Retail vs. Ecommerce: Key Differences
Understanding the differences between retail and ecommerce is more than a classroom exercise—it becomes a strategic lever in helping retailers stay competitive, meet customer needs, and maximise revenue performance.
Traditional retail and ecommerce are both about bridging businesses to consumers and generating sales from the end-user prospect; however, they certainly do this in very different ways.
As brands are advancing towards a seamless omnichannel customer journey, traditional retail and ecommerce lines are starting to fade away. This omnichannel approach combines the best of both dimenions: the sensory experience of physical stores and the convenience of online retail.
Both models have the same ending point, which is selling a product or service; however, they differ in operational strategies, target markets, and customer experiences. With sales predicted to reach $4.1 trillion globally in 2024, ecommerce has emerged as a major global pillar of retail sales. This exponential growth underpins both the importance for businesses to understand how ecommerce differs from traditional retail and where they could complement one another.
In this blog we will be discussing the major differences between ecommerce and retail and how the two models may actually work hand in hand, creating space for businesses to flourish despite stiff market competition.
Understanding the difference between retail and ecommerce
Retail is the sale of goods or services from a business to an end user. It includes all transactions, from retail stores to internet merchants, direct sales, and mail orders too. Retail is literally the last stop on the supply chain: the place where a business connects with an end user looking to satisfy their unique demand for goods or services.
Traditional retail is characterised by a physical store that allows customers to physically interact with products.
There are several types of physical retail stores, depending on the consumer taste:
- Department Stores: These are extensive stores that carry various categories of products, such as clothing and furniture or appliances.
- Big-box stores: These are large, warehouse-type retailers, such as Asda, carrying a variety of products in one location.
- Discount Stores: They are affordable and hence, resell products at lower prices.
- Mom-and-pop stores: Small, independent businesses emphasising personalised service and community connection.
While the main goal of brick-and-mortar stores is to attract customers into a showroom and provide them with an exceptional shopping experience, the nature of ecommerce, which takes place entirely online, changes the way consumers find these stores. Understanding these dimensions of traditional retail is foundational to the scope and scale of its effect as companies begin to reconfigure themselves for a radically moving retail landscape.
What does traditional retail mean?
Traditional retail is what we commonly refer to as old-school retail, by providing the goods or services that consumers want at brick-and-mortar stores. Focusing on the most basic level of interaction, it also includes carefully chosen touchpoints to process critical functions both at the beginning and throughout the customer journey, making it even easier for them.
Some of the key components of traditional retail are:
- Product procurement and selection: Partnering with wholesalers, distributors, or even manufacturers to choose quality products or services that will satisfy market needs and generate sales. With differing available options, the right mix of products is critical.
- Store layout and presentation: A good store layout helps the shopper navigate through departments or product aisles. It offers the customer a comprehensive experience that encourages exploration and boosts sales potential. Visual merchandising is a major tool that attracts the attention of customers through high-priority products.
- Customer engagement: Retail spaces often focus on building loyalty through direct, personalised service. In-store staff contribute to brand identity, ensuring new and existing customers feel valued and supported throughout their visit.
- Marketing and promotions: Physical brick-and-mortar retailers deploy methods of attracting both foot traffic as well as the conversion rate with in-store events, seasonal promotions, and customer loyalty programs.
Although ecommerce is rising, traditional retail hones in on these pleasures to create a multi-sensory experience that fosters the customer-business relationship. As a result, retailers have to keep innovating just to remain relevant and meet the changing expectations of consumers.
What does ecommerce mean?
Ecommerce is the action of selling and buying goods and services via the Internet using websites or mobile applications. It emphasises convenience, giving customers the option of shopping round the clock and from any location.
Key processes in ecommerce:
- Product selection: Selecting products for sale online.
- Order fulfilment: Quickly packing and sending orders
- Customer Service: Offering help via online methods such as chat and email.
