If you are considering starting a new business and you have the possibility to invest in a Physical Store or choose an Online Store, here you will find a real case, with both business models.
By GILBERTO ACUNA
In this article, I am going to tell you our own story. We started an ice cream business in Houston, Texas; it is a franchise that is well-recognized locally and nationwide.
Of course, each case is different, and many factors can influence, such as industry, competition, economy, market, government regulations, employment, etc., but serve this article as a real example of what to expect from a Physical business and an online store.
Physical store
Our Physical store is a highly recognized ice cream franchise in the US, and we acquired this business in 2012. It is essential to mention that this store had existed since the 1990s, and in our case, it only represented a change of ownership. It was already established, had clients, and was very known locally.
Online store
As part of the trends, it was from the year 2014 that we started building the online store to complement the Physical store. The technology we used is WordPress and WooCommerce, and it is worth mentioning that the online store was created ourselves, so this was cheaper for us.
As for the investment in a Brick and Mortar store, well, it is very, very big. And the risks are high too.
Physical store
To begin with, investing in commercial premises either as a purchase or for rent is required. The most common is that it is rent, and here in the US, commercial premises contracts usually have a duration of 10 years, with relatively solid penalties for non-compliance, so it is better than the contract is fulfilled, with all the advantages for the owner of the commercial premises (aka landlord). And we all know that when you start a new business, the risks of not surviving are very high.
Second, the investment in the equipment, refrigerators, exterior signage, remodeling of commercial premises, restrooms, kitchen, equipment, inventory, and much more. All this without counting all marketing expenses, city permits, training, franchise payment, etc.
As we already mentioned, the initial investment was more than $100,000 in our case.
Online store
In an online store, the only required to invest is good hosting, the domain name, and the cost to develop an online store, which can be created by yourself or done by a qualified freelancer. The hosting can cost between $10 and 20 dollars per month, and the domain name costs about 30 dollars per year.
For an online store with electronic commerce for about 70 or 80 products, I consider that the cost cannot be more than $5,000 to $10,000. That’s it.
Brick and Mortar store
The products that our ice cream shop currently offers in the Physical store are: ice cream, waffle cones, milkshakes, sundaes, ice cream cakes, etc., and all these products are considered premium quality, far superior to the rest of the existing brands.
Similarly, it also offers catering to companies, special events, birthday parties, weddings, baby showers, and much more.
Online store
In the online store, even though all the same products are available, only the higher-priced products are sold, such as ice cream cakes and liter and half-liter packs.
Most online sales through our online store are made within a radius of around 5 miles of the store.
The same thing, ordering ice cream catering services for corporate companies, schools, churches, weddings, and private parties such as birthdays, graduations, baby showers, etc., are available.
Booking of fundraising benefit events for non-profit organizations such as schools, churches, community benefits, etc., is also available. It also offers catering to companies, special events, birthday parties, weddings, baby showers, and much more.
Below I comment on the risk involved in a Physical store against an online store.
Physical store
Undoubtedly, the risk will always be much more excellent by having a more significant investment in a physical store. For example, as we mentioned before, many risk factors exist, including permits, training, certification, purchasing inventory, and employees; these expenses represent a much greater risk against an online store. All this without even considering whether the projected sales can be achieved.
Online store
In the case of an online store, the most that can be lost is what has been paid for the domain name, hosting, and the cost of the online store. Of course, they can permanently be canceled at the end of the contracted period, which can be one year or even less.
Physical store
In terms of operating costs, a Physical store will exceed the costs of an online store by far. The most important concepts are rent, labor, electricity, water, and telephone.
Online store
In the case of the online store, again, it is only the expenses, such as the monthly hosting and the annual domain, that are all, as well as the production costs.
Physical store
Speaking of profit margins, the margin of any restaurant or ice cream shop, as in our case, can generally be second to industry standards in the US; 10%-15 % is average.
Online store
On the other hand, considering that once an online store is created, it manages its brand alone in operation, the margin can be practically 100% since the time allocated for its operation is minimal.
Physical store
On the other hand, in a Physical store, the average recovery time can be from three to five years.
Online store
As for the return on investment, in the same way, in our experience, an online store quickly recovers the investment, perhaps in the first sale.
Comparison - Physical Store vs Online Store
In conclusion, it could be a good complement and in fact, I think it should be an online store against a Physical store, that is, in the case of the restaurant, a very good strategy must be prepared to have an online store in a complementary way, which represents sales. from the Physical store.
In other words, perhaps you can earn the same in a Physical store that you do not have online.
If in another case it was decided to only launch an online store without having a physical store, the problem may be in the brand creation of the brand. That is going to represent much more time to position an online store in the digital world through social networks and using digital marketing.
Without any doubt, we think that having an online store these days is no longer something optional but something that all businesses that are dedicated to marketing products, in one way or another, should have.
The future of E-commerce
Now, the trend is not only towards online stores, but also online communities, which in our opinion is a step further. An online community is a platform that allows diverse people with similar tastes and preferences to coexist in the same virtual space, and businesses must take advantage of this space to offer their products and services.
Similarly, online marketplaces such as Amazon, eBay, etc., represent a great opportunity, and with today’s technologies, it is becoming easier for us to also develop our online communities or online marketplaces.
We have developed various online stores, with technologies such as WooCommerce and Shopify, as well as Online Markets, and Online Communities. We are experienced and can help you with your project, please contact us today.
If you have a project for e-commerce, please consider the option of developing an online marketplace or online community around your brand or services, which will undoubtedly be the basis for great success for your project.
It is important to mention that this article does not represent any responsibility for the author or the website since it was made with approximate estimated data and is not intended to offer any data that can be used for a real-life example.
