9 Differences of E-Commerce vs. Retail: Can You Do Both?

Businesses of all types, from grocery and convenience stores to liquor stores and boutiques, are ramping up their online sales. Done right, selling online is a great way to reach new customers and increase revenue.

So yes, it’s a tempting idea. But before you dive in, you need to understand the differences between e-commerce and retail, and if you can manage both seamlessly and effectively.

At POS Nation, we know the challenges of managing a retail business, and we see firsthand how expanding to e-commerce can level up your sales. 

That’s why we’ve put together this comprehensive guide on the key differences between e-commerce and retail, so you can make an informed decision about your business’ future.

We’ll explore the pros and cons of each channel, what to consider before expanding, and how the right point of sale (POS) system makes all the difference.

Let’s dive in.

E-Commerce vs. Retail: What’s the Difference?

The differences between running an online store and an in-person business are obvious at first glance. E-commerce refers to buying and selling products over the internet, while in-person retail refers to selling products directly to customers in a physical store.

There are pros and cons to each.

There’s no right answer for which sales channel is best for you. If you’re starting a new business or considering expanding in one direction or the other, it’s important to carefully consider the potential benefits against the costs.

Related Read: 5 Things You NEED To Know About Omnichannel POS

A Third Option: A Hybrid Approach

For many small businesses, the decision isn’t whether to run a traditional retail storefront or sell online — but how to offer a mixture of both without tearing your hair out. 

A hybrid approach allows you to reap the benefits from both in-person and online sales. Here are some examples:

• A boutique has a small downtown location and also ships items directly to customers’ doors,
• A liquor store partners with a third-party service like DoorDash to give customers a convenient online delivery option. 
• A small grocery store lets you order online for curbside pickup.
• A corner store lets you order a limited selection of items for delivery (excluding tobacco and alcohol).
• A butcher shop does both in-store and direct-to-consumer (DTC) meat sales for customers within the state.

A key aspect of a hybrid approach is that it’s not all or nothing. It allows customers to browse your selection online, while giving you control over which fulfillment methods are suitable for your business and budget. 

Omnichannel sales are good for your bottom line, too. Businesses that sell both in person and online spend almost four times more than customers who only shop in store — and 10 times as much as online-only shoppers.

However, taking a hybrid approach means using point of sale (POS) and e-commerce tools that support omnichannel order management. In other words, you need a system that unifies your inventory and workflows to avoid confusion and keep your business running smoothly.

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Retail vs. E-Commerce: 8 Tips To Do Both Effectively

If you have a physical location, e-commerce might be your ticket to getting your business in front of more customers. If you sell successfully online, a physical location is a great chance to define your niche and form deeper connections with customers.

Here’s what you need to do to run a successful omnichannel retail business.

1. Translate Your Brand Across Sales Channels

A “sales channel” simply refers to the different places you sell your products. Common sales channels include physical channels (in-store sales, farmers markets), online channels (webstore, third-party marketplaces like Amazon), and service-based channels (curbside pickup, third-party services like DoorDash).

Retail customer service: Small, in-person retailers thrive thanks to a niche selection and friendly customer service. Nothing beats the personal connection of a brick-and-mortar store.

E-commerce customer service: E-commerce is great because it’s convenient and a low-effort way to browse products.  

How to make both work: For successful omnichannel sales, translate that same experience, friendliness, and expertise to every sales channel you use. 

Here are some examples of how different businesses do it:

• Grocery stores often use the same colors for their website that they use for their in-person signage and logo, creating a similar look and feel.
• Liquor stores and food markets that rely on staff knowledge and recommendations can write detailed product descriptions for their top sellers, or create a section on their website for local delicacies and staff picks, mimicking how they use stickers and signage in store.
• Boutiques might show suggested items or items frequently bought together to help customers create outfits, browse other styles, and upsell accessories.
• Small businesses can create friendly “about” pages and social media posts to differentiate themselves from more robotic corporate counterparts.
• Small businesses that do the majority of their business in person can still benefit from listing their stock online — many customers like to check a store’s selection before they come in.

One last tip: A quick fix for offering online sales is to use a separate e-commerce website. However, redirecting to a third-party website can be confusing for customers and often creates more complexity and confusion for you and your staff. 

