere.
3. Inventory Management
Retail: Physical inventory tracking
Many brick-and-mortar retail stores track their inventory physically. Depending on the size of the store, inventory will be limited and managed through in-store systems, with updates made regularly.
Physical products are tracked to ensure the store has enough stock to meet customer demand. You might use manual processes, such as physically counting products in the store or using barcode scanning technology to keep track of inventory levels.
Time-consuming physical inventory tracking may not provide real-time information, which makes it difficult to manage stock levels and ensure customers can always buy what they want in the moment.
Pro tip: A cloud-based, robust POS system solves for this with automated inventory management. Excellent inventory management software offers tools like alerts for low stock, automatic stock replenishment, label printing, real-time metrics, vendor management, and more.
E-commerce: Digital inventory tracking
E-commerce uses digital inventory tracking. A large inventory is managed through a central database, often with real-time updates. To ensure customer demand is met, e-commerce stores typically use digital inventory management systems to track stock levels.
Real-time stock information can help e-commerce stores avoid out-of-stock situations and ensure customers can always buy their desired products. Digital inventory management systems can also manage multiple sales channels.
Retail: In-store promotions and signage
Retail marketing usually involves in-store promotions and signage to attract customers and drive sales. There are many ways to grab attention and encourage customers to purchase, including in-store displays, sales promotions, product demonstrations, and other marketing materials.
The in-store marketing approach can be highly effective for creating urgency and encouraging on-the-spot purchases.
E-commerce: Online marketing and advertising
E-commerce marketing can be more robust. There are various channels for e-commerce stores to market to customers easily.
With a wealth of customer data, including browsing behavior, purchase history, and demographics, e-commerce stores can reach new and existing customers using various methods, including email marketing, SEO, and social media advertising.
This data can be used to create highly-targeted ads and promotions based on customer segmentation.
By tailoring landing pages and personalizing product recommendations, e-commerce marketing can create a seamless customer experience. Finally, reaching customers through various digital channels is often more cost-effective.
5. Sales Tax
Retail: Sales tax applied at the point of sale
You can’t overlook sales tax. It’s a tricky subject, but someone has to do it!
The customer pays the final price, including sales tax, in a retail store at the point of sale. The store then collects and remits the appropriate taxes.
Typically, retail stores are responsible for collecting and paying sales tax for the state in which they are located, so sales tax is relatively straightforward.
E-commerce: Sales tax varies by state and can be more complex to manage
For e-commerce stores, sales tax is more challenging to manage. The rules and regulations surrounding sales tax vary by state. If their customers live in multiple states, e-commerce stores may have to collect and remit sales tax in more than one state.
As a result, e-commerce stores must be aware of changes in sales tax laws and collect and remit the correct amount of tax in each state.
Pro tip: Both retail and e-commerce businesses can benefit from a robust, cloud-based POS system for sales tax management, as it automatically calculates the sales tax for each transaction and ensures that the appropriate amount of tax is collected and remitted.
6. Shipping and Delivery
Retail: In-store pickup or local delivery options
Retail stores can give customers the best of both worlds. They typically offer in-store pickup or local delivery options for customers who purchase products in their storefront.
Customers can pick up their purchases at the store or have them delivered locally, depending on their preferences and needs.
It’s convenient for customers. Not only do they receive their purchases quickly and easily, but if they choose to pick up their purchases in-store, they can talk to sales staff who are able to take steps to ensure they’re happy.
E-commerce: Nationwide shipping options
For customers who prefer shopping from home, don’t have time to visit a physical store, or live too far away, e-commerce is more appealing.
However, nationwide shipping can be more complex to manage than local delivery. E-commerce stores must coordinate with shipping carriers and ensure products are delivered promptly and cost-effectively.
Pro tip: By automating shipping calculations and coordinating with shipping carriers, cloud-based POS systems can help manage shipping and delivery for retail and e-commerce businesses.
7. Customer Data
Retail: Physical customer data collection
By using customer surveys, loyalty programs, and point of sale systems, retail stores can collect data such as purchase history, demographics, and feedback on products and services.
Collecting this data allows stores to track purchases, personalize promotions and offers, and improve the overall customer experience, among other things.
Obtaining physical customer information can prove challenging because customers may be reluctant or forget to provide it.
E-commerce: Digital customer data collection
E-commerce businesses can access a wealth of customer data, including website analytics, purchase histories, browsing habits, and demographics.
