A Report on Cost Benefit Analysis on Starting a Retail Store Vs. online Store

A report on cost benefit analysis on starting a retail store vs. online store

Lekha Manganahalli Basavaraju

Florida Institute of Technology

Abstract

In this modern economy where Ecommerce is growing 10 times rapidly than offline retailing, it is important for a business to promote its products in the right channel. With the popularity of online shopping, someone with an idea of opening a new retail business no longer has to open a store. However, that doesn’t mean that there is no longer availability of retail store. With the product, consumers and overall business goals one has to decide whether storefront or online store will works best for the business.

In the research paper Cost benefit analysis is done on the pros and cons of opening offline retail store or online. This paper shows the comparison between the two types of business in term of cost, risk, inventory, competition, marketing, legalities & expenses, customer convenience, customer convenience, technology & security, taxation. Comparison is done with a tabular column with the above-mentioned attributes. Data for the above will be derived from articles, blogs, Ecommerce portals, business communities’ websites, books on retail business and online business.

Introduction

Advances in technology have had an effect on almost all sectors of human life. From social interactions to economic and political issues, technology has taken center stage influencing and affecting the way we conduct business and social interactions. Shopping has also changed as a result of the influence of technology with most people preferring online shopping to the traditional physical store shopping. This trend took center stage in the past decade with many retail giants integrating the two approaches to achieve maximum benefit. This proposal aims to understand the growing importance of online shopping and to examine the relationship that exists between online shopping and physical store shopping.

Internet and Information Technology have made tremendous contribution for business transformation witnessed nowadays all over the world. This has given birth to E commerce, which encompasses several pre purchase and post purchase activities leading to exchange of products or services or information over electronic systems such as the Internet and the other Telecommunication networks.

Analyzing the competitive advantage of E-Commerce it is observed that E-Commerce enables simpler, faster and efficient business transactions.

With the popularity of online shopping, someone with an idea for a new retail business no longer has to open a storefront. That doesn’t mean, however, that there is no longer a need for retail stores or that all business ideas work well online. If someone is looking to open a store, one must consider the product, the consumer and the overall business goals when decided whether a retail storefront or online store will work best for business

Background for the research:

The 21st century has witnessed a surge in online shopping and a considerable drop in physical store shopping. Many major retailers predicted the year 2012 as the year that  would completely turn the face of shopping with many consumers predicted to engage more in online shopping than physical store shopping (Cao, Xu &  Douma,2012). Changes were felt especially with the rise in online consumer spending and a drop in physical store spending in many countries. In the UK for example, the value of online retail sales increased by 14% in 2012 to hit £50bn. Online shoppers are estimated to have spent about £1,500 each on 39 items. The report also showed that the value of internet retail trade accounted for about 12% of the total retail spending. There is evidence of further growth in the coming years with estimations of growth rates of about 3% this year (Clifford, 2012).