Retail vs. ecommerce: How do they differ?
ecommerce and traditional retail have become increasingly intertwined. While distinct in their approaches, they complement each other and are both essential for a retail business success, especially as omnichannel and multichannel retailing become the norm.
They both serve the same customer goal, but there are essential differences between these two concepts:
- Market size
- Investment needed
- Product interaction and shopping experience
- Product selection and availability
- Customer service
- Location
- Pricing and promotions
- Inventory management
1. Market size
- Traditional retail: The physical size and location of traditional stores often limit the brand’s ability to rely on nearby customers for foot traffic and revenue. This model limits the customer base to customers within a particular radius, thus limiting market potential. Old-fashioned retailers also face hurdles in adjusting to the increased consumer behaviours, such as online shopping, which can affect footfall and sales.
- ecommerce: ecommerce removes geographical barriers for a retailer, and they can get an international customer base. This implies that, unlike physical retail, which faces geographical limitations, ecommerce allows businesses to expand their customer base virtually without bounds. ecommerce skyrocketed, with up to 20–30% of businesses converting online in the height of the pandemic. Amazon tops the global rankings for online marketplace traffic which demonstrates the immense opportunities presented by ecommerce platforms.
2. Investment needed
- Traditional retail: First of all, there are many costs to brick-and-mortar shops—rent, amenities, and staff. Aside from this, different regions will have rent prices of their own, along with the size of each store and utilities costs to sustain electricity, heating, and cooling in order for a business to run. It costs retailers to stock their merchandise as well—visual merchandising and all the in-store displays necessary to provide a true shopping experience are also included in operating costs. Labour costs for employees, benefits, and training are an important aspect of customer service, as are any security measures needed to reduce theft and increase public safety. In addition to that, marketing and advertising also provide store traffic while taxes, insurance, and maintenance keep the store open.
- ecommerce: The initial cost for designing and developing your ecommerce business’ website entails making it user-friendly, integrating a payment gateway, and signing on for secure server hosting. Digital marketing tools, including email marketing platforms, SEO, and social media ads, are all required for converting customers. Even with lower operational costs of running an ecommerce store versus traditional brick-and-mortar counterparts, as an online footprint grows, more and more physical warehouse space is required to meet inventory needs and fulfil commodity orders.
3. Product interaction and shopping experience
- Traditional retail: The idea of traditional retail includes customers interacting with the products. This way they have the opportunity to try the goods on the spot, purchase products, and take them home. People often decide on a purchase based on these tactile experiences.
- ecommerce: Customers virtually have no way of trusting or verifying the product online other than photos, videos, and customers reviews, which increases the number of returns. Still, augmented reality (AR) and 360-degree product views are closing this gap.
An effective omnichannel strategy integrates these tactile in-store experiences with the convenience of in-store technology digital channels, allowing customers to seamlessly transition between traditional retail and ecommerce touchpoints.
4. Product selection and availability
- Traditional retail: In a traditional retail environment, you have very little real estate to showcase and sell your product. Often, retailers decide what to sell in their physical stores based on demand or the amount of shelf space they have. That translates to retailers being picky with which products will be taken to the sales floor, and, therefore, certain products (be they seasonal or bestsellers) may take longer for customers to get their hands on.
- ecommerce businesses: The ecommerce platform can hold an inventory that is much larger and has new products that easily outnumber their average brick-and-mortar store through a wide diversity of selection—essentially, limitless stock. Likewise, online shops also have the ability to allow their customers to subscribe for notifications or back-in-stock alerts, notifications that inform your customer when items are out of stock and restocked. It saves customers time and boosts their chances of finding the product they desire.
5. Customer service
- Traditional retail: In traditional retail, the in-person nature of shopping allows for sales associates to assist right then and there with questions or concerns on any product. These types of in-the-flesh experiences do tend to connect people and cultivate brand loyalty through human interaction and directly solving consumer problems.