Businesses can use this data to create detailed customer profiles and identify patterns and trends in customer behavior to make data-driven decisions about everything from product development to marketing.
Pro tip: POS systems help businesses organize customer information by centralizing it in one easy-to-access location and ensuring that it’s accurate, up to date, and accessible.
8. Payment Processing
Retail: In-person payment processing
A retail store typically processes payments in person, using traditional payment methods such as cash, credit, or debit cards. This allows for a quick and easy checkout experience and helps reduce the risk of fraud or errors.
However, checkout lines might be inconvenient if there isn’t enough staff, if there are demanding customers, or if customers forget their card or PIN.
Note: Retail businesses must use secure payment terminals and adhere to industry standards for data security to ensure the security of in-store transactions.
E-commerce: Online payment processing
E-commerce typically handles payment processing online through a payment gateway that facilitates customer and business transactions — like PayPal!
Some payment gateways charge a fee per transaction, while others charge a percentage of the transaction value.
Note: You must secure online transactions with SSL certificates and comply with industry standards for data security (such as PCI DSS). Protecting both the business and the customer from fraud and other security threats is crucial.
Pro tip: Some POS systems integrate with multiple payment gateways and offer flexible payment options, such as split and partial payments, to assist businesses with payment processing.
9. Product Returns
Retail: In-person product returns
The return process in a physical store is straightforward. Customers are expected to return their items with a receipt, and the store will refund the purchase or offer vouchers.
Personal interaction might be more beneficial for the store and the customer. The associate can listen to concerns and provide solutions.
It can be more time-consuming for the customer, however, as they might need to wait in line or speak with a manager to escalate their complaint.
E-commerce: Online product returns and exchanges
If customers prefer online shopping, they might also prefer online returns. E-commerce stores process product returns through an online portal, meaning customers can initiate a return or exchange from their homes.
Online product returns and exchanges can be more challenging for retailers, as they may need to manage logistics, shipping fees, and handle processing returned items.
Considerations Before Expanding to E-Commerce
Omnichannel retail offers several benefits for businesses and customers. Before taking the leap, there’s much to consider — but the benefits do outweigh the negatives.
For small businesses:
- Retail storefronts and e-commerce platforms can increase business reach and provide additional revenue streams.
- In addition to reaching potential customers who may not live nearby, businesses can also take advantage of the growing trend of online shopping.
- Meanwhile, retail storefronts can offer customers a more personal shopping experience and create a physical presence for the company.
- Consumers can purchase products and services in a variety of ways with omnichannel retail.
- Depending on their preferences and needs, customers can shop online or in store.
- Customers can view or try out products before buying or have them delivered directly to their homes.
There will also be challenges. Do you have the resources and systems in place to manage both effectively? You’ve got to consider inventory management, order fulfillment, customer service, and more.
Most importantly, you must be ready to provide a consistent customer experience across both channels, including pricing, promotions, and brand messaging.
The Role of a Robust, Cloud-Based POS System
To provide seamless omnichannel experiences to your customers and employees, you need a robust POS system that connects all aspects of your business operations.
Everything you need is in one place, from automated inventory to order fulfillment, sales to customer service, and order fulfillment to reports.
When products sell across multiple locations and channels, inventory levels must update in real time, so you know exactly what is available and in what quantities.
Order fulfillment is easier with a complete supply chain and logistics strategy. You will need inventory visibility and accurate forecasts to plan supply chain activities.
You will also have to communicate effectively with vendors and mitigate shipping delays.
Return processes should be just as seamless as initial delivery, and the option to return items easily online or in store is the best practice. All of these processes must be digitized.
Other ways a POS system helps manage your retail operations include:
- Hotkeys for faster error-free transactions
- Reporting to guide your business strategy
- Employee management features like time-clocking, productivity reports, and role-based permissions
- Customer loyalty and promotion capabilities
- Label and barcode printing
And so much more!
E-Commerce vs. Retail: Can You Do Both?
Can you do both e-commerce and run a physical retail store? The short answer is… Yes! With the right preparation and a guiding hand, you can open an online version of your store, or the other way around.
And to make your life easier, we recommend investing in a cloud-based POS system.
With POS Nation, you can manage your omnichannel store easily. Your best bet is investing in a customizable POS solution, so you get all the features you need and none you don’t.
You can schedule a demo with one of our product specialists to see the ins and outs of our POS system. We’d also recommend trying our build & price tool to create your perfect POS system and get a price quote.