Instead, use platforms that let you manage in-person and online sales from the same platform. 

2. Understand the Strengths of Each Channel

As mentioned above, there are strengths and weaknesses for both retail and e-commerce. Understanding what makes each work helps you lean into the strengths of both.

Retail strengths: In-person retail lets people ask questions and is a much more tactile experience, allowing customers to touch, feel, and smell products. It’s also ideal for customers who aren’t sure exactly what they want, because they have opportunities to browse and ask questions.

E-commerce strengths: Many people specifically choose e-commerce because it’s easy to buy items on the fly and fit shopping around a busy schedule. They can search for the exact items they need.

How to make both work: You need to understand the types of products and experiences your customers want from in-store and online shopping. While it’s important to create a consistent look and feel for your business, it’s equally important to lean into the uniqueness of each sales channel.

Here are a few examples to illustrate what we mean:

• Grocery and food market customers may prefer to browse produce and organic products in store, but make bulk purchases online.
• A cigar lounge offers a varied selection of individual cigars to try in store — great for curious customers looking for recommendations and to relax in person. However, they cater more to cigar connoisseurs online, selling boxes of cigars and taking special requests.
• A deli sells individual cuts and takes requests in store, but reserves its online store for sample packs, charcuterie boards, and other bulk purchases.
• An Indian grocery store has plenty of repeat in-person customers who love to browse, but find many new customers are intimidated. As a result, they mostly focus their website and online sales on recommended Indian pantry staples. 

The differences between how your customers interact with your brand online versus in store preferences might not be obvious at first. Periodically check the sales reports on your POS and e-commerce systems to look for differences in bestsellers or product category sales between channels.  

3. Make Attractive Product Displays and Product Pages

When customers browse a store, whether it’s in person or online, they react strongly to attractive product displays, a well-organized layout, and helpful signage. 

Retail store layout: Creating an intuitive store layout with helpful signage and displays cuts down on confusion and makes it easy for customers to find their favorites.

E-commerce layout: Many online customers enjoy browsing in a more targeted way, looking at products by type, seeking out sale items, or searching directly for specific products. 

How to make both work: Thinking about how customers navigate your store and see products should be a priority for all sales channels. No one wants to walk through a poorly organized store or navigate an unintuitive website. 

Here are some tips to make sure your products pop in person and online:

• If your store has distinct sections or departments, replicate them online by adding tags in your inventory management system. This makes it easier for customers to browse.
• Many POS systems include built-in product databases with pictures — use these to ensure every item on your website has a picture, not just a text description. 
• Just like a grocery store might highlight in-season produce or deals at the front of the store, show special offers on your website’s homepage.
• If your e-commerce solution supports it, show items that are frequently bought together or highlight buy one, get one (BOGO) offers when customers add products to their cart. This serves a similar purpose to special stickers or standing displays in store.
• If you sell custom product bundles (e.g., meal prep kits, seasonal items), take high-quality pictures that capture customers’ attention.

A fun, creative store display might just convince someone to splurge on an item they wouldn’t have otherwise. A great product picture and description can do the same for online shoppers. 

4. Unify & Simplify Your Inventory Management

Effective inventory management is crucial for both in-store and online sales. Inventory management encompasses all the processes necessary to maintain a steady stock of popular products without over- or under-ordering.

Retail inventory management: Until recently, many small retail businesses managed their inventory manually, tracking stock by walking the floor and conducting cycle counts to check for products that were running low. Modern inventory management systems help retailers digitize their inventory.

E-commerce inventory management: Online shoppers expect accurate stock levels, correct pricing, and detailed product descriptions. This means many online shops start with a digital inventory list. Inventory systems built for e-commerce also support creating pick lists and other features to speed up order fulfillment.

How to make both work: To ensure stock levels are accurate across channels, stores need a POS system that updates and syncs inventory information and levels across channels. This ensures customers get an accurate view of your selection, no matter where they shop.

In truth, many challenges in inventory management are shared between retail and e-commerce businesses. Here’s how you can overcome these common challenges:

• Use POS systems that offer built-in e-commerce or inventory management systems that sync with e-commerce. This keeps your stock levels and information in sync automatically. Whatever you do, don’t use separate inventory systems for e-commerce and retail.
• Use POS and e-commerce systems specifically built for your industry. For example, grocers and butchers need online systems capable of tracking perishable inventory and selling by weight.
• If you want to roll out online sales slowly or only put a limited selection online, use inventory management software that specifies which items are eligible for online sales. 
• Even if you don’t plan to offer delivery or curbside pickup, having an inventory system that syncs with a website gives customers a convenient way to browse your selection and check stock levels before they come in.

Accurate inventory management is essential for far more than omnichannel sales. Modern inventory management systems help reduce costs, track swings in demand, and keep shelves stocked with customer favorites.

5. Create Customer Segments and Personalize Marketing

When customers feel like marketing is generic or not relevant to their interests, they’re likely to ignore it. In addition to standard marketing tactics like sales and promotions, businesses of all stripes need ways to personalize their marketing.

Retail marketing: Staff in physical stores have the advantage of being able to talk to customers and recommend things in real time. They can also set up customer loyalty programs to monitor customer purchase histories. Signage is a helpful way of drawing customers toward particular products, too.

Physical stores also engage with the community through local events like wine tastings, cooking classes, or art fairs. 

E-commerce marketing: E-commerce marketing tends to be more robust since it has access to a larger pool of customer data. E-commerce businesses use many tactics to reach new and existing customers, including email marketing, search engine optimization (SEO), and social media advertising. Online shopping also gives businesses access to customer browsing history, demographics, location, and other data to segment customers and personalize offers.

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 than physical advertising and signage.

How to make both work: Retail businesses, even ones that primarily sell in store, can and should learn the fundamentals of digital marketing and SEO. Most people find and research local businesses online, and a strong online presence is a great way to get people through your doors. 

At the core of effective hybrid retail and e-commerce marketing is a system that syncs your customer data across sales channels. This ensures that information like purchase history and customer loyalty rewards work no matter where a customer shops. 

While terms like “customer segmentation” and “personalized marketing” might sound intimidating at first, they’re relatively easy to pull off in practice. Simply use your POS system to filter customers by sales channel and purchase history to create targeted offers. Here are some examples:

• Every Friday, a deli that primarily does business in person offers double points for loyalty members who make online orders.
• A convenience store owner sorts their loyalty members by the time of day they typically shop, creating customer groups for morning commuters, lunch shoppers, and late-night snackers. When it’s time to send out announcements and marketing, she can highlight the offers that are most important to each group.
• A liquor store sends out a BOGO 50% deal on six-packs of craft beer to all customers who bought craft beer in the last two weeks.
• A grocery store filters down to customers who’ve shopped in person at their store in the last month and sends out an offer to waive service fees on curbside pickup for the next 72 hours. 
• A small Greek market notices that most bulk orders of olive oil come from their online store, so they set up an online-only discount for an olive oil sample pack.

Using customer data to personalize offers gives your digital marketing a personal touch in a way that generic coupons don’t.

Related Read: 5 Ways To Build Your Small Business’ Online Presence

6. Know Differences in Tax Requirements

Taxes have always been complicated — but thanks to recent court decisions and new rules, it’s gotten more complicated. 

Retail 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. For most in-person sales, sales tax is applied at the point of sale. Tax rates can be set on your POS backend, including any special rates for restricted items like alcohol and tobacco.

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.

E-commerce taxes: Online sales are where things get tricky. Thanks to a 2018 court decision, online businesses must now pay state sales tax. The rules and regulations surrounding what qualifies a business to pay local taxes vary by state. If your e-commerce customers live in multiple states, you 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.

How to make both work: There are plenty of options for local businesses that aren’t ready to dive into the complexities of selling across state lines. Setting up options for buy online, pickup in store (BOPIS) or restricting deliveries to certain area codes lets you benefit from online sales — without giving your accountant nightmares.

Many e-commerce platforms and marketplaces help you calculate sales tax automatically. If you sell in multiple states, you also want to keep detailed transaction records for your accountants.

7. Use a Trusted Payment Processing Partner

These days, cash transactions make up just 14% of payments in the U.S., with the average customer preferring to pay via credit card or contactless payment. To accept cards and other digital payment methods, small businesses must work with a payment processor.

Payment processors charge small fees for different types of payments, which can add up over time. If you work in a high-risk business like alcohol sales, tobacco retail, or convenience, you may be required to work with a speciality high-risk payment processor.

Retail payments: Most POS systems offer in-house payment processing or integrate with a third-party payment processor. Some providers offer discounted fees for high volumes of transactions. Many retailers also still take cash, which comes with its own risks.

However, checkout lines might be inconvenient if there isn’t enough staff, the store doesn’t take a customers’ preferred method of payment, payment is slow, or the system goes offline.

E-commerce payments: Dedicated e-commerce platforms usually partner with other payment processors, with many sites offering payment via card or through payment portals (e.g., PayPal, Shop). Just like in-person retailers, specialty retailers in high-risk areas must use specific payment processors.

Note: You have to secure online transactions with SSL certificates and comply with industry standards for data security (like PCI DSS). Protecting both the business and the customer from fraud and other security threats is crucial.

How to make both work: Handling multiple payment processors can make running a hybrid business more complicated than it needs to be. Working with POS providers that offer in-house payment processing ensures that payments are handled the same way whether customers shop in store or online.

Here are a few more things to be aware of when considering POS systems and payment providers:

• Make sure your payment processor supports any industry-specific needs like partial or split tenders, deposits for subscriptions, or EBT payments.
• If you’re in a high-risk industry, it’s safest to work with industry-specific systems. Otherwise, you risk losing access to payments or even your whole POS system if they decide to end high-risk payment support in the future.
• Look for systems that support dual pricing if you handle a lot of cash. This incentivizes customers to pay in cash by offering a cash discount while avoiding the legal gray areas of surcharging.
• Know how much transaction fees are. Many low-budget POS systems make up their costs by charging higher transaction fees.
• For retailers, find a system that can still process payments offline. This ensures that if your internet goes down, your business won’t grind to a halt.

Choosing the right payment processor for your business might seem minor, but it makes all the difference in the long run. 

8. Have a Clear Policy for Product Returns

Remember: Not every person who shops with you will be a satisfied customer. Processing returns is fairly standard, but it can get more complicated the more sales channels you use.

Refunds and returns are also a common target for scammers.

Retail returns: The return process in a physical store is straightforward. Customers are expected to return their items with a receipt, and the store refunds the purchase or offers in-store credit.

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, though, as they might need to wait in line or speak with a manager to escalate their complaint.

E-commerce returns: 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 of returned items.

How to make both work: We’ve talked a lot about unifying the shopping experience for customers. Returns are one area you should keep separate. Train employees on how to handle returns for each type of purchase, how to spot common scams, and when to contact a manager.

Here are some industry-specific examples of return policies:

• A liquor store doesn’t accept returns for items purchased in store, but offers store credit for damaged items or incorrect products from online deliveries (requiring a picture or manager approval). 
• In addition to standard return policies, a small grocery store has plans in place for food safety recalls or if customers were unknowingly sold expired items.
• A convenience store only allows refunds for unopened, nonfood items.

Many POS systems allow you to set up workflows for returns, including automatically notifying managers for certain types of transactions. 

Related Read: What Are Chargebacks in Retail? (& 6 Ways To Avoid Them)

Considerations Before Expanding to E-Commerce

Omnichannel retail offers several benefits for businesses and customers. Before taking the leap, there’s a lot 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 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.

For customers:

• 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 have to consider inventory management, order fulfillment, customer service, and more.

Most importantly, you need to be ready to provide a consistent customer experience across both channels — including pricing, promotions, and brand messaging.

E-Commerce vs. Retail: Can You Do Both?

So, can you offer 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.

To make your life easier, we recommend investing in a cloud-based POS system.

At POS Nation, we match retailers with the specialty systems they need to achieve their goals. Whether you’re an established retailer looking to offer limited online sales, a food market ready to start shipping across state lines, or an online business preparing to open their first storefront, we’re here to help.

Every store is different, and not all businesses need the same tools. Check out our flexible pricing tiers to find a system that fits your goals and budget.