- ecommerce: ecommerce comes with digital support mechanisms such as 24/7 chatbots, live chat, and large FAQ sections where customers can find help or answers to their problems at any time. While all the posts online are great and easier, bigger or more complex customer issues without human contact make it a little tougher.
However, we can also see that a lot of ecommerce platforms use customer data to tailor-make online experiences for them, and this works hand in hand to fill the gap from automating service to providing personalised service by making unique product recommendations or custom responses for any type of customer.
6. Location
- Traditional retail: In a physical location, traditional retailers are limited to the customers that come through the door, while shoppers have to travel there in person—an inconvenience for which some will find little patience, particularly those who live far away or have restricted mobility. That reliance on physical presence restricts the store’s accessibility to customers in a specific geographic area, forcing those farther away from it to exert more energy accessing goods.
- ecommerce: ecommerce provides unrivalled convenience, allowing customers to make purchases from any location with internet access. It also eradicates geographical boundaries; this means that businesses will be able to serve a global consumer base, and consumers will be able to make purchases. any time, day or night. ecommerce provides much greater flexibility than traditional retail in the convenience of shopping wherever and whenever with your product being delivered to your customers doorstep.
7. Pricing and promotions
- Traditional retail: In physical stores, prices are generally higher due to various overhead charges—rent, utilities, worker wages, and display of these goods in store. In order to recoup these costs and incentivise purchases, brick-and-mortar locations use tricks such as in-store promotions, limited-time-only coupons and sales, loyalty programs, or colourful visual merchandising displays with the intent to draw in consumers and compel that last nerve for urgency.
- ecommerce: One of the benefits of shopping online is that it can provide the lowest-cost prices due to a myriad of significantly lower operating costs needed to run and safeguard a shop, together with fewer labour resources required in conventional price lists.
Furthermore, online stores with more adaptive pricing policies can adjust their prices during the business day, using a so-called dynamic mechanism. This practice implements real-time price adjustments based on demand, competition price, or customer call centre activity, among other factors. ecommerce enables customers to compare prices from different sellers more effectively to make better-informed buying decisions than in the past. Ultimately the consequence is higher price transparency.
8. Inventory management
- Traditional retail: Inventory management in traditional retail is an ongoing discipline that requires a constant eye to ensure stock levels are accurate and items are available for customers on demand. Frequent stocktaking and a manually recorded sales register where an employee needs to restock on the go before any popular item is out of stock. Moreover, returns management is also very important because customers expect easy and frictionless goods returns that require products to be processed and restocked in a timely fashion.
- ecommerce: Innovative retail technology such as centralised warehouses—where more stock is kept—and integrated systems allow for better management across different ecommerce fronts. With the help of automated tools, such as robotics and inventory management software, keeping an eye on products for tracking, sorting, and restocking becomes easier. Particularly when there are a lot of orders and returns to be managed, which in turn ensures both speed as well as accuracy. This helps ecommerce businesses by providing faster delivery, increased stock transparency, and reduced human error—meaning overall better efficiency in your business operations and also happier customers!
Final thoughts
Traditional retail and ecommerce are not separate strategies anymore but pieces that can work together for the future of retail. With retail digital transformation rewriting consumer shopping habits, businesses with a hybrid model are likely to perform the best.
While plenty still fret that online shopping is killing the high street, retailers can do away with this danger by bringing together the unbelievable quality of each. With a combination of an app store and a brick-and-mortar location, retailers can attract both online shoppers who love the convenience of shopping from home and consumers who enjoy actually seeing products in person. This increases retailers’ ability to connect with potential customers, which deepens ties with current customers and increases customer loyalty.
Each business model brings a different set of demands and opportunities. Startups should know the different business models in the market, as each one has its own pros and cons. For seasoned retailers, shifting to a consumer distribution model will mean deep exploration of who your real audiences are and what the market trends are telling you in terms of balancing investment between store and online. Thriving in this competitive space therefore relies on capitalising on the best of both traditional and ecommerce retail